3 reasons to re-evaluate your prior authorization strategy

2017 03 09 15 50 50 218 Nanos Peter 400

Reducing the administrative complexity of health could save $40 billion annually.1 As government mandates and payor guidelines grow more complex, it becomes increasingly important to prevent claim denials by streamlining the prior authorization process so that every dollar due can be collected. The complex process of manually securing prior authorization is fraught with heavy administrative burdens that eat valuable time and money, and cause headaches for everyone involved.

More providers are turning to automated ordering systems to remain competitive in today's changing healthcare landscape. These systems not only enable physicians to enter imaging orders in real-time and receive results the same day, but are also effective in overcoming the obstacles associated with manual prior authorization.

There are three good reasons why now might be the perfect time to swap out manual prior authorization for an automated, streamlined process that will help providers, patients, and payors alike.

1. Lower administrative costs and reduced risk of denials

Healthcare providers are continually looking for ways to drive down operating costs and increase revenue while maintaining care quality. The nonprofit alliance CAQH, which focuses on streamlining the business of healthcare, reported that the costs associated with administrative tasks consume more than $300 billion annually in the U.S. healthcare system.2 Many of these administrative tasks can be cut by streamlining prior authorizations.

Peter Nanos from Merge.Peter Nanos from Merge.

Numerous additional expenses, seen as human capital costs, are applied toward rectifying inefficient healthcare claims processing and payment, as more than a third of physicians surveyed by the American Medical Association reported having staff who work exclusively on prior authorization.3

By upgrading to electronic prior authorization systems, providers can decrease the risk of denials and increase reimbursement. For example, one location that was surveyed tied an annual revenue increase of $1.2 million to recovered revenue from eliminating imaging denials once prior authorization services were offered.4

2. Redirect time saved to patients

Introducing the use of electronic transactions in the complex communications process between healthcare providers and insurers can make significant improvements to claims success. A manual system forces providers to bear the responsibility of making phone calls to verify claims, sending faxes, or mailing claims, which are time-consuming activities that set the stage for human error.

Instead of navigating multiple online portals -- incurring time, effort, and nuisance -- healthcare practices and medical imaging providers can manage orders in a centralized location with an automated system. This helps reduce the estimated 10 to 20 hours per week that clinical staff members spend obtaining prior authorizations4 and lowers the time spent per transaction from 20 to six minutes.1

By reducing the amount of time physicians dedicate to paperwork and back-and-forth conversations due to denials and additional requests for claims, they have more time to spend with patients. For some perspective, nearly 90% of physicians surveyed reported that prior authorization sometimes, often, or always delays access to care.2

Electronic systems can initiate automated prior authorization processes for hospitals and imaging centers, which in turn helps reduce front-end denials. In 81% of instances where claims are denied for imaging orders, prior authorization was either not obtained or not handled properly.5

Physicians and other providers are often overwhelmed by claim denials that occur frequently with a manual claims process. Time is money. Reducing the time clinical staff members spend on prior authorizations can cut costs and free up time that can be better focused on delivering patient care.

3. Retain a competitive advantage

To remain competitive, providers, hospitals, and health networks must re-examine and update their prior authorization strategies. With myriad provider options, patients look for those who can meet their demands for efficiency and timeliness. The healthcare industry continues to make significant strides toward full adoption of electronic transactions. As progress continues, all providers must keep up to meet the growing demand.

Most imaging programs are investing in automated prior authorization, and several states are expected to take legislative actions to standardize the processes in the coming years. In 2015, 10 states had uniform prior authorization.6 And several payors, such as the U.S. Centers for Medicare and Medicaid Services, have begun requiring adoption of certain transactions as part of contractual agreements with providers.1

Supporting this movement is a coalition of 16 healthcare organizations that urge health plans, benefit managers, and others to reform prior authorization requirements imposed on medical tests, procedures, devices, and drugs.2 With the introduction of coalitions, legislative actions, and government initiatives, upgrading to an electronic prior authorization system is a requirement to remain competitive in the marketplace.

Painless conversion

It is clear that healthcare providers must update their prior authorization systems now or risk being left behind. The transition from a manual to automated system can be both seamless and painless if due care is given to vendor selection. It can bring significant returns to providers, including lower administrative costs, reduced staff time spent on administrative tasks, fewer claim denials, improved cash flow, more time to deliver quality care, and the ability to remain competitive.


  1. Ensuring a healthier tomorrow. American Hospital Association website. http://www.aha.org/content/13/healthtomorrow-report.pdf. Accessed February 8, 2017.
  2. 2016 CAQH Index: A report of healthcare industry adoption of electronic business transactions and cost savings. CAQH website. http://www.caqh.org/sites/default/files/explorations/index/report/2016-caqh-index-report.pdf. Accessed January 23, 2017.
  3. American Medical Association. Healthcare coalition calls for prior authorization reform. Marketwired website. http://www.marketwired.com/press-release/health-care-coalition-calls-for-prior-authorization-reform-2190834.htm. Accessed January 25, 2017.
  4. Seven steps to take control of imaging preauthorization. Advisory Board website. https://www.advisory.com/-/media/Advisory-com/Research/IPP/Resources/2013/26546_IPP_IG_Poster.pdf. Accessed January 12, 2017.
  5. Merge Healthcare launches new business unit to automate prior authorization and improve referral success. Merge Healthcare website. http://www.merge.com/News/Article.aspx?ItemID=650. April 9, 2015. Accessed January 5, 2017.
  6. Smith VK, Gifford K, Ellis E, et al. Implementing coverage and payment initiatives: Results from a 50-state Medicaid budget survey for state fiscal years 2016 and 2017. Kaiser Family Foundation website. http://kff.org/medicaid/report/implementing-coverage-and-payment-initiatives-results-from-a-50-state-medicaid-budget-survey-for-state-fiscal-years-2016-and-2017/. October 13, 2016. Accessed January 5, 2017.

Peter Nanos is vice president of Solutions Management at Merge, an IBM company. In his role, he is responsible for developing the strategy and road maps for solutions that allow referring physicians and imaging centers to electronically exchange orders, reports, and images. He is also responsible for the Merge Lab products.

Prior to joining Merge, Peter held a variety of roles in IT and imaging informatics at the University of Chicago Medicine. He managed the department of radiology IT informatics portfolio, which included infrastructure and application development.

The comments and observations expressed herein are those of the author and do not necessarily reflect the opinions of AuntMinnie.com.

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