Insurance Authorization Process Inefficiencies & Opportunities INTRODUCTION Medical practices, hospitals, and health systems are losing substantial money and business to inefficient and costly insurance authorization processes associated with patient referrals. The authorization process is difficult to streamline as authorization complexity and technology capabilities vary across insurance payers. An innovative solution that simplifies the authorization process by quickly delivering electronic authorization results on 100 percent of referrals may offer the functionality you need to provide better patient care and improve your bottom line. BACKGROUND A patient referral is created when a referring provider (ex: primary care physician) examines a patient and determines that he or she needs to be sent to a referred provider (ex: specialist, such as a radiologist) for further evaluation. The referring provider creates a referral to send their patient to the referred provider. Based on the reason for the referral and the type of insurance the patient has, it may require an authorization from the patient s insurance payer. An insurance authorization is a decision by a health payer or plan that a health care service is medically necessary. It is also referred to as a prior authorization, prior approval, preauthorization, or precertification. A patient s health insurance or plan will often require an authorization for certain services before patients receive services, except in an emergency. An authorization is not a promise their health insurance or plan will cover the cost. THE PROBLEM The authorization process is typically quite complex and includes many manual steps for both referring and referred providers. Frequent issues resulting from the process include: Significant administrative resources spent on authorizations Long turnaround times from payers Frequent errors due to poor technology and communication Patient dissatisfaction when asked to sign a financial waiver or request to reschedule appointment Business lost due to patients not being scheduled quickly enough Last minute cancellations when authorization is not complete, resulting in lower utilization of staff and equipment 1 Healthcare.gov Glossary. Preauthorization. August 2015. Retrieved from https://www.healthcare.gov/glossary/preauthorization
Here is a closer look at where the authorization process breaks down and creates barriers for providers and patients: 1 2 3 4 Referring Provider Unable to Obtain Authorization Quickly Upon referral creation, the referring provider s staff contacts the patient s payer to determine if the visit will require an authorization check to be performed. If so, a manual process is initiated, often a phone call. While this process varies among payers, it usually involves the completion and faxing of an authorization form. The payer will deem the medical service approved, denied, or ask for additional information to be submitted. If a service is denied, the practice staff may file an appeal based on the referring provider s medical review process. Response times and authorizations vary for each payer, increasing complexity. Once an authorization determination is known, the referring provider sends an update to the referred provider. Practice Staff Not Adequately Trained to Keep Up with Authorization Policies Across Payers With the passing of the Affordable Care Act, many payers have created stricter and more complicated rules for obtaining insurance authorizations. It takes a skilled workforce of authorization experts to identify when referrals need an authorization and how to obtain it based on the specific payer s requirements. For practice staff juggling many priorities, it is difficult to keep up with payer changes, resulting in back-and-forth interactions with payers and significant lag times to obtain authorizations. Authorization Sent to Referred Practice Often Contains Missing Information or Mistakes Authorizations contain missing or incomplete information about 40 percent of the time because referring providers do not benefit directly from the referral visit and are often strapped for administrative resources. 2 In those circumstances, the referred provider s staff will need to correct information and initiate the insurance authorization if the payer allows. If the payer requires the referring provider to obtain the authorization, the referred provider s staff will need to reach back out and request that the authorization be resubmitted, often resulting in circles of phone tag that can cause a longer lag time. Long Authorization Turnaround Times Result in Lost Business and/or Patient Dissatisfaction Depending on the practice s policy, referred providers have three ways to respond to referrals and their corresponding authorization status: A. Wait until a correct authorization is secured before scheduling their patient in order to lower financial risk. Longer lag times to schedule, however, increase the likelihood that the patient will not follow through with visit, as they may decide they feel better or decide to see a different specialist. B. Decide to not wait until an authorization is secured and schedule the patient right away, assuming financial risk. If the authorization is not obtained in time for the patient s appointment, the patient may be required to sign a financial waiver form or be given the option to reschedule to avoid financial risk. This may result in patient dissatisfaction and last minute cancellations, impacting schedule utilization. C. Schedule the patient to be seen as medically necessary, despite authorization status. If the authorization is not secured, the provider risks not being reimbursed by the payer. If this occurs, additional administrative time may be spent filing appeals. Despite effort, the visit may result in a write-off of revenue. 2 Clarity Health. Service Center Referral Report. August 2015.
CONSEQUENCES OF AUTHORIZATION PROCESS INEFFICIENCIES 1 Revenue Lost to Write-Offs According to a study by the American Hospital Association, hospitals write-off $46.4 billion/year nationwide in uncompensated care, representing 5.9 percent of annual billings. The study defines uncompensated care as an overall measure of hospital care provided for which no payment was received from the patient or payer. 3 This figure is the sum of a hospital s bad debt and the financial assistance it provides. Bad debt consists of services for which hospitals anticipated but did not receive payment. Financial assistance consists of services for which hospitals neither received, nor expected to receive, payment because they had determined the patient s inability to pay. The authorization process addresses bad debt, as hospitals anticipate to be paid for services from insured patients but are denied by the payer. Improving the authorization process to ensure all required authorizations are obtained in a timely manner would reduce lost revenue associated with bad debt. Since 2000, hospitals of all types have provided more than $459 billion in uncompensated care to their patients, according to the study. 2 Poor Referral Success Rates A study by the Journal of General Internal Medicine found 46 percent of faxed referrals never resulted in a patient visit. 4 Failed referrals for specialty care are common and result in lack of care coordination for patients and missed business opportunities for referring providers. Both technology and authorization turnaround times contribute to referral success rates. To test how technology influences referral success rates, the study replaced faxed referrals with a web-based application shared by generalists and specialists that included enhanced communications and automated notification to the specialty office. Comparing scheduling results before and after the implementation of the web-based referral system, only 54 percent of faxed referrals were scheduled. In comparison, 83 percent of electronic referrals were scheduled. Practice policies on authorizations determine when a referral is scheduled. Some practices do not wait for an authorization to be obtained and schedule their patient immediately. If the authorization is not obtained in time, they may ask their patient to sign a financial waiver form or reschedule. Other practices will not schedule their patient until the authorization is obtained, often causing long lag times for patients. In turn, patients may decide to see another specialist or not be seen at all. This results in patient dissatisfaction and/ or loss of business for the practice. 3 American Hospital Association. Uncompensated Hospital Care Cost Fact Sheet, 2015 Update. January 2015. Retrieved from http://www.aha.org/research/policy/finfactsheets.shtml. 4 Journal of General Internal Medicine. A Web-based Generalist-Specialist System to Improve Scheduling of Outpatient Specialty Consultations in an Academic Center. June 2009. Retrieved from http://www.ncbi.nlm.nih.gov/pmc/articles/pmc2686771.
In conclusion, web-based referral systems are more than twice as likely as faxed systems to lead to a scheduled visit. By transmitting referrals and their corresponding authorizations electronically, referred practices can more efficiently process information and schedule patient visits successfully. Securing complete authorizations in a timely manner ensures practices can quickly schedule patients, all while lowering their financial risk and increasing patient satisfaction. 3 High Operational Costs In a Council for Affordable Quality Healthcare study, they estimate nearly 24 million authorization and referral certification transactions occur yearly. Due to the manual process of obtaining authorizations, it costs healthcare providers $45.49 per authorization transaction. 5 A separate Health Affairs study found practice staff spend 20 hours per week per physician interacting with authorization requirements including pharmaceutical formularies, claims, credentialing, contracting, and data on quality. When converting time to dollars, the national cost to practices is at least $23 billion to $31 billion per year. For practices, this means for every two physicians there is a full-time staff member spending their time on health plan interactions alone. 6 The costs do not appear to be decreasing either. The Health Affairs study asked respondents to state the extent to which they believed their practice s costs of interacting with health plans had changed over the prior two years. On a five-point scale ranging from decreased a lot to increased a lot, 41 percent of respondents stated that costs had increased a lot; 36.4 percent stated they had somewhat increased. With the passing of the Affordable Care Act, the process of obtaining an authorization has grown more complex. It takes a skilled workforce of authorization experts to identify when referrals need an authorization and how to obtain it based on the specific payer s requirements. Often practice staff are spread thin and have difficulty keeping up with payer changes, resulting in back-and-forth interactions with payers and significant lag times to obtain authorizations. AUTHORIZATION PROCESS SOLUTION CHALLENGES Creating an automated authorization process solution is daunting due to industry limitations. Authorization requirements for medical services vary by procedure and payer. Because the technology capabilities of payers to process authorizations differ, it is not possible to fully automate 100 percent of authorizations today. Technology-only solutions process authorizations for the small number of payers who allow it, leaving behind a substantial portion of authorizations that staff are required to manually obtain. A service-only solution processes authorizations for most payers, but does not provide significantly faster speed than current practice staff. Another challenge authorization process solutions face is creating a streamlined workflow for practice staff who are often overwhelmed with the number of platforms they interact with on a daily basis (ex: electronic medical records, scheduling, and/or billing platforms). Adding another stand-alone solution is often met with skepticism, as staff members are concerned it would disrupt their workflow and cause additional work. 5 Council for Affordable Quality Healthcare. 2014 CAQH Index: Electronic Administrative Transaction Adoption and Savings. Calendar Year 2013. Retrieved from http://www.caqh.org/sites/default/files/explorations/index/report/2014index.pdf. 6 Health Affairs. What Does It Cost Physician Practices To Interact With Health Insurance Plans? May 2009. Retrieved from http://content.healthaffairs.org/content/28/4/w533.full.
THE SOLUTION INNOVATIVE AUTHORIZATION SOLUTION MEETS CHALLENGES A complete solution encompasses both technology and servicing to deliver authorization results on 100 percent of referrals that require it. Clarity Health has developed this solution by combining a sophisticated rules engine with world-class servicing to rapidly deliver electronic authorizations across payers, directly affecting the bottom line of practices, hospitals, and health systems. Clarity also addresses workflow concerns by offering its solution as a stand-alone platform or integrated with a practice s current EMR or referral system. In addition, Clarity partners with third-party healthcare technology vendors to provide an integrated authorization solution to their entire customer base. By creating a flexible platform that adapts to customer and partner needs, practice staff are able to increase their workflow efficiency and focus on more productive tasks. BENEFITS OF COMPLETE AND FLEXIBLE AUTHORIZATION SOLUTION Clarity delivers measurable benefits to customers in three key areas: 1 Lower Write-Offs By increasing the speed of obtaining authorizations, practice staff can schedule patients with confidence that the authorization is secured prior to their visit, lowering financial risk due to bad debt. Clarity provides unparalleled turnaround times: Over 50 percent of authorizations are completed within one business day and 80 percent are completed within two business days. 7 Specialist customers report a 65 percent increase in complete and accurate authorizations with Clarity, directly affecting payment. 8 One hospital imaging center reported a 41 percent reduction in their denial rate within nine months of using Clarity. 2 Increase Referral Success Rate Increasing the speed to schedule patients reduces the risk they will change their mind or be seen by another specialist. By receiving timely and complete insurance authorizations in Clarity s streamlined work list or an integrated platform, practice staff can quickly contact and schedule referrals for successful patient visits. On average, 75 percent of customers report their referral capture has increased since adopting Clarity. The increase is significant; overall, nearly 60 percent of customers report their referral capture rate has improved by 21 percent or more. 9 7 Based on Clarity Health Service Level Agreement and reported outcomes. August 2015. 8 Clarity Health. Customer Survey: Authorization Efficiency. February 2015. 9 Clarity Health. Insurance Authorization Time Savings. August 2015.
3 Reduce Operational Costs By outsourcing insurance authorization work from practice staff to Clarity, staff can reallocate their time to more valuable tasks. Clarity s cost-effective solution adjusts to practice referral volume fluctuations and stays up-to-date on payer rules to ensure the highest accuracy. Clarity customers report a time savings improvement of 59 percent by outsourcing their authorization processes. Specialist customers reported an average time savings of 16.9 minutes per referral with Clarity Health. 10 The Affordable Care Act has caused more administrative work for many practices, but Clarity s authorization expertise allows staff to rest easy. With the expansion of payer and plan rules, 77.5 percent of customers say the ACA increased complexity and 80 percent say the ACA increased the time spent obtaining authorizations. By tapping Clarity s authorization expertise, 80 percent of customers report they have experienced time savings due to Clarity keeping up with insurance plan and payer changes. 11 CONCLUSION Today, the patient referral insurance authorization process for medical practices, hospitals, and health systems is costly and inefficient due to poor technology and manual processes that rely on the limited capabilities of insurance payers. The consequences of these inefficient processes include revenue lost to write-offs, poor referral success rates, and high operational costs. To address these challenges, Clarity Health created a complete insurance authorization solution that combines a sophisticated rules engine with world-class servicing to rapidly deliver electronic authorization results on 100 percent of referrals that require it. The flexibility of the platform allows it to be used as a stand-alone product or integrate with an existing healthcare technology system. Third-party healthcare technology vendors can also leverage Clarity s functionality by integrating and deploying it to their customer base. The end result for customers includes lower write-offs, increased referral success rates, and reduced operational costs. Over 90 percent of customers report being satisfied or very satisfied with Clarity s authorization solution. 12 NEXT STEPS If you are interested in learning how Clarity Health can help you meet your insurance authorization needs, please email contact@clarityhealth.com. 10 Clarity Health. Customer Survey: Time Savings. January 2015. 11 Clarity Health. Customer Survey: Affordable Care Act. April 2015. 12 Clarity Health. Customer Survey: Customer Satisfaction. June 2015.