What CMS’s New Rule Means for Prior Authorization

Yesterday, the Centers for Medicare & Medicaid Services (CMS) finalized a new rule (CMS-0057-F) aimed at streamlining the prior authorization (PA) process, a fundamental but often complex and problematic aspect of healthcare delivery. The rule promises to bring considerable change to a PA system that, despite its worthy aims, has been confusing and challenging for providers, members, and payers alike.

In this article, we first review the current state of the system, including the benefits PAs are supposed to deliver and the problems they sometimes create in practice. We then describe the main provisions of the CMS rule, assess its implications, and offer some guidance to insurance payers on potential ways to respond.

Prior Authorization’s Best Intentions

While prior authorization may sometimes strike patients and providers as a needless hurdle that insurers have inserted into the caregiving process, it serves a vital purpose. Prior authorization functions as a gatekeeping tool, ensuring that the treatment or medication prescribed aligns with established guidelines and is indeed necessary for the patient’s condition. It’s a tool that’s meant to deliver three main benefits:

1. Cost Control: One of the critical benefits of prior authorization is its potential for cost control. Insurance companies hope to keep healthcare costs in check by ensuring that prescribed treatments are medically necessary, thereby avoiding unnecessary or overly expensive procedures.
2. Quality Assurance: Prior authorization also serves as a quality check. It can ensure that patients receive the most appropriate care for their specific health circumstances, thereby reducing the incidence of overmedication/adverse drug interactions and inappropriate/ineffective treatments.
3. Patient Safety: By evaluating the necessity and suitability of a prescribed test or treatment, prior authorization not only helps to ensure the quality of care, it also helps to ensure patient safety.

A Reality That’s More Fraught

Unfortunately, the implementation of prior authorization often ends up being more complex and burdensome than intended. While the process was designed to ensure optimal care for patients, it represents a significant administrative burden for healthcare providers and may result in patients delaying or foregoing necessary care. Let’s delve into some of the main challenges that arise with the implementation of prior authorization:

1. Administrative Burden: Prior authorization often involves substantial paperwork and time-consuming communications with insurance companies. This administrative burden takes away valuable time that healthcare providers could spend with their patients. In fact, a 2017 American Medical Association survey indicates that medical practices report spending an average of nearly two full business days (14.6 hours) per week per physician on prior authorization activities.
2. Delayed Care: The time required to obtain a prior authorization can lead to delays in treatment. In urgent cases, these delays can have serious implications for patient health and wellbeing. A 2022 American Medical Association survey of more than 1,000 physicians found that 94 percent reported care delays while waiting for insurers to authorize necessary care, and 80 percent said that patients’ struggles with insurance companies related to prior authorization can at least sometimes lead to treatment abandonment. When asked about their perception of the overall impact of PAs on clinical outcomes among their patients, 89 percent reported a somewhat or significant negative impact.
3. Inconsistent Requirements: Inconsistencies in prior authorization requirements among different insurance companies can lead to confusion and increased administrative workloads.

The prior authorization process represents a balancing act between cost control, quality assurance, and patient safety on the one hand and the need for efficient, timely care on the other. While it offers significant benefits, it’s clear that the current prior authorization process needs to be improved to reduce the administrative burden on healthcare providers and ensure prompt, consistent care for all patients.

The Value Proposition of CMS-0057-F

The Centers for Medicare & Medicaid Services (CMS) just published the CMS Interoperability and Prior Authorization Final Rule (CMS-0057-F), which should alleviate some of the problems and frustrations associated with prior authorization.

Reducing Administrative Burden: The rule intends to streamline the prior authorization process by improving data exchange between healthcare providers and payers. By digitizing and automating the submission and retrieval of prior authorization requests and responses, CMS aims to reduce the administrative burden on healthcare providers.

Minimizing Care Delays: The rule intends to speed up the prior authorization process by requiring that payers respond within 7 days for standard requests and within 72 hours for urgent cases. These shorter response times aim to minimize sometimes dangerous delays in patient care.

Standardizing Requirements: The rule aims to establish industry-wide standards for prior authorization processes. By creating a uniform set of requirements, CMS hopes to minimize confusion and simplify the process for healthcare providers and patients alike.

This new rule will transform the prior authorization process. While it may not entirely eliminate all the challenges associated with prior authorization, it represents an important step towards a more efficient, streamlined, and patient-centric healthcare system.

What It Means for Payers

With the CMS-0057-F rule’s implementation dates of January 1, 2026 and January 1, 2027, proactive payers should take the following four steps to prepare:

• Invest in Technological Infrastructure: Payers should prioritize investing in technological infrastructure to streamline data exchange. The rule stresses the importance of digitization and automation in the submission and retrieval of prior authorization requests. Upgrading systems is crucial for maintaining efficient communication with healthcare providers.
• Ensure Timely Response: Payers must ensure that their systems are equipped to respond to prior authorization requests within the stipulated timeframes. This may require internal process optimization and staff training to handle the increased efficiency demanded by the rule.
• Standardize Prior Authorization Requirements: The rule calls for the standardization of prior authorization requirements. Payers should be prepared to align their existing processes with industry-wide standards, which may involve restructuring guidelines and communication protocols.
• Establish Open Communication: Payers should establish open lines of communication with healthcare providers. Understanding the challenges and needs of providers can help payers develop more efficient and user-friendly prior authorization processes. This collaborative approach can also aid in a smoother transition and implementation of the new rule.

New federal regulations are rarely welcome. But properly viewed, the new CMS-0057-F rule presents an opportunity for payers to greatly improve their own systems and processes, while also enhancing the efficiency and effectiveness of healthcare service provision for the benefit of all stakeholders involved. Look out for our follow-up article on how payers should respond to the new rule, focusing on more detailed actionable recommendations on each of its major provisions.

Bottom Line: It’s a Process Transformation

Managing, and ultimately benefiting from, the transformation prompted by CMS-0057-F will require payers to do more than just adopt new technologies and administrative processes. These technologies and processes will also have to be made user-friendly. Effective communication is also paramount. As the prior authorization system evolves, constant and clear communication among all stakeholders is essential. This not only means communicating changes in procedures, but also providing channels for feedback that foster an environment of collaboration and mutual support. Above all, the transformation calls for a comprehensive understanding of the evolving healthcare landscape and intelligent navigation of its complexities.

To make the most of this transformation and unlock its full potential, finding the right partner is vital. Contact us at info@terrygroup.com to learn more about how Terry Health applies its process management, data science, compliance, and change management expertise to help organizations prepare.