In any healthcare practice, the term “prior authorization” is a synonym for red tape and administrative headaches. It’s generally viewed as a necessary evil, a time-consuming obstacle in the way of patient care and payment. Practice managers are well aware of the hours their employees spend on the phone with payers, but the real cost of this activity goes far beyond payroll.
There is a tangled web of unidentified costs, both human and financial, quietly siphoning off resources, creating staff burnout, and causing serious leaks in your revenue cycle management (RCM) system. Indirect costs, from lost productivity to turnover, can be far worse than your direct administrative costs.
In order to properly safeguard your practice’s bottom line and the health of your staff, you first need to learn about the complete extent of the issue and invest in quality prior authorization services. When you reveal these hidden costs, you can set up specifically tailored strategies to contain the damage and regain valuable revenue.
Uncovering the Hidden Costs of Prior Authorization
The actual effect of pre-authorization reaches well beyond the time consumed for one submission. It has a ripple effect of inefficiency and loss throughout your entire practice.
- The Financial Cost of Lost Productivity
The most glaring expense is the time of the staff. Research has found that medical practices dedicate almost two full business days’ worth of physician and staff time weekly to handling authorizations. But what is the opportunity cost of this time?
When your best nurses or medical assistants are busy on the phone defending an insurance company’s denial of a claim, they are not working with patients, helping with procedures, or delivering clinical services. This reduction in clinical productivity results in fewer patients treated per day, which directly affects the practice’s ability to generate revenue.
- The High Cost of Claim Denials and Rework
An ineffective prior authorization process is one of the major causes of claim denials. Where an authorization is absent, invalid, or does not conform to the final service provided, the resultant claim is automatically denied. Every denial costs $25 on average to redo, but that is only the beginning.
The procedure of probing the denial, acquiring new information, and resubmitting the claim distracts staff from other urgent revenue cycle management responsibilities, including working on accounts receivable. This causes a backlog, harms your overall payment cycle, and greatly escalates the likelihood that certain claims will be written off completely.
- The Revenue Lost due to Treatment Abandonment
When a prior authorization that is required is held up, patients experiencing chronic pain or those anxious about their health often quit. A great many patients forgo their prescribed course of care due to difficulties in receiving the authorization. It is a direct, quantifiable financial loss and one that is too often forgotten when determining the authorization process cost.
- The Human Cost: Staff Burnout and Turnover
The most destructive below-the-radar cost is likely the impact that prior authorizations have on your employees. The constant fighting with payers, the redundant and monotonous paperwork, and the stress of handling upset patients form a perfect storm for professional burnout. This is not merely a morale issue; it is also a big fiscal one.
Burnout results in decreased productivity, increased absenteeism, and eventually, employee turnover. Replacing a knowledgeable administrative staff member with a new recruit can cost a great deal, many times more than their annual compensation.
Strategic Solutions to Contain the Damage
Identifying the hidden costs is the beginning. The second step is to execute a strategic plan to reduce them.
- Centralize and Specialize Your Prior Authorization Process:
Rather than assigning authorizations to several individuals, employ a single “authorization specialist” or a small group. This concentration develops extensive expertise and productivity. These specialists master the complex rules of all payers and become phenomenally fast and productive at submitting clean requests.
This minimizes errors, reduces time spent on the job by other clinical personnel, and provides one point of accountability, lowering your cost per authorization directly. One effective means to achieve this is outsourcing the PA process to a professional team of highly qualified RCM specialists.
- Invest in a Proactive “Financial Clearance” Workflow:
Shift your mindset from securing authorizations reactively to achieving “financial clearance” proactively. This means no high-cost procedure or medication is scheduled until the prior authorization is approved and the patient’s out-of-pocket costs are understood. This workflow connects the clinical, administrative, and financial components of care. It prevents last-minute cancellations, eliminates the risk of performing an unpaid service, and provides patients with the financial transparency they expect.
- Examine Your Data to Identify Bottlenecks:
Treat your prior authorization process as any other high-impact business function. Monitor key metrics: How many authorizations do you request in a week? What is your mean approval time by the payer? What is your initial denial rate? Exploring this data will uncover the patterns of your worst problems so that you can aim your efforts where they will do the most good for your revenue cycle management.
By perceiving prior authorization as it really exists, the imperative for a strategic transformation is evident. An investment in an efficient, expert-driven process is a vital investment in safeguarding your revenue, caring for your staff, and keeping your practice healthy and strong.
