The Importance of Preauthorization

In the medical billing world, preauthorization, prior authorization, precertification, and notification are terms that may be used interchangeably to mean that for certain situations and procedures, providers have to contact insurers in advance and obtain a certification number in order to be reimbursed properly (or at all) for services. Insurance verification and insurance authorization services play a vital role in revenue cycle management. In fact, most claim denials happen when a patient is ineligible for services billed by the provider.

Depending on what the patient's coverage documents and the provider's contract with the insurer say, neglecting to obtain preauthorization can result in reduced reimbursements or lower benefits for the patient. Services that don't require preauthorization can be subject to review in some cases. Knowing which insurers require which preauthorizations can be complex, but your medical billing software and/or precertification tools provided by insurers can help medical billing specialists navigate the preauthorization maze.

Common Procedures That Require Preauthorization

Many insurers require patients to obtain referrals from a primary care physician before seeing a specialist. Hospital admissions that don't come through the emergency department often require preauthorization by insurers. Additionally, imaging studies like MRIs and CT scans often require preauthorization or something called "prenotification," which is more involved than a referral, but less onerous than a preauthorization. These processes result in an authorization number that providers must use on claims submitted for payment.

Providers have different policies about what they do when a patient doesn't have a referral, preauthorization, or prenotification. Some providers postpone treatment until proper authorizations are obtained, while others may go ahead with a procedure and try to retroactively get authorization. 

Correct CPT Codes: The Key to a Smooth Preauthorization Process

The best way to smooth the preauthorization process is for medical billing personnel to be prepared with the correct CPT code for the anticipated services. Of course, it's not always possible to determine the exact CPT code before a service has been provided. Communication with the physician is essential so you can learn what procedures he or she anticipates performing. It's best to learn all possibilities rather than risking that a procedure will be performed without preauthorization. In other words, it's better to authorize treatment that ultimately isn't given than to perform a procedure without preauthorization and risk not being reimbursed.

In an emergency situation, patient coverage may not be known before the physician encounter. In these situations, providers are required to contact the insurer as soon as possible after the fact to obtain any necessary authorizations.

What Can Happen if You Don't Get Necessary Preauthorization?

When services are provided without expected preauthorization, what happens next depends on the insurer and the specific policy under which the patient is covered. Some insurance plans state that if a patient seeks services requiring preauthorization, but doesn't obtain preauthorization, the patient is liable for covering the payment. If a provider neglects to obtain preauthorization and payment is denied by the insurer, it may come down to absorbing the cost of the treatment or trying to collect it directly from the patient, neither of which are good options.

Can You Get Retroactive Authorizations?

With some insurers, you can get authorization retroactively, but with others, retroactive authorizations aren't given, even if failure to get it in the first place was a mistake. Still, other insurers may overturn a denial based on lack of preauthorization if appealed, but generally, they're not under an obligation to make the reimbursement if the process for preauthorization was not followed. If an insurer assigns full responsibility for payment to the patient for a procedure that wasn't preauthorized, you're put in the position of deciding whether to pursue collection from the patient.

The burden of obtaining preauthorizations is on the provider because patients don't know CPT codes and may not know when preauthorization is (or might be) required. Double-checking up front whether preauthorization is required may take some extra time on the front end, but it can save significant time later trying to chase down claims and payments and prevent having to absorb costs for procedures that weren't preauthorized.