Prior authorization is an integral but often difficult part of billing for durable medical equipment. Prior authorization acts as a process for ascertaining the in-pocket coverage of certain DME items by the insurer of a particular patient before they’re provided to the patient.
In the absence of prior authorization, DME providers are at risk of having claims denied and payments delayed and face increased administrative burdens. As demand for DME rises, with the worldwide DME market predicted to grow at a CAGR of 5.3% from 2022 to 2028, effective revenue cycle management methods, such as obtaining prior authorization, are critical to maintaining this development.
Let’s look at how neglecting PA in DME billing can have major financial consequences and affect patient care.
Risks of Inadequate Prior Authorization in DME Billing
Dodging prior authorization leaves DME providers vulnerable to the following risks:
Risk of Higher Claim Denials
DME claims are denied due to lack of prior authorization, creating significant revenue losses. Each denied claim requires extensive follow-up, adding to the time and cost burden on billing teams. The average cost of reworking a rejected claim can roughly be $25, but for complex claims such as DME, this cost can soar to $118 per claim, putting a substantial burden on providers’ resources.
Delays in Reimbursement and Disruption to Cash Flow
Lack of authorizations can cause claims denial, and providers end up waiting for considerable periods. This disrupts cash flow and stretches the resources of small DMEs, as they cannot be efficient due to such disruptions.
Increased Administrative Waste
Denied claim processing and appeals demand some time and resources that could be spent on other productive activities. For smaller practices, the time spent managing these denied claims limits their ability to handle other billing tasks, resulting in inefficiencies and higher operational costs.
Erosion of Patient Confidence
Failure to secure PA interrupts patient treatment because patients may experience delays in receiving critical medical equipment. This frequently causes frustration and discontent among patients, which can harm the provider’s reputation.
Compliance Issues and Legal Repercussions
Failing to adhere to payer PA requirements can lead to compliance violations. For example, submitting claims without obtaining prior authorization is considered non-compliant billing, which could expose providers to audits, potential fines, and even legal action. Providers who repeatedly ignore Prior Authorization risk being flagged by insurers, possibly affecting future reimbursements and causing long-term financial harm.
Why Prior Authorization Is Often Missed
DME billing often fails to include prior authorization for several reasons:
- Insurance agencies vary their requirements for each policy, so there is a lot of work to stay on top of it all.
- Over-reliance on manual processes; with that comes more room for human mistakes.
- Billing staff may not be aware of special requirements for various insurers or the concept of prior authorization, and hence, the process is entirely omitted.
Strategies to Improve Prior Authorization in DME Billing
Here are some of the effective strategies by which this process can be improved:
Automation of Authorization Process
Automation could make the process of prior authorization easier:
- Verification of patient insurance coverage and flagging items requiring authorization.
- Access to real-time insurance information to reduce errors.
- Tracking of requests from submission until approved.
Centralize Insurance Information
A centralized database of insurance companies and their authorization needs makes the process easier. This database must contain:
- Coverage details.
- Needed documents.
- Contact information to make it easily accessible.
The said database will make the process easier as it will enable the workforce to have easy access to reliable information without much hassle, thereby reducing errors and increasing efficiency.
Staff Training Improvements
Thorough training allows billing teams to have information pertaining to the prior authorization requirement and best practices. The areas for training should be focused on:
- Obtaining knowledge regarding specific insurance policies.
- Creating proper, adequate documentation.
- How to search through prior authorization software.
Training the staff from time to time equips them with the tools needed to process complex authorizations efficiently. Approval rates increase as a result of this measure.
Double-Checking Procedures on High-Value DME Items
High-value DME items must be double-checked before claims submission to ensure prior authorizations are completed to avoid costly denied claims and delays.
Outsourcing Prior Authorization Services
Outsourcing prior authorization services can help alleviate the heavy burden that comes with in-house staff. Outsourced services know the intricate requirements by insurers related to insurance, and very effectively process authorization, which results in:
- Less administrative requirements on the in-house teams.
- More accurate and fewer claims denied.
- Saves time, so that you can devote more time to the core business.
Measuring Success in Prior Authorization Management
Continuously measure the success of the prior authorization enhancements and maintain the streamlined process. Some key metrics are:
- Denial Rate Due to Missing Prior Authorization: Track how often a claim denial occurs because of missing, incomplete, or missing prior authorization.
- Turnaround Time for Authorization Approvals: Track how long it takes to get those authorizations approved to speed up if needed.
- Revenue Impact of Denied Claims: Track revenues lost due to denials related to authorization, which will be an area of remediation.
Monitoring frequently enables the identification of any gaps in the process and also the return on investments in tools, training, or third-party services.
Improving the process of prior authorization contributes to increasing accurate DME billing and helping the financial soundness of clinics, which further aids in reliable and quality patient care. If needed, outsourcing prior authorization service to a specialized medical billing company may help avoid these challenges.
