Automated Prior Authorization: A High-Value Opportunity

Digital Operations
Automated Prior Authorization:
A High-Value Opportunity
InthefaceofmanualPAproliferationandpressurefromthevalue-basedcare
model,theneedisgrowingforreal-timeelectronicPAsystemsthatwilleasethe
administrativeburdenonstakeholdersthroughoutthehealthcareecosystem.
Executive Summary
Though prior authorization (PA) is an important tool
for controlling the rising cost of U.S. healthcare, it also
represents a common pain point for both payers and
providers in terms of cost and administrative burden.
These burdens can also act contrary to organizations
moving toward value-based care and a consumer-
centric healthcare system. Electronic and automated
PA systems can lower the costs and burdens of the PA
process for all parties, but not all solutions are created
equal or deployed effectively. To identify and understand
current and future trends, obstacles and opportunities in
PA, Leavitt Partners conducted a series of interviews with
medical and pharmacy directors from payers, including
health plans and pharmacy benefit managers (PBMs),
across the U.S. regarding their PA process, challenges
and best practices.
Cognizant 20-20 Insights
May 2019

For large providers, it’s possible to achieve an effective PA
process, but only with a lot of dedicated manpower, a specialized
team, and a relatively high level of investment. Smaller
organizations would find it much more difficult to develop the
needed staff and expertise to interact with all the payer systems
in a timely manner for patients.
ww Interviewee
The administrative and cost burden of PA
As healthcare costs have continued to rise, payers
are increasingly focusing on PA as a utilization
management tool. The percentage of medical
claims referencing PA increased on average by
2.3% from 2011 to 2013, with some payers doubling
and tripling the number of care events that require
authorization.1
These statistics do not include
pharmaceutical PAs, so the number is most likely
much higher when factored in.
Eighty-six percent of physicians report that the
burden of PAs has increased over the past five
years. One study estimated that on average, PA
requests consumed about 20 hours a week per
medical practice: one hour of the doctor’s time,
nearly six hours of clerical time, plus 13 hours of
nurses’ time.2
On the payer side, PA systems can
require a substantial investment both in the initial
development of a system and in human capital to
have qualified experts review and make decisions
on PA submissions.
PA costs quickly compound into a significant
burden. One study estimated that when time is
converted to dollars, practices spent an average
of $68,274 per physician per year for interacting
with health plans. This equates to between $23
billion and $31 billion annually.3
About one-third
of doctors are using dedicated data-entry staff to
handle PA requests, which incurs an extra cost;
for the other two thirds of doctors, the PA process
reduces the time available to see patients.4
Care
interruptions caused by PA delays are also costly.
A cancelled appointment or procedure due to a
missing or denied PA results in lost revenue, and
expensive staff and equipment sit unused.
2 / Automated Prior Authorization: A High-Value Opportunity

The opportunity cost of electronic PA
The high cost burden of PAs presents an equally
large opportunity. A 2018 study found that
electronic PA could save as much as 416 hours
per year for a physician and his or her staff.5
Additional research estimated that the average
cost to a provider for a fully electronic PA was
$1.89, compared to $7.50 for an entirely manual
authorization.6
PAs with attachments have shown
a high savings opportunity per transaction, with
savings estimates upward of $45 per transaction.7
In one report, providers that exclusively used
electronic PAs for medication requests reduced
their administrative workload by 2.5 hours each
week. Modernizing the system can lower cost
not only in terms of manpower and time, but also
through other considerations like devices, space or
toner usage over the long term.
But for some, the move to electronic PA systems
has yet to result in significant cost savings and/or
personnel reduction. Many interviewees seemed
to fall into a dissatisfactory “middle ground” of
investing in an expensive, and sometimes unwieldy,
electronic solution that had not yet resulted in
being able to relieve staff due to automation.
Several interviewees reported having to increase
the size of their PA teams in recent years despite
the introduction of electronic tools, saying that
the tools hadn’t become sophisticated or tailored
enough to save time or personnel. Additionally,
several interviewees reported that PA/electronic
health record (EHR) systems often remain
incompatible, so providers must manually pull the
necessary records to submit as part of a PA.
We have seen a high
level of success with a
highly automated PA
system based on clinical
pathways, and we’ve been
able to pass the savings
from this system on to
consumers in the form of
lower premiums, enabling
us to stay competitive in
our market.
ww Interviewee

Lack of agreement about what is possible in terms of PA
Currently, the vast majority of payers (96%)
are committed to implementing electronic PA
solutions as a way to address administrative
problems with procedures.8
But actual adoption
of electronic systems has lagged far behind other
transaction types, as the percentage of plans and
providers that use fully electronic systems remains
in the single digits (see Figure 1). Over one third
of PA systems are still fully manual.9
The variance
across systems compounds this problem – 76% of
providers report working with a combination of fax,
phone and electronic channels.10
There is a lack of
industry consensus around what is even possible in
terms of a real-time automated PA solution.
Quotes from three interviewees illustrate the
broad difference of opinions among payers:
Payer A
“A fully electronic system with
no delay is the ideal, but it
doesn’t exist and may not be
developed within the next 10
years.”
Payer B
“The technological capability
for an effective PA system
may exist, but someone needs
to invest in customizing and
maintaining it.”
Payer C
“An ideal-state PA system is
achievable – we try and often
succeed to have all necessary
PAs completed before our
patients leave the office.”
Adoption of Electronic PA by Medical Plans and Providers
Figure 1
Source: 2017 CAQH Index
56%
7%
38%
58%
10%
32%
47%
19%
35%
57%
8%
35%
FULLY ELECTRONIC PARTIALLY ELECTRONIC FULLY MANUAL
2014 2015 2016 2017
Further, all interviewees wanted a more automated
system, but many expressed concern that critical
decision-making is needed for patients who might
have a complex case or be exceptions to the rule.
They worried that a fully automated system would
see these patients slip through the cracks.

The potential of automation
A transition to automation presents new
opportunities. Though electronic solutions have
proved they can save significant time and money,
even processes that use electronic aspects often
include manual components either on the provider
or payer end, especially with many diverse and
non-interoperable systems. For example, some
providers send PAs manually to a clearinghouse or
another partner that then converts these records
to an electronic format for the payer. Conversely, a
provider may have to manually submit information
using a payer web portal; while the process is
“electronic” on the payer end, the transaction still
takes time and resources for manual input on the
provider end. These manual inputs can create
bottlenecks that leave PAs taking days to process.
Automated PAs would use a solution that
automatically matches the request to parameters
set by the payer to ensure accuracy. Once
eligibility, benefits design and clinical guidelines
are met, the authorization can be instantly
adjudicated and returned to the provider while
the patient is still in office. Those requests that
contain errors or do not conform to payer rules
would be flagged and returned to the provider just
as quickly for correction. Effectively leveraging
the power of real-time automation can be a key
solution for payers and providers who feel they are
investing in electronic PA systems without seeing
a high enough ROI, as well as opening the current
bottleneck of care for patients.

The responsibility of making PA work for patients
The statistics on PA turnaround time can be
staggering and have real implications for effective
care delivery:
❙❙ 64% of physicians report that they have waited at
least one business day for a PA decision and 30%
say they have waited three or more business days.
❙❙ 79% of providers report that they are sometimes,
often or always required to repeat PAs.
❙❙ 92% of physicians say that PA programs have a
negative impact on patient clinical outcomes.
❙❙ Patients often become discouraged by the PA
process, with 78% of doctors reporting that
PA can at least sometimes lead the patient to
abandon treatment.11
These challenges can interfere with provider care
plans, especially as physicians might not immediately
know that a delay has occurred. For example, a
consumer may be prescribed a medicine and
expect to be able to enter the pharmacy and pick
it up right away, only to discover that a PA was not
yet approved. Patients can become confused and
frustrated with their payer, pharmacist and physician.
The PA process and its associated delays present
significant problems for pharmacists and patients.
The majority of prescriptions (66%) rejected at
the pharmacy require PAs, amounting to about
300 million PA requests per year.12
Of those
prescriptions, 36% are abandoned. Resolving
PAs can cost pharmacists just as much time as
physicians, and many patients will associate that
delay with the pharmacist, while the pharmacist
feels the issue rests with the payer. One interviewee,
a director at a specialty pharmacy, reported that it
typically takes one to three days to get a PA, which
in her view is most often an unnecessary delay. The
high volume of PAs processed by her pharmacy
has allowed her to determine with relative certainty
which PAs are merely a formality (i.e., approval is
almost always given) and which are clinically justified.
Patient Impact of PA
Figure 2
Source: CoverMyMeds Analytics
About 1 in 10 prescription claims are rejected at the pharmacy.
66%
of rejected
prescriptions
require PA.
33%
of these will be
abandoned by
the patient.

Net promoter score is critical, and physician satisfaction is
hugely important to the net promoter score. A PA system that
providers are happy with affects that a great deal. Net promoter
score is also linked to a patient’s relationship with their doctor,
so when care is more seamless, scores go up.
ww Interviewee
This implies that an automated PA system could
significantly reduce the time burden for patients
and the cost burden for providers by drastically
decreasing PA turnaround time. This would also
result in increased patient satisfaction and better
medication adherence.
While parties agree that PAs take too long,
payers and providers often disagree on whose
responsibility it is to tackle this problem. Some
payers prefer to rely on the “sentinel” effect of PAs
to avoid delays – expecting physicians to learn the
medication formularies or clinical guidelines for all
the payers they work with and avoid prescribing
drugs or procedures they know to be PA-
dependent. Physicians may not regard this as their
responsibility, and they feel that payers should be
accountable for creating an efficient PA system so
their members do not experience care delays.
At the bottom line, an effective PA system requires
buy-in on both sides of the equation. While it can
be difficult to make changes to an entrenched
PA system, doing so can improve payer-provider
synergies. An ideal-state PA solution requires an
initial investment on the part of payers, but over
time it can broker trust with physicians by limiting
their administrative burden and helping to ensure
that their patients’ well-being is a priority.

PA and the transition to value
The growing shift to value-based care is driving
demand for improved PA tools and processes.
Value-based care introduces more financial stress
for providers,13
and a PA system causing care
delays that interrupt clinical pathways affects a
patient’s satisfaction with their provider, or affects
patient adherence to treatment guidelines that
can present a risk for organizations participating in
value-based care.14
When flaws in the PA system
have detrimental effects on patient care, this affects
quality outcomes that are important to value-based
contracting. A truly effective PA system can help
value-based care and PAs work to achieve similar
goals of cutting cost and eliminating unnecessary
utilization while maintaining positive health
outcomes. Interviewees agreed that the more
satisfied providers are with their PA system, the
more likely they are to change their behavior over
time based on PA feedback, rather than consider
PAs as a flawed system or a barrier to effective care.
One pharmacy director at a regional, provider-
owned health system reported that risk-bearing
entities tend to have a significantly lower number of
PA denials despite having seemingly similar systems
and decision-making processes. The interviewee
suggested that the decrease in both PA requests
and denials from value-based organizations can be
attributed to incentives that encourage doctors to
avoid using PAs altogether. These incentives may

align with explicit organizational mandates (e.g.,
prescribing cheaper drugs where possible to save
money), but may also be the result of physicians’
desire to avoid the added expense and hassle of
the PA process for which they receive no additional
compensation.
The ongoing transition to value will present
opportunities for payers and providers who are
looking to mutually improve the PA process and
align incentives and risks. A 2018 Consensus
Statement by the AMA, AHA, AHIP and other
organizations stated that while PA can help to
maximize the value of healthcare spending,
improving the process is critical for patients
and doctors. The statement recommended
that healthcare leaders “reduce the number
of healthcare professionals subject to prior
authorization requirements based on their
performance, adherence to evidence-based
medical practices, or participation in a value-based
agreement with the health insurance provider.”15
Physicians who are willing to participate in
agreements where they are held accountable for
cost and performance will likely welcome reform to a
PA process that supports them in these goals.

Looking ahead
PA is poised to undergo a major transformation
as both payers and providers struggle to fully
make the switch to electronic models. As PAs will
continue to be an important cost-containment
tool for payers and plan sponsors, the importance
of a system that works for today’s providers
and patients only grows. Value-based care
arrangements and rapidly developing health
information technologies will also drive motivation
and capability to make the change.
There is a key opportunity for payers and providers
to reduce administrative and cost burden through
the implementation of electronic and automated
solutions. As accountability for patient outcomes
and costs becomes increasingly important across
healthcare stakeholders, an effective PA system can
also play a role in bringing value to the point of care.
A real-time automated solution has the potential
to tackle administrative and clinical requirements,
increase payer-provider cooperation and ensure
that patients get the proper care when they need it.

Endnotes
1 Bricker, Eric, “Healthcare Insurance Carriers Requiring Prior Authorization: Stats and Trends,” Compass, 2013, https://alight.
com/compass.
2 Casalino, Lawrence, et al., “What Does It Cost Physician Practices to Interact With Health Plans?” Health Affairs, July/August,
www.healthaffairs.org/doi/full/10.1377/hlthaff.28.4.w533.
3 Ibid.
4 “Survey: Patient clinical outcomes shortchanged by prior authorization,” American Medical Association, March 19, 2018,
www.ama-assn.org/survey-patient-clinical-outcomes-shortchanged-prior-authorization.
5 Mendelowitz, Josh, “What’s Wrong with Prior Authorization for Medication and How to Fix It,” Healthcare.com, Aug. 28,
2018, www.healthcare.com/blog/how-fix-prior-authorization-medication/.
6 Mattson-Hamilton, Michelle, “A review of electronic prior authorization technology,” TechTarget, June 9, 2017,
https://searchhealthit.techtarget.com/feature/A-review-of-electronic-prior-authorization-technology.
7 “2015 CAQH Index,” Council for Affordable Quality Healthcare, March 12, 2015, www.caqh.org/sites/default/files/
explorations/index/report/index_guide.pdf.
8 Morra, Dante, et al., “U.S. Physician Practices Versus Canadians: Spending Nearly Four Times as Much Money Interacting
with Payers,” Health Affairs, August 2011, www.healthaffairs.org/doi/pdf/10.1377/hlthaff.2010.0893.
9 Beaton, Thomas, “Payers, Providers Pledge to Improve Prior Authorizations,” Health Payer Intelligence, Jan. 18, 2018,
https://healthpayerintelligence.com/news/payers-providers-pledge-to-improve-prior-authorizations.
10 “2017 CAQH Index,” Council on Affordable Quality Healthcare, 2018, www.caqh.org/sites/default/files/explorations/index/
report/2017-caqh-index-report.pdf.
www.ama-assn.org/survey-patient-clinical-outcomes-shortchanged-prior-authorization.
12 “ePA National Adoption Scorecard,” CoveryMyMeds, 2018, www.covermymeds.com/main/pdf/cmm-scorecard-2018.pdf.
13 Japsen, Bruce, “Move to Population Health Hits Hospital Finances,” Forbes, Sept. 21, 2018, www.forbes.com/sites/
brucejapsen/2018/09/21/move-to-population-health-hits-hospital-finances/#bfd483f78fba.
www.ama-assn.org/press-center/press-releases/survey-patient-clinical-outcomes-shortchanged-prior-authorization.
15 “Health care leaders collaborate to streamline prior authorization,” American Medical Association, Jan. 17, 2018,
www.ama-assn.org/press-center/press-releases/health-care-leaders-collaborate-streamline-prior-authorization.

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