If You Want to Get Paid, Get Authorization
In medical billing, authorization describes the process where a healthcare provider like you gets approval from an insurance company before performing certain medical services or procedures. This approval guarantees that your patient’s health insurance policy will cover the services and that the insurance company will reimburse you. Authorization is a critical part of the billing process because it prevents claim denials, complies with insurance policies, and triggers timely and accurate payments.
Why is Authorization Important in Our Healthcare System?
Although patients pay for insurance coverage to help reduce out-of-pocket expenses for medical services, their insurance plan doesn’t automatically cover everything. The insurance company might require additional approval before you can perform certain treatments, procedures, or medications.
Insurance companies use the authorization process to manage healthcare costs by covering only medically necessary procedures. Authorization also helps to ascertain that certain high-cost services are only used when medically necessary and that their use isn’t being abused simply to jack up costs, since these high-end services could lead to significant claims if they’re not properly vetted. Authorization enables healthcare providers like you to get reimbursed for services rendered while minimizing the risk of denied claims.
The Three Types of Authorization
The types of authorization that you need to secure vary, depending on the services you’re requesting.
- Prior authorization (also known as pre-authorization) is the most common type of authorization; it’s required before you can provide treatment. For example, you may require prior authorization for high-cost procedures such as surgeries, diagnostic imaging (MRI, CT scans), and expensive medications.
- An insurance company could request concurrent authorization during your patient’s treatment to make sure it’s still necessary in the company’s view. For example, if your patient is receiving ongoing therapy or care, you may need to obtain concurrent authorization to continue the treatment or to adjust the plan.
- Retrospective authorization occurs after a service has been rendered, usually if authorization wasn’t obtained in advance or if the insurer needs to review whether the procedure was necessary after the fact. But this should be avoided, since it can lead to delayed payment and possible denials.
How Authorization Works
The authorization process involves several steps, which are closely coordinated between the healthcare provider’s office, the patient, and the insurance company.
- Ask, is authorization necessary? The first step is to determine whether a particular service requires authorization. Check on the type of service being provided, the patient’s insurance plan, and the insurance company’s policies. While some services require authorization, others don’t. As a healthcare provider, you should rely on the insurer’s guidelines to know which services need pre-approval.
- You request authorization. After you determine that authorization is needed, you submit a request to the insurance company that includes detailed information about the patient, the proposed procedure or treatment, and the medical necessity for the service. You submit the request through an online portal or by submitting a paper request form.
- The insurer reviews your request by analyzing the patient’s medical records and the proposed treatment plan to determine if the service meets their criteria for medical necessity and coverage. To support your request, the insurance company may require additional documentation, such as test results, physician notes, or imaging reports.
- After reviewing the request, the insurance company will either approve or deny the authorization. If the request is approved, your patient can move forward with their treatment. If it’s denied, you and your patient are notified of the reason for the denial. You can appeal the decision if you believe the service is medically necessary or if there was a mistake in the review process.
- Once the insurer grants authorization, you must document the approval in the patient’s medical records so the service can be billed appropriately when completed. Also, you must include the authorization code or reference number on the insurance claim to expedite proper processing and reimbursement.
Why Authorization is Important in Medical Billing?
- It certifies medical necessity. Authorization confirms that the insurance company views the services provided as medically necessary and reduces the chance that unnecessary or inappropriate treatments will be approved and reimbursed.
- It minimizes claim denials. If your claim doesn’t get prior authorization, the insurer is more likely to deny it. By obtaining authorization beforehand, you can avoid delays and confirm you’re reimbursed for services.
- It improves revenue cycle management. If you get authorization early in the process, you can predict your reimbursement and avoid the costly and time-consuming process of appealing denied claims.
- It complies with insurance contracts. As a healthcare provider, you’re obligated by contract to follow insurance company policies. By obtaining authorization, you establish compliance. If you don’t get the proper authorization, it could lead to audits or penalties for non-compliance.
- It protects your patients. Authorization certifies that your patients receive care covered by their insurance plan. Without it, they may be forced to pay out of pocket for services that weren’t pre-approved.
Why Can Authorization Be So Challenging?
- There can be delays in processing. Since it can take several days or even weeks to get authorization, it can delay patient care.
- Payer requirements can be complex. Because different insurers have varying policies and requirements, the authorization process can be confusing.
- It dumps an increased burden on your administrative staff. Managing authorizations can be an overwhelming bureaucratic workload, especially if you’re a smaller practice with a limited staff.
