The Prior Authorization Challenge: Impact on Accounts Receivable in Healthcare
The process of obtaining prior authorization before delivering medical services has become an increasingly complex challenge for providers. Insurance companies require this step to ensure that the proposed treatment is medically necessary and falls within the coverage guidelines. However, the situations where this is required has increased significantly (see the MGMA 2023 Regulatory Burden Report) and the difficulty in obtaining prior authorization can have far-reaching consequences, particularly when it comes to the negative impact on Accounts Receivable (AR).
The Prior Authorization Conundrum:
One of the primary hurdles faced by healthcare providers at hospitals and clinics is the intricate and time-consuming nature of the prior authorization process. Providers are required to submit extensive documentation, including medical records, and supporting evidence, to justify the necessity of a particular medical service. The sheer volume of paperwork and the intricacies involved often result in delays, leading to a protracted waiting period for approval.
Implications for Accounts Receivable:
The delay in obtaining prior authorization directly translates to billing and payment issues with delayed payments and a significant impact on the revenue cycle. As medical services are rendered before approval is secured, providers often find themselves waiting for revenue cycle staff to seek approval before they can bill for the service. The challenge then is to work with the insurance payer to get that approval before they submit a claim to seek reimbursement. This delay, in turn, disrupts the delicate balance of the accounts receivable process, leaving a gap in cash flow.
Increased Claims Denials and Claim Rejections:
In many situations attempts to obtain retroactive approval are unsuccessful. The higher rates of denials and rejections due to issues related to prior authorization. Incomplete or inaccurate information during the authorization process can lead to automatic denials, necessitating additional time and resources for resubmission.
Administrative Burden and Resource Drain on Hospital Staff:
The administrative burden associated with navigating prior authorization is a drain on resources focused on patient access. At pre-registration and registration, patient access specialists are required to comply with increased regulatory hurdles. The lack of skilled staff or insufficient staff at the front end can mean prior authorization may not happen. The time to manage the documentation, communication with payers, and resubmission processes compete with the day-to-day demands on patient access specialists resulting in non-compliance.
Patient Experience and Provider-Patient Relationship:
The impact of prior authorization difficulties extends beyond the financial realm, affecting the overall patient experience when a patient must wait for that PA from their insurer. Delays in receiving necessary medical services due to authorization issues can lead to frustration and dissatisfaction among patients. This not only jeopardizes the provider-patient relationship but may also result in patients seeking alternative healthcare options.
Addressing the Challenge:
To mitigate the negative impact on AR, healthcare providers must adopt strategies to streamline the prior authorization process. Investing in technology solutions that automate and centralize authorization workflows can significantly reduce the administrative burden. These tools can help ensure accurate and timely submissions, reducing the likelihood of denials and rejections.
Collaboration and communication with payers is crucial. Establishing strong relationships with insurance companies can facilitate a smoother prior authorization process. Regular training and education for staff on evolving payer requirements and industry best practices are essential to staying ahead of the curve.
Relying on RCM partners can alleviate the demands on their own staff and give the ability to rely on the expertise of such vendors in navigating the complex process. Payers can have inconsistent payment policies that may be unclear to patient access specialists and more easily mitigated by revenue cycle management specialists like InlandRCM. Our team has extensive experience working closely with payers to address AR issues.
Read more on this topic in the Medical Group Management Association 2023 Annual Regulatory Burden Report found at https://www.mgma.com/federal-policy-resources/mgma-annual-regulatory-burden-report-2023
Conclusion:
In the ever-evolving landscape of healthcare, navigating the prior authorization challenge is a critical aspect of financial success for providers. The difficulties associated with obtaining timely authorization have a direct and tangible impact on Accounts Receivable, affecting cash flow, increasing administrative burdens, and potentially straining patient relationships. By adopting proactive strategies that include clear workflows at patient access, leveraging technology, and fostering strong payer relationships, healthcare providers can minimize the negative impact on AR and ensure the financial health of their organizations. It's a challenging journey, but one that is essential for sustainability and must be addressed before services are provided as much as possible.
For help managing your prior authorization process or clean-up of AR issues email us at start@inlandrcm.com