Appropriate care and better outcomes are the goals of utilization management, including prior authorization. But the processes to achieving these goals need to become more efficient.

By Medecision

Improving outcomes and delivering high-quality care are top priorities for all healthcare industry stakeholders. Despite this, the healthcare industry is broken and complicated and often uses outdated processes and systems. A prime example of this is utilization management.

In 1989, the Institute of Medicine defined utilization management (UM) as a “set of techniques used by or on behalf of purchasers of healthcare benefits to manage healthcare costs by influencing patient care decision-making through case-by-case assessment of the appropriateness of care prior to its provision.”

More than three decades later, that definition is still true—but utilization management has taken on new meanings for the healthcare industry over the years. When the healthcare industry operated under a fee-for-service model, UM was primarily used to reduce costs. Now, with the industry’s continued shift toward a value-based care payment model, UM is leveraged not only as a cost-cutting strategy but also as a method to ensure quality and manage risk.


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However, many UM processes and strategies are still manual—making them inefficient, time-consuming and expensive. Take, for example, prior authorization. Payers use prior authorization to determine and verify whether a procedure, treatment or drug is medically necessary before it is completed or prescribed. The ultimate goal of prior authorization is to improve patient outcomes by ensuring a patient receives the most appropriate treatment or procedure while also reducing waste or error. However, this can be a lengthy and cumbersome process.

For instance, a physician may order lab tests or imaging. The lab receives the order and checks for prior authorization requirements, contacting the health plan. A representative from the payer organization reviews the patient information and either rejects or approves the order. Too often, this process is completed via fax and manual entry, and can take days or even weeks.

These delays can lead to poor patient outcomes. In the 2020 AMA Prior Authorization Physician Survey, 30% of physicians reported that prior authorization had led to a serious adverse event for a patient in their care. An astonishing 90% said that for patients whose treatment requires prior authorization, they feel it has a somewhat or significant negative impact on their patients’ outcomes.

Appropriate care and better outcomes are the goals of prior authorization and utilization management—but the processes for achieving these goals need to become more efficient.

Enter automation.

Automation Advantages

The automation and digitization of certain processes—specifically with prior authorization and utilization management—can free up staff to perform higher-value tasks. Automation can help make the prior authorization process more efficient, reduce wait times, and allow care managers to focus on authorizations for higher-cost services, drugs and procedures.

Earlier this year, the Centers for Medicare & Medicaid Services (CMS) passed the “Interoperability and Prior Authorization” final rule. The rule, which has not been implemented by the Biden administration, would not go into effect until January 2023. If implemented, it would require certain health plans (Medicaid and Children’s Health Insurance Program managed care plans and fee-for-service programs, individual market Qualified Health Plans, and federally facilitated exchanges) to use application programming interfaces (APIs) built to the Health Level 7 (HL7) Fast Healthcare Interoperability Resources (FHIR) standard to give providers access to more data and make the prior authorization process more efficient. The API must be able to send prior authorization requests and receive responses electronically—and the rule requires payers to send decisions within 72 hours for urgent requests and seven calendar days for standard requests.

While this new rule doesn’t apply to all health plans, it’s one that payers should subscribe to regardless of requirements. Automating the prior authorization process has a slew of benefits, including:

  • Administrative savings. In 2020, total spending on prior authorization amounted to $767 million—with 86% of the spending incurred by providers. However, the CAQH Index estimates that nearly $417 million could be saved each year if plans and providers switched to fully automated transactions. The cost to complete a prior authorization manually costs $13.40 per transaction and $7.19 per partially electronic web portal transaction. Money isn’t the only thing that can be saved, however—time is also of the essence. One study found that a manual prior authorization required 21 minutes of provider staff time, while electronic transactions can be completed in four minutes.
  • Increased patient/provider satisfaction. With an automated process, both providers and patients experience reduced wait times. Solutions with industry-leading automation can help plans achieve faster turnaround times. For example, when one client switched to Aerial from its home-grown system, it achieved 57% faster turnaround times. Authorization requests were automated and integrated directly into Aerial, with efficient, expedited workflows and auto-approval rules that reduced turnaround times and the time and expense associated with more manual processes. An additional benefit was an increase in provider and patient satisfaction.
  • Focused care on at-risk individuals and populations. Routine requests like lab work, outpatient imaging or therapy can be approved automatically and electronically, freeing up care managers and UM staff to focus attention on high-cost services, treatments or procedures for at-risk patients.

As the healthcare industry continues to move toward value-based care, payers and providers alike will be tasked with improving the patient experience and also managing costs. To learn more about utilization management through the lens of value-based care, click here to download our free whitepaper.

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