Putting a price on the hassle of preauthorization

The first study of its kind attempting to document the true cost to physicians of insurer-mandated prior authorizations has delineated what researchers say is most likely just the tip of the iceberg.

“These costs are still meaningful, particularly for small practices, but there are costs that our methods don't capture,” said Christopher P. Morley, PhD, lead author of the paper in the January-February Journal of the American Board of Family Medicine and vice chair of research in the Dept. of Family Medicine at State University of New York Upstate Medical University in Syracuse, N.Y. “This is extra work that's being imposed on physicians by insurers. There ought to be some sort of reimbursement for this time.”

Prior authorization for insurance coverage of tests, drugs and other clinical services has long chafed physicians as an onerous, time-consuming administrative burden, particularly since the majority are approved. A spokeswoman for America's Health Insurance Plans responded that insurance companies often use prior authorization as a patient safety measure for procedures where there is perceived to be significant misuse.

In response to demands from local doctors who wanted to know how much it was actually costing them in hopes of influencing insurer pay rates, researchers organized two projects involving the staff at a total of 12 practices with 39 physicians in the Northeast.

Practice staffers recorded time spent on facilitating prior authorizations, and the projects were in part funded by the New York State Academy of Family Physicians and the Health Resources and Services Administration. Additional funding was provided by Life Laboratory, a small nonprofit based in Fort Washington, Pa., that organizes projects investigating system issues that can affect care quality.

“Clinicians in the field asked for this work to be done,” Morley said. “Without data, you cannot negotiate effectively.”

The paper reported that prior authorization activities cost practices an average of $2,161 to $3,430 per year per physician. A previous study in the August 2011 Health Affairs had estimated that physicians spent $82,975 annually interacting with insurers, although other activities besides prior authorization were included. That paper relied on practice's recall of costs rather than active monitoring.

“To actually try to get physicians to directly say what they are doing and not ask them to recall after the fact in theory should be more accurate,” said Lawrence Casalino, MD, PhD, an author of the Health Affairs study and chief of the division of outcomes and effectiveness research at Weill Cornell Medical College in New York. “There's such a hassle factor with preauthorizations. When I was in private practice with nine other physicians, we had two staffers who only handled prior authorizations.”

Study may undercount costs

This more recent study is most likely an undercount, researchers said, because practices were participants in practice-based research networks, meaning their primary focus was caring for patients and running the practice. The project was secondary.

“Trying to do the study while taking care of real patients was far more difficult than we thought it would be,” said David J. Badolato, MD, a family physician in Fort Washington who took part in the study. He is also the founder of Life Laboratory.

In addition, the study did not track preauthorization for referrals to specialists or revenue lost by not being able to carry out other money-generating activities. Preparation time for prior authorizations was not included, and the authors believe that some practices were able to reduce the impact by doing significant advance footwork.

Despite these shortcomings, researchers hope the data will be a starting point to help practices better negotiate insurance contracts. They also intend to research further to get a better handle on how much it costs physicians and medical practices, because these numbers can add up quickly for the health system as a whole.

Prior authorizations cost the health system $728 million in 2012, according to the American Medical Association. The AMA is calling for the largely manual prior authorization process to be replaced with an automated decision support system. The organization has a prior authorization toolkit to help practices reduce costs associated with the process.