What is Authorization in Medical Billing?
Authorization in medical billing refers to the process wherein the payer authorizes to cover the prescribed services before the services are rendered. This is also termed as pre-authorization or prior authorization services. As the name suggests, the approval has to be obtained from the insurance payer for the proposed treatment or services.
There are certain procedures that mandate pre-authorization from the insurance provider. During the insurance eligibility verification process, we must ensure to verify on what services require prior authorization. The approval is based on the insurance scheme of the patient. Basis the benefit terms required medical procedures, insurance companies pre-authorize the request. A pre-authorization number is given by the insurance provider which has to be quoted in the final claim form which will be submitted post the treatment is completed.
Why Is Pre-authorization Services Important In RCM?
Pre-authorization in medical billing helps in hassle-free claim of bills. Authorization does not guarantee payment of bills. However, not having a pre-approval can result in non-payment or denial of the bills.
Challenges In Pre-Authorization
Right diagnosis and providing the correct medical codes are very crucial in pre-authorization. Correct coding and documenting the required procedure before the treatment is the key for timely pre-authorization. This is often a challenging task. A coder’s role and task make a huge impact in this process.
Also, at times, certain procedures would have been planned and accordingly prior authorization would have been obtained. But, when the treatment is rendered to the patient, some other medical procedures would be required based on various factors like patient health condition. And accordingly, some alternative procedures could be undertaken without pre-authorization. In these cases, there are very high chances for the payment to be declined as approval was not taken. Therefore, it is better to secure authorization for treatments that would be required for a particular patient than for the claim to be denied payment for not having authorization. There is no penalty when a procedure has been authorized but is not completed.
In emergency cases, patient treatment commences before obtaining any pre-authorization. This situation typically happens in an accident or illness that arises on weekends or during night. In these scenarios, the health care provider should contact the insurance payer at the earliest possible time, seek and obtain the required authorizations.
How Does Medical Necessity Impact Pre-Authorization?
When health care providers fail to secure the necessary approvals and the payment is denied by the payer (insurance company), the hospital has to make a decision whether to absorb the cost or collect from the patients. During the verification process, procedures not covered under the health plan of the patient are clearly understood and noted. When the patient receives those benefits or treatments not covered under their insurance plan, patient is responsible to pay for those services. However, when claims get denied due to the failure from the provider’s end to receive authorization, they are obliged to absorb the cost themselves resulting in financial loss affecting the overall revenue cycle.
In some cases, the unpaid amount is billed to the patient and the financial responsibility falls on the patient. But doing that is incorrect and would affect the reputation of the hospital. Therefore, obtaining pre-authorization at right time is highly critical in obtaining payment for the treatments offered.
Some of the best practices in Pre-authorization services in medical billing to ensure a smooth process are:
• Doing a thorough verification process to know the services covered to obtain pre-authorization
• Maintaining complete documentation and record of all necessary information
• Maintaining an amicable relationship with insurance providers
• Understanding the contract terms and process of various insurance providers and adhering to their guidelines to avoid delays and denials
• Having standard templates to avoid documentation and human errors
• Providing necessary training to staffs for all necessary procedures