The Centers for Medicare & Medicaid Services (CMS) have taken a bold step by mandating a standard for prior authorization. I talked to Nikki Henck, Senior Director of Utilization Management at Sagility, about the implementation and potential impact of this proposed requirement, which, if finalized, will be enacted in January 2026.
The Dilemma of Prior Authorization
Prior authorization, also known as a pre-approval, strikes fear into both patients and providers. In a 2022 American Medical Association physician survey, 88% of providers said that the burden of doing prior authorization was high or extremely high. Another survey by the Medical Group Management Association (MGMA) ranked prior authorization as the largest regulatory burden on doctors.
Yet in a traditional fee-for-service payment model, prior authorization by payers is absolutely crucial. Without it, overtreatment would skyrocket, causing pain to patients and bankrupting the payers. Prior authorization exists in many nationalized health systems, not just in the U.S.
In theory, fee-for-value would eliminate the need for prior authorization because everyone should be aligned on a common goal of keeping the patient well while minimizing treatment. But that is an ideal far off in the future.
In 2022, more than 66 million prior authorization requests were submitted manually by phone or fax, according to the Council for Affordable Quality Healthcare. A manual submission often occupies more than 20 minutes of staff time at the medical practice. Further, in some states, it can take up to 14 days to get a decision back from the insurance company.
Denials take up even more time; a clinician who wants to appeal the decision could spend an hour or more on the phone with the payer’s representative.
Henck told me of the many barriers doctors face in submitting authorization requests. Because every health plan has unique payment rules and medical policies, the process currently lacks the kinds of automated checks that other systems have, and that would ensure that information submitted by the practice meets plan requirements for a pre-approval evaluation. Presently, physicians bear the burden of understanding each health plan’s requirements for utilization review.
A Process in Urgent Need of an Upgrade
Clearly, prior authorization is crying out for standardization and interoperability. The federal government has been haranguing vendors and clinicians to make interoperable systems since the HITECH act was passed in 2009. But those efforts made little headway for years because the standards were ambiguous, inconsistently implemented, and generally insufficient for the needs of modern medicine.
The release of FHIR in the mid-2010 decade changed everything. Finally, a modern data exchange system was developed by a savvy group of independent designers who understood modern API concepts. In 2018, CMS chief Seema Verma pushed forward the organization’s goal to advance true interoperability. In 2021, the Patient Access API, which allows patients to download their data through their preferred third-party app, became available to healthcare beneficiaries.
The proposed regulations will automate the process of prior authorization, exchanging data faster and more transparently. Most importantly, it eliminates arbitrary decision-making and enables decisions in real-time.
Brilliantly, the proposed CMS process automates the payer’s decision as well as the submission process. In other words, the payer must specify all the criteria for judging a prior authorization request in advance—and incorporate them into an automated process that can return an approval or denial within seconds. The workflow is illustrated in a diagram in an article on the FHIR web site.
When patients receive an authorization while they’re still in the provider’s office, they are more likely to follow through with the recommended treatment.
The standardization of documentation for prior authorization also enables physicians to submit requests within their familiar electronic medical record systems, reducing the burden on providers.
A CMS fact sheet offers more details on CMS’s thinking and plans.
CMS’s 2020 Interoperability and Patient Access Final Rule had ushered in the requirement for government-sponsored plans to developed APIs that use FHIR regulations as the framework for data exchange. The new prior authorization API, Prior Authorization Requirements, Documentation and Decision (PARDD), is based on FHIR and provides quick access to prior authorization data and processes to providers and patients.
Incompatible, vendor-specific language will be replaced by new FHIR-based standards such as Clinical Quality Language. Henck says that the regulations will affect half of the U.S. population.
The new proposed CMS mandate for prior authorization will not solve all its inherent pains. However, providers will more easily understand a health plan’s requirements for utilization review, and health plans must render a decision in real time.
The standardization of prior authorization documents also enables physicians to submit requests within their familiar electronic medical record systems, reducing the burden on providers. A FHIR-based, electronic prior authorization submission process can save significant money by dramatically reducing the time spent on documentation, phone calls, and faxes. These factors are incentives for adoption.
Systems that were set up to maximize reimbursements and satisfy regulators have failed the doctors who do the work on the ground, and ultimately their patients. The enormous clout of CMS is now being marshaled behind FHIR and other modern standards that can restore the needs of doctors and patients at the center of our health care system. Best of all, CMS is creating transparency in an area long characterized by seeming arbitrariness and waste.
This is a great step for practices and EHR companies but what would really help is if CMS mandated the format of EOB and Remittances.