The Centers for Medicare & Medicaid Services (CMS) have embarked on a decisive move by enforcing a standard for prior authorization. In a conversation with the Senior Director of Utilization Management, we discussed the potential implementation and impact of this proposed mandate, slated for enactment in January 2026
The Predicament of Prior Authorization
The process of obtaining prior authorization, also referred to as pre-approval, instills apprehension in both patients and providers. According to a 2022 survey conducted by the American Medical Association, 88% of providers expressed that the demands of prior authorization were notably high. The Medical Group Management Association (MGMA) further underscored this sentiment by ranking prior authorization as the most significant regulatory challenge for doctors.
In the traditional fee-for-service payment model, prior authorization by payers is undeniably vital. Without it, there would be a surge in over-treatment, leading to discomfort for patients and financial strain on payers. This practice is not exclusive to the U.S., as prior authorization is prevalent in numerous nationalized health systems.
Although the fee-for-value model theoretically negates the necessity for prior authorization, achieving this ideal remains a distant prospect. In 2022, the Council for Affordable Quality Healthcare reported that over 66 million prior authorization requests were manually submitted via phone or fax. Such manual submissions often occupy over 20 minutes of staff time at medical practices. Moreover, in certain states, the decision-making process by insurance companies can take up to 14 days.
The appeals process for denials consumes even more time, with clinicians potentially spending an hour or more conversing with the payer’s representative. The Senior Director of Utilization Management highlighted the myriad obstacles faced by doctors in submitting authorization requests. Due to each health plan’s distinct payment rules and medical policies, the current process lacks automated checks present in other systems. These checks would ensure that information submitted by practices aligns with plan requirements for pre-approval evaluations. Presently, physicians shoulder the responsibility of comprehending the requirements for utilization review set forth by each health plan.
An Urgent Requirement for Process Enhancement
Undoubtedly, there is a pressing need for standardization and interoperability in the realm of prior authorization. Since the enactment of the HITECH Act in 2009, the federal government has consistently urged vendors and clinicians to create systems that seamlessly communicate with one another. However, progress in this endeavor was slow due to vague, inconsistently applied standards that were inadequate for the demands of modern healthcare.
The introduction of FHIR in the mid-2010s marked a pivotal moment. This modern data exchange system was crafted by a group of adept independent designers who possessed a deep understanding of contemporary API principles. In 2018, the head of CMS spearheaded the organization’s mission to drive genuine interoperability. By 2021, the Patient Access API, empowering patients to retrieve their data through favored third-party applications, was made accessible to healthcare beneficiaries.
The proposed regulations are poised to revolutionize the prior authorization process, enabling swifter and more transparent data exchanges. Most significantly, it eradicates capricious decision-making and facilitates real-time determinations.
Notably, the envisioned CMS procedure automates both the payer’s judgment and the submission process. Put differently, the payer must stipulate all criteria for assessing a prior authorization request in advance, and integrate them into an automated workflow capable of promptly issuing approvals or denials.
When patients receive authorization while still in the provider’s office, they are more inclined to adhere to recommended treatments. Additionally, the standardization of documentation for prior authorization empowers physicians to seamlessly submit requests through their familiar electronic medical record systems, ultimately lightening the burden on providers.
A fact sheet from CMS provides further insights into their strategies and intentions
The 2020 Interoperability and Patient Access Final Rule by CMS introduced a mandate for government-sponsored plans to develop APIs using FHIR regulations as the foundation for data exchange. The newly introduced prior authorization API, known as Prior Authorization Requirements, Documentation and Decision (PARDD), is FHIR-based, providing swift access to prior authorization data and processes for both providers and patients.
Outdated, vendor-specific language will be phased out in favor of modern FHIR-based standards like Clinical Quality Language. According to the Senior Director of Utilization Management, these regulations are set to impact half of the U.S. population.
While the proposed CMS mandate for prior authorization may not entirely alleviate its inherent challenges, it will offer providers clearer insight into a health plan’s utilization review requirements, compelling health plans to provide real-time decisions. The standardization of prior authorization documents will also empower physicians to seamlessly submit requests through their familiar electronic medical record systems, ultimately alleviating the burden on providers. Adopting an electronic prior authorization submission process based on FHIR can lead to substantial cost savings by significantly reducing time spent on documentation, phone calls, and faxes. These incentives are poised to encourage widespread adoption.
The existing systems, originally designed to maximize reimbursements and meet regulatory standards, have fallen short in supporting the physicians who are on the frontlines of healthcare delivery, and consequently, their patients. The formidable influence of CMS is now directed towards advancing FHIR and other contemporary standards that prioritize the needs of both doctors and patients at the core of our healthcare system. Significantly, CMS is ushering in a new era of transparency in an area long characterized by perceived arbitrariness and inefficiency