GAO: Prior Authorization Saves Money

By Kristin Easterling

(May 24, 2018)—Recently, the Government Accountability Office (GAO) conducted a study on Medicare prior authorization requirements. The requirements began in seven states for certain power mobility devices such as power wheelchairs in 2012. The categories later expanded to include DME, home health and others.

Some Medicare prior authorization programs, such as the DMEPOS program are permanent, and others, such as home health, are paused. The states covered under prior authorization demonstrations reflect high utilization areas of concern.

On May 21, 2018, the GAO released their report publicly with the recommendation that Medicare prior authorization continue across industry categories, prior to some programs expiring.

Prior authorization is a payment approach used by private insurers that generally requires health care providers and suppliers to first demonstrate compliance with coverage and payment rules before certain items or services are provided to patients, rather than after the items or services have been provided. Under the Centers for Medicare & Medicaid (CMS) program, Medicare Administrative Contractors (MACs) review prior authorization requests in order to make determinations to approve or deny them based on Medicare coverage and payment rules. Approved requests will be paid as long as all other Medicare payment requirements are met.

GAO found in their analysis of the prior authorization demonstration that savings could be as much as $1.1 billion and $1.9 billion, through March 2017. CMS notes, however, that the saving could be due to other efforts such as the Competitive Bidding program.

Many provider, supplier and beneficiary groups GAO spoke with reported benefits of prior authorization, such as reducing unnecessary utilization. However, provider and supplier group representatives reported that some providers and suppliers experienced challenges. These include difficulty obtaining the necessary documentation from referring physicians to submit a prior authorization request, although CMS has created templates and other tools to address this concern, reported the GAO. Also, some providers reported challenges of knowing if the MACs would approve prior authorization requests at all, leaving them short on reimbursement.

Noted by the GAO and DME MACs, physicians may lack incentive to provide documentation to providers because the provider loses the payment, not the physician. Providers must obtain all documentation before providing the item or service to beneficiaries, but physician paperwork requirements delay services. Provider groups noted that CMS has more requirements than private insurance companies toward prior authorization, which CMS acknowledges. The MACs state they are working to relieve some of the burden of non-affirmation by providing e-templates and working directly with providers when a non-affirmation occurs, often via telephone.

Other concerns from DME and home health suppliers are found in the full GAO report here. The GAO concluded that the paused demonstrations, including home health, should be resumed and the current power wheelchair demonstration extended in order to continue savings for CMS.

Find the summary of the report here.