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What is pre-authorization and why is it important? 

Pre-authorization is the insurance company’s permission that is given to the provider to perform a service.  If permission is not obtained, the provider will not properly get paid for the service.  The prior approval process allows the insurance company to (1) verify that the patient’s account has enough benefit dollars for the insurance company to pay the provider for that upcoming service; (2) ensure that the particular service is an eligible service under the patient’s insurance plan; (3) determine if the procedure is medically necessary.

An approved pre-authorization is not a guarantee of payment.  However, it is an indication of your insurance company’s intention to pay for the upcoming service.  If a required pre-authorization is not obtained, it is almost certain that the insurance company will either not pay for the provided service, or if you are lucky, give you a reduced payment.

Even though there are some policies that hold the patient financially liable for payment, typically, the patient is not responsible for services that are unauthorized.  The provider either absorbs the cost of the service or must collect from the patient.  Both are suboptimal options for the provider.

You can obtain retroactive authorizations with some insurance companies.  However, there are some that will not give you authorizations retroactively.  It is important to note that if you do not follow their pre-authorization protocols, the insurance companies are under no obligation to pay for your services.

The pre-authorization process involves the use of Current Procedural Terminology (CPT) codes.  It is essential for the correct CPT code/procedure to be submitted to the insurance company.  If for example, you obtained an authorization for a CT Head/Brain without contrast (70450), but ended up performing an MRI Brain without contrast (70551) for the patient, the insurance company will probably deny your claim because the authorization was for a CT and not for an MRI.  To extend the concept, if you had obtained authorization for 70450, but ended up performing the CT with and without contrast, the insurance company could deny the claim since the CPT code for the with and without study is 70470 (not 70450).  Authorization numbers are given on approved procedures, and these numbers are to be included on the insurance claims.  Because the authorization number is linked to an associated approved CPT code or to an approved procedure, if you submit a CPT code that is different than the code that was approved, the claim will probably be denied.

We all know that it is always best to do things from the front-end instead of trying to fix things on the backend.   When you are doing eligibility checks, also verify if the procedures require prior authorizations.  Also keep in mind that pre-authorizations are only valid for a specific timeframe.  If the timeframe has passed, you must again go through the process to obtain another authorization.

Plan for denials.  Sometimes you can do everything right on the front-end and still get a denial.  They are inevitable.  Expect them and have resources to resubmit the required medical documentation to appeal the denials.

In conclusion, if you want to be properly paid for your services, it is vital that you have processes in place to obtain the required pre-authorizations.  Do not give insurance companies the excuse to not give you the revenue that you deserve.

Physician Revenue Navigators is a premier company that provides revenue management for healthcare entities. Contact us to learn more about how we can help you understand the importance of the pre-authorization process.

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