Prior authorization is an approval process to ensure that services provided by healthcare organizations will be reimbursed by insurance carriers. Prior authorization denials can result in revenue loss. Due to multiple prior authorization issues, over $21 million in charges was denied, and $291,217.63 was ultimately written off as uncollectible in a one-year period at the Department of Surgery at Hospital X. This paper aimed to design an improved process to reduce, or eliminate, the issues causing charges to be written off. Three divisions with the most prior authorization denials within the department were identified. A comprehensive review of the current prior authorization process was conducted. Each division was found to have a unique prior authorization issue that was causing charges to be written off. Barriers were identified, educational training was provided accordingly, and process changes were implemented thereafter. When comparing the results pre- and post-interventions, these interventions resulted in these charges no longer being denied or written off. The processes utilized here can be easily replicated for organizations with similar barriers.
Keywords: prior authorization, denials, revenue loss
The reimbursement landscape of the healthcare industry is complex, and claim denials create a considerable obstacle for health care organizations (HCO) that strive to collect timely and accurate payments for services. The constant evolution of reimbursement rules and regulations from legislative statutes and healthcare insurance payers complicate the already difficult reimbursement process. The American Health Information Management Association (AHIMA) conducted an analysis of numerous hospitals’ payment transactions in 2017 that revealed that initial denial rates among five national payers ranged from 7.5 percent to 11.1 percent of net revenue from patient services, which means one-tenth of revenue is at risk for nonpayment.1 The cost of unproductive claims processing, reimbursement, and reconciliation can significantly impact HCOs’ ability to remain financially stable. In an effort to pursue every dollar for the services provided to their patients and reduce administrative waste, HCOs must design processes to streamline claims management for revenue cycle departments. A hot topic in healthcare reimbursement today is prior authorization, a process put in place to ensure that services provided by healthcare organizations will be reimbursed by insurance carriers.
A prior authorization process is designed to ensure high-quality care while simultaneously regulating healthcare spending. The process accomplishes two main goals: 1) HCOs can provide high-quality patient care supported by appropriate payment; and 2) payers can maintain their own benefit plan designs and payment levels. Though insurance companies believe that prior authorizations improve efficacy and ensure patient safety,2 the process is labor-intensive, imposing administrative and financial burden on clinicians and support staff. Bendix reported that prior authorization activities for physicians totaled $69 billion annually based on a 2011 study.3 Experts suggest that HCOs must find ways to minimize the burden of prior authorizations without affecting the quality and efficiency of patient care.4
To meet prior authorization requirements, proposed patient care paperwork must be filled out and submitted to the payer prior to a procedure; however, the information entered onto the prior authorization paperwork may be different from the procedure that is ultimately performed in the operating room (OR). To further complicate matters, the staff responsible for filling out the prior authorization paperwork are often clinical staff who do not possess knowledge of billing and coding guidelines. The lack of such knowledge can result in incorrect data being placed onto the prior authorization paperwork, and some payers will not allow a retro-authorization to be done after the surgery.
For healthcare organizations, the prior authorization process is wearing down physicians as prior authorization regulations are becoming more and more cumbersome. Ultimately, payers have become the gatekeeper in determining if a patient will receive the medical services prescribed by the physician. Additionally, prior authorization rules are leading to patients deviating from the suggested course of treatment. These administrative deferments and limitations influence patients’ ability to access needed care in a timely manner. In a recent study, the American Medical Association (AMA) found 30 percent of physicians polled reported that PA has led to a serious adverse event for a patient in their care.5 Most payers have independent prior authorization policies within sub-plans, making it difficult for HCOs to streamline prior authorization procedures.6 Furthermore, it is common for providers to be unaware of which services require prior authorization.
Figure 1 illustrates an example of a current prior authorization process for a HCO.7 While this process is time-consuming for HCOs, the payer also utilizes considerable time and resources addressing prior authorization requests. A standardized, automated workflow could prove to be beneficial to all parties: HCOs, payers, and patients.
Revenue loss related to the prior authorization process for HCOs was estimated to be between $23 to $31 billion annually, and future predictions expected the impact of the prior authorization process to grow substantially.8 In the Department of Surgery at Hospital X, claims denials related to prior authorizations have been identified as a primary cause of revenue loss. Prior authorization denials make up 16 percent of the claim denials. This HCO utilizes a centralized billing office, which has resulted in there being a separation between what prior authorization processes are handled by the billing office and which processes are handled in the department of surgery. The HCO’s current system lacks a universally adopted process and exchange of data, resulting in duplicated manual approaches and no consistent method of processing and obtaining a prior authorization.
The purpose of this paper was to identify prior authorization issues that could be handled completely within the Department of Surgery without having to engage HCO employees that were not under our control. We wanted to find the root cause of these prior authorization denials, improve the accuracy of these processes, and minimize such denials in order to prevent revenue loss.
The setting of this project was the surgery department at Hospital X. Surgical divisions of the department include general surgery, urology, plastic surgery, cardiothoracic surgery, surgical critical care, hand surgery, pediatric surgery, and vascular surgery. The participants involved in this project included clinical and administrative staff in the department. Additionally, relevant billing and coding staff were included in the educational sessions for this project.
The high volume of prior authorization denials for the department necessitated a change in the prior authorization process. The Plan-Do-Study-Act (PDSA) framework, a performance improvement tool, was utilized to guide and design the implementation process of this project.
During the “plan” stage, a retrospective audit of the procedures performed by clinicians in the surgery department were conducted by the revenue cycle manager (RCM). Between July 1, 2018, and June 30, 2019, the number of denials by division, dollar amount of denials by division, and number of denials by denial code were reviewed. Based on the reports done during the phase, the top three divisions with the most past denials and the largest financial impact related to prior authorization claim denials were identified for investigation in this project. These three divisions were plastic surgery, urology, and vascular surgery.
During the “do” phase, the three divisions mentioned above were investigated for specific prior authorization “target areas” that we could focus on for process improvement. It was found that plastic surgery had a large number of denials for not completing prior authorization requirements that were unique for one payer and for excisional debridement done in the wound care clinic; therefore, this issue was chosen as our target area for improvement. The clinical staff received education on how to pre-authorize these services. In urology, it was found that the clinic was also failing to pre-authorize clinic procedures such as prostate biopsies and medication; therefore, this issue was chosen as our target area for improvement. The clinical staff were provided with educational sessions on which procedures and medications required pre-authorization, and they were shown how to perform these. Vascular surgery issues were related to cases being posted incorrectly prior to the procedure; therefore, this issue was chosen as our target area for improvement. Due to the unique process of posting OR cases, the “do” phase for this division required a different action. All elective cases posted to the operating room (OR) and catheterization lab were reviewed by the department of surgery RCM for coding including the CPT codes posted for the OR case, and the information entered onto the clinic note or progress note when the procedure was ordered to verify that accurate codes were being placed onto the OR case. Education for vascular staff included some coding education on various procedures that were found to have errors, and the “cheat sheet” that staff was using to post cases was updated and expanded.
The “study” phase involved an audit to evaluate whether the educational sessions (plastic surgery and urology) and the multidisciplinary review (vascular surgery) for elective surgical procedures achieved the desired outcomes by comparing the pre- and post-implementation audit data. Coding and billing practices of the clinical and administrative staff for certain elective procedures performed by the top three divisions between July 1, 2018, and June 30, 2019, were identified in the retrospective audit. Services performed from September 1, 2019, through January 31, 2020, were included in the post-implementation audit. In total, 2,052 procedure charges were reviewed. The audit data were documented within an excel spreadsheet. The categories included date of service, primary surgeon, procedure name, service line, location, initial CPT code(s) posted, CPT code(s) billed, charges, accuracy of billed CPT code(s), and financial impact.
Finally, during the “act” phase, a trained medical coding professional was assigned to review the prior authorization process as well as surgical case postings for prior authorization information. The desired outcome for this project was an improvement in coding accuracy, increase in reimbursement, and reduction in resources for the coding and billing of elective surgical procedures related to prior authorization processes.
Institutional Review Board (IRB) approval was not required for this project as it was a quality improvement project conducted within the Department of Surgery. No identifiable patient data were used in reporting the outcomes of this project.
The retrospective audit revealed that between July 1, 2018, and June 30, 2019, the Department of Surgery received denials related to prior authorization equated to $3,444,773. Total denial amount during this same period was $21,358,805.60, meaning that authorization related denials were responsible for 16 percent of revenue loss. During the same period, $291,217.16 in prior authorization denials were written off as uncollectible.
Three divisions with the highest financial impact from these denials were: plastic surgery with $343,839 in denials and $84,191.42 written off; vascular surgery with $309,891 denied and $25,468.67 written off; and urology with $263,841 denied and $85,034.83 written off. The plastic surgery wound care clinic received denials for in clinic excisional debridement by one specific insurer. The urology clinic procedure charges also received denials from the same specific insurer due to no pre-authorization. The clinic staff was unaware that prior authorization was required for some insurance companies. In vascular surgery, the operating room cases were often created and posted by a resident, nurse practitioner, or office employee with little to no coding or billing experience. These cases had incorrect CPT codes placed on the case, which was the information used by pre-arrival to request prior authorization. When the case was incorrect, it meant the prior authorization was incorrect as well. After review of the encounters linked to prior authorization claim denials, it was determined that one of the biggest concerns was the CPT code not matching the procedure that was authorized. Other identified challenges included registration errors and payer regulation constraints. It was determined that all three of these issues were preventable and all process changes necessary to prevent these denials could be contained within the Department of Surgery without having to involve other departments.
During the post-implementation period, 2,052 procedure charges related to this study were performed (plastic surgery, 1957; urology, 84; vascular surgery, 11). The error rates leading to prior authorization denials were determined and categorized for each division. The financial impact of the errors on reimbursement was assessed as well. Details on number of denials and revenue loss can be found in Table 1.
It was found that plastic surgery experienced 88 charges that were written off as uncollectible due to prior authorization denials during the pre-implementation audit, The charges associated with these write-offs were $84,191.42. Of these write-offs, the charges related to the pre-authorization issues we chose to work on were $22,624.75 and a total of 62 charges. The main area identified for improvement included excisional debridement services performed by plastic surgery providers at Hospital X’s wound care clinic. Authorization denials in these cases occurred due to referral information that was not specific enough for correct prior authorizations to be done prior to the patient being seen by the plastic surgery provider. Patients were often referred to the plastic surgery division with a general reason such as “chronic wound,” and an office visit was scheduled. Once patients were evaluated by the provider, it was determined that excisional debridement needed to be done that visit. However, because this encounter was set up as a clinic visit, the procedure had not been pre-authorized, which some insurers require it for reimbursement. CPT codes billed for these services were 11042, 11045, and 15275.
After the educational sessions on payer rule differences, which payers required prior authorization on clinic procedures, and what the deadline was for each payer were completed, a process for reviewing the prior authorization for the relevant insurance companies in the clinic on the day of procedures was developed and instituted. During the post-implementation period, charges written off for prior authorization denials totaled $13,946 with a total of eight charges; of these write-offs, none were charges in our target area.
It was found that vascular surgery experienced 42 charges that were written off for prior authorization issues during the pre-implementation audit The charges associated with these write-offs were $25,468.67. Of these write-offs, the charges related to our chosen improvement target area were $23,354 with a total of 12 charges. The main area identified for improvement included the process for posting vascular surgery cases accurately and a review of the prior authorization process for these services. When surgical cases are posted in the EHR at this institution, the CPT codes placed on the case are viewed by centralized billing office staff that then used these codes to request prior-authorization. Nursing and office staff determined which CPT codes to place onto the case by referring to an old cheat sheet of surgical codes. They were not aware of how these code assignments affected the authorizations being obtained by the centralized billing office, nor were they aware that some payers will not allow retro-authorization for elective cases if the charges on the claim differ from what CPT codes were chosen to post the case. The CPT codes for these cases varied greatly from case to case, so no specific CPT codes were singled out for the division.
The nursing and office staff in vascular surgery received training on payer preference for elective operative room postings. The cheat sheet that office was using was updated with current payer information as well as new codes. Staff was instructed to call the revenue manager with any coding questions prior to posting a case. After the educational sessions were completed, the project team audited vascular surgery procedures performed during the post-implementation date range. Of the 11 vascular surgery cases audited, zero were denied for prior authorization. Other write-offs for prior authorization issues totaled $35,902.30 with a total of 22 charges; of these, none were charges in our target area.
It was found that urology experienced 92 charges that were written off for prior authorization issues during the pre-implementation audit. The charges associated with these denials were $85,034.83. Of these write-offs, charges related to our chosen target improvement area were $73,527.09 and a total of 43 charges. The main area identified for improvement included education on which urology procedures required prior authorization and an update on the process for completing prior authorizations. The CPT codes that were being written off in this division were J9217 – leuprolide acetate (for depot suspension), 7.5mg, J9031 – BCG (instillation), and 55700 – prostate biopsy. These codes required prior authorization to ensure payment; however, the clinic was not performing this.
After the educational sessions were completed, the project team audited the urology procedures performed during the post-implementation period. During this period, charges written off for prior authorization denials totaled $7,698.62 with a total of eight charges; of these, none where charges in our target area.
Many providers still report a large burden related to prior authorization, with 85 percent describing the burden as “high or extremely high” in 2020.9 Periodical reviewing denials and staying current on payer rules is critically important to preventing prior authorization denials that would otherwise result in lost revenue. Through comprehensive review, we were able to identify three separate prior authorization issues that could be prevented through process changes and education. Prior authorization write-offs were completely eliminated for these target areas in all three division. Continual training and education are essential to safeguard an organization from multiple types of prior authorization denials. Overall, between pre- and post- implementation, multidisciplinary coding and billing education and training resulted in a significant decrease in resources utilized to collect payment for procedures performed.
Similar to research by Menger et al,10 this project found that provider practices should take time to research and analyze such data to make sure that they are not losing revenue that could have been prevented. The real-life implications of this study is that payer guidelines can change and differ among payers. Consistent, ongoing review of denial data helps adjust policies for each payer and ensures that practice policies stay current and meaningful.11
With the implementation of this project, a decrease of claim write-offs was actually observed in all divisions in target areas. The plan was to continue streamlining the process utilized in this project so that it could be applied in other divisions of the surgery department at Hospital X. It is important to know that there is still a considerable amount of work for the department to complete, with each different type of prior authorization issue needing to be identified and analyzed for solutions.
One strength of this project was that this was one of the first prior authorization denial prevention initiatives in our organization. The literature search also showed that very few organizations had made such efforts. Another strength was the use of the PDSA cycle, which permitted the planning and implementation of the rapid change processes and offered the opportunity for future revisions and re-implementation of this process. As to limitations, one was the lack of previous peer-reviewed research on this topic. Also the number of divisions of the department of surgery reviewed were limited to three divisions. Other divisions will be evaluated to further prevent revenue loss.
Prior authorization denials caused over $21 million revenue loss in a one-year period in the department of investigation. This project aimed to design an improved process to reduce the financial impact of such denials. Three divisions within the department that had the highest prior authorization denial rates and the largest financial impact were targeted for intervention. A comprehensive review of the existing prior authorization process was conducted. Problems were identified, accordingly educational sessions were provided, and changes were implemented. The comparison of pre- and post-intervention results showed that process changes eliminated any charges from being written off in the target areas of this study. The Plan, Do, Study, Act process that was used in this project could easily be replicated by other organizations to help prevent revenue loss. Because prior authorization issues are so complex, this process should be performed on a routine basis to continually review prior authorization issues as they arise.
1. AHIMA. “Best practices for denials prevention and management.” 2019. Journal of AHIMA, 90(3), 36-39.
2. Bendix, J. “The prior authorization predicament.” 2014. Medical Economics, 91(13), 29-35.
4. Marett, C. P. & Mossman, D. “Good, bad, and ugly: Prior authorization and medicolegal risk.” 2014. Current Psychiatry, 13(12), 36-55.
5. LaPointe, J. “Prior Authorization Burden Still High Despite COVID Struggles.” 2021, April 13. RevCycleIntelligence. Retrieved December 12, 2021, from https://revcycleintelligence.com/news/prior-authorization-burden-still-high-despite-covid-struggles
6. Ning, M. S., Gomez, D. R., Shah, A. K., Kim, C. R., Palmer, M. B., Thaker, N. G., Grosshans, D. R., Liao, Z., Chapman, B. V., Brooks, E. D., Tang, C., Rosenthal, D. I., Garden, A. S., Frank, S. J., & Gunn, G. B. “The insurance approval process for proton radiation therapy: A significant barrier to patient care.” 2019. International Journal of Radiology Oncology, 104(4), 724-733.
7. Braun, T. L., Braun, J. L., Hernandez, C., & Monson, L. A. “Insurance appeals for pediatric reconstructive surgery: A micro analysis and how-to guide.” 2018. Annals of Plastic Surgery, 80(3), 198-204.
9. American Medical Association. “Prior authorization research & reports.” 2019, August 21. Retrieved December 12, 2021, from https://www.ama-assn.org/practice-management/sustainability/prior-authorization-research-reports
10. Menger, R. P., Thakur, J. D., Jain, G., & Nanda, A. “Impact of insurance precertification on neurosurgery practice and health care delivery.” 2017. Journal of Neurosurgery, 127, 332-337.
11. Brooks, E. D., Ning, M. S., Palmer, M. B., Gunn, G. B., Frank, S. J., & Shah, A. K. “Strategic Operational Redesign for Successfully Navigating Prior Authorization Barriers at a Large-Volume Proton Therapy Center.” 2020. JCO Oncology Practice, 16(10), e1067-e1077. doi:10.1200/jop.19.00533
Karen Marble is an associate director of administration and finance in the department of surgery.
Genie Briggs is an experienced revenue cycle leader with a background in ambulatory operations and professional and facility coding and billing.
Xiaoshan Z Gordy is an assistant professor in the Department of Health Sciences, School of Health Related Professions.