Guide To Authorization In Medical Billing
Authorization is the process of getting approval for a medical service or procedure before it is given. This is done to ensure that the service or procedure is covered by insurance. Authorization is usually required if you need a complex treatment or prescription. Coverage will not happen without it. That’s why beginning the pre-authorization process early is essential. Let’s take a more detailed look.
What is Authorization in Medical Billing?
Simply put, authorization in medical billing refers to the process of getting permission from an insurance company before a doctor or nurse gives certain treatments, medicines, or services. This approval shows that the service is needed and that the patient’s insurance will pay for it.
A doctor or nurse might do a treatment without the right medical authorization and then find out later that the insurance company won’t pay for it. This can lead to big medical bills for individuals and loss of money for hospitals and clinics.
Why is Prior Authorization Necessary?
In medical bills, one of the most important parts of permission is prior authorization services. Many health insurance plans have to agree to pay for certain drugs or medical services before they will do so.
This is why earlier permission services are important:
Cost Control
To make sure that the treatment that is being given is the most cost-effective choice, insurance companies use prior authorization services. If there’s a better option, the insurance company might offer that instead.
Prevention of Unnecessary Procedures
Some medicines or treatments might not be needed for a patient’s situation. Prior authorization helps cut down on medical measures that aren’t needed.
Reduction of Fraud and Overbilling
By asking for medical authorization, insurance can make sure that the treatment being asked for is legal and medically necessary.
Better Results for Patients
Making sure that patients get the right care at the right time keeps problems from happening and raises the level of healthcare as a whole.
Types of Authorization in Medical Billing
Depending on when and how clearance is received, there are many forms of authorization in medical billing. Knowing these kinds will enable billing experts and suppliers to go through the system more quickly.
Pre-Authorization (Prospective Authorization)
- Most often used medical authorization forms.
- Has to be acquired before rendering a medical treatment.
- Needed for certain treatments, imaging studies (MRI, CT scans), specialist drugs, and procedures.
Concurrent Authority
- approval occurring during continuous therapy.
- Usually seen in circumstances of long-term treatments, prolonged hospital stays, and intensive care.
- guarantees continuous authorization in healthcare for continuous patient treatment.
Authorized Retrospection
- Following a procedure, medical permission is sought.
- Usually carried out in an emergency when previous permission was not feasible.
- More chance of claim rejections should the insurance company fail to identify the required operation.
How Does the Prior Authorization Process Work?
The process of getting authorization in medical billing can be lengthy and complicated. Here’s a step-by-step breakdown of how prior authorization services typically work:
Step 1: The Healthcare Provider Submits a Request
The provider’s billing team contacts the insurance company to request medical authorization for a specific service. This is done via electronic submissions, fax, or phone calls. The request includes:
Patient details
Name, date of birth, insurance policy number, and medical history.
Provider details
Name of the physician or hospital requesting the authorization.
Procedure or treatment details
The specific service being requested, along with its medical billing code.
Medical necessity documentation
Supporting documents that justify why the service is required, such as lab reports, imaging results, physician notes, and previous treatment history.
Step 2: Insurance Company Reviews the Request
The insurance company evaluates if the requested service is covered under the patient’s policy. They may consider:
Checking Coverage Eligibility
The insurer verifies if the requested procedure or medication is covered under the patient’s policy. Some treatments may have restrictions or alternative options.
Assessing Medical Necessity
Using accepted criteria, the insurance company decides if the service is medically required. To determine if the operation is warranted, they could consult clinical guidelines, expert views, or medical publications.
Comparing with Alternative Treatments
If there is a less painful or more affordable treatment choice, the insurance company may make the provider try it first (this is called “step therapy”).
Verifying Provider Credentials
Some procedures call for particular credentials or the healthcare practitioner to be in-network. The insurer might find out if the service satisfies their requirements.
Step 3: Additional Documentation May Be Required
The insurance sometimes requests more information, like medical history, lab findings, doctor’s notes, or other supporting records. Typical causes of more documentation needs are:
Missing Information
If key details (e.g., diagnosis code, provider details) are absent, the request may be delayed.
Lack of Medical Justification
If the insurer needs more proof that the service is necessary, they ask for additional medical records, test results, or physician statements.
Alternative Treatment Consideration
Sometimes the insurer asks why alternative treatments were not chosen before approving a more expensive procedure.
Step 4: Approval or Denial
If approved, the provider can proceed with the treatment. If denied, the provider can either:
Resubmit the request with additional documentation –
If the denial was due to missing or insufficient information, the provider can submit a new request with more details.
Request a peer-to-peer review
The provider can speak directly with the insurance company’s medical director to discuss why the procedure is necessary.
File an appeal
If the provider believes the denial was incorrect, they can formally appeal the decision.
Step 5: Proceeding with the Approved Service
As long as the medical authorization request is granted, the healthcare provider can schedule and carry out the treatment or service. Usually, the permission is good for a certain period—say, thirty to ninety days. Should the service fall short during that period, a fresh prior permission application might be required.
Providers should also verify:
- The approval details, including any conditions or limitations set by the insurer.
- The correct medical billing codes to avoid claim denials later.
- The patient is aware of any remaining costs not covered by insurance (such as copays or deductibles).
Step 6: Claims Submission and Final Processing
Once the service is provided, the provider submits a medical claim to the insurance company for payment. This includes:
- Patient details and insurance information.
- Procedure details, including CPT and ICD-10 codes.
- The approved prior authorization reference number.
If everything is correct, the insurance company will handle the claim and pay the provider. The claim may be refused or delayed, nevertheless, if there are disparities—that is, erroneous billing codes, and missing previous permission records.
How Long Does Prior Authorization Take?
Prior authorization in medical billing can take a while depending on a number of factors. For basic situations, the procedure might take anywhere from few hours to many days. For more difficult treatments or medications, approval can take weeks. Different insurance companies process requests differently depending on their policies and review periods.
If the situation is urgent or emergency, fast review may speed up authorization. Normal requests, however, often include more than one step—such as gathering documentation, determining if the medical need is satisfied, and maybe following up for further information. Important information missing from the request or if the provider takes a long time to respond to insurance inquiries may also cause delays.
To reduce wait periods, healthcare professionals can rely on past authorization services or medical billing organizations that specialize in streamlining the process and obtaining clearances as quickly as feasible.
Wrap Up!
Authorization in healthcare is an important step so that medical treatments and procedures are reimbursed by insurance. The process can be time-consuming and annoying for both doctors and customers, but it helps keep costs down and stops services that aren’t needed.
Studies show that prior authorization in medical billing causes delays in care for patients in almost 94% of cases. In fact, 79% of doctors say that these delays have caused patients to stop treatment altogether.
These delays can be cut down by outsourcing prior authorization services. When experts handle medical authorization, approvals happen faster, claims are denied less often, and paying goes more smoothly.
Medphoenix RCM can help if prior authorizations are making your office move more slowly. Get in touch with us to speed up the process of receiving authorization for medical billing
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