Why are Prior Authorizations so Painful?

So why are prior authorizations so painful?  As a young pediatric surgeon trying to build a practice back in 2012, this was precisely the question I asked myself every month as I looked through my accounts receivable (AR) reports.  Prior authorizations were consistently my largest source of denied payments and write-offs.  On top of that, prior authorizations were a constant source of frustration for both my office staff and my patients in getting care delivered.

Fast-forward five years and it doesn’t seem like things have gotten much better with prior authorizations.  Some would even say that it has gotten worse with time.  That’s why I co-founded Voluware to create a smarter way to automate prior authorizations.   Here are some of the disturbing facts about the costs of managing prior authorizations:

1. The American Medical Association (AMA) reported an estimated $23 – $31 billion is spent annually by U.S. healthcare providers on prior authorizations.
2. A Health Affairs article in 2011 estimated that $83,000 was the average spend per physician on interactions with insurance companies.
3. The Kaiser Family Foundation estimated that 864.8 million hours per year are spent by physicians on prior authorizations.

So why prior authorizations are so painful?  I’ll share some insights gained during my 5-year journey in understanding and fixing the thorny issues around prior authorizations:

1. Prior authorizations are extremely manual processes. Whether it’s paper fax forms or typing data into a clunky payer web portal, the act of requesting a prior auth is an intensely manual activity.  In some of our time-motion studies, it took around 16 minutes per authorization to fill out forms by hand and fax in.  It can be even worse when you need to call for authorization as you face an eternity on hold.
2. Why are prior authorizations so manual? Prior authorizations are so incredibly manual because of a fundamental lack of interoperability. None of our existing information systems on the payer side and the provider side seem capable of meaningfully exchanging data. Within this gap, manual faxing or data entry into a web portal represents the lowest common denominator integration of the information in the respective workflows of business partners.
3. Why is there no interoperability of information systems when it comes to prior authorizations?  Despite having an electronic standard for prior authorizations (EDI 278) for well over a decade, a fundamental inability to handle the complexities of prior authorizations at a local level has hampered meaningful adoption.  Much like politics, all healthcare is, for the most part, fundamentally local. That means local contractual agreements and local provider networks. and homegrown or outdated information systems never constructed to seamlessly transact data.
4. Why can’t information systems seamlessly transact data? This boils down to two very fundamental issues. The first is that most systems, whether they are EHRs on the provider side or utilization management systems on the payer side, are old. Like 1970’s MUMPS and DOS old. These systems were never designed to keep up with the constantly changing business requirements and were certainly never built to talk to one another. The second issue is the more challenging of the two. Every system, whether it is on the provider side or payer side, is designed to act as its own source of truth. Even if two systems were able to talk to each other, without an efficient method to reconcile and normalize the data between systems renders any brute force integration effort ineffectual.

Well, I hope that this was a useful primer on why prior authorizations are so painful.  Stay tuned as I delve deeper into the nuts and bolts of the above-mentioned pain points, and show you how our Valer platform was designed to automate prior authorizations.  Please reach out if you would like to learn more: Valer® Team.