Initially meant to protect patients from unnecessary procedures, prior authorizations have shifted towards being a cost containment strategy for health payers. This shift is causing significant frustration among providers and patients due to the lengthy manual process and the potential for unnecessary denials and care delays. These pain points are a jumping-off point, leading to increased legislative and regulatory actions at both state and federal levels, which focus on fixing the prior authorization process.
The conversation surrounding prior authorization regulations is a complex and ever-evolving one. What’s true today could be completely different several weeks or months from now, so anyone in healthcare should stay up to date by referring to trustworthy sources like the American Medical Association (AMA), Centers for Medicare & Medicaid Services (CMS) and American Hospital Association (AHA).
By staying plugged into these sources, it’s clear that progress is being made. Regulations and policies are moving the industry in the right direction. However, there’s still room for improvement, and there are distinct areas where regulations don’t go far enough to create a lasting impact.
Before diving into a future-case best scenario, we need to understand the current prior auth legislation landscape and how it impacts payers, providers and patients.
The current landscape
In January, CMS announced finalized rules tied to prior authorization to enhance transparency and data collection throughout the process. Since then, the topic of prior authorization legislation gained significant traction, with payers, providers, patients and vendors alike hoping to understand how these regulations will impact daily operations and the patient care continuum.
Although the CMS rules reinvigorated discussions around prior auth legislation, many states were already tackling this issue at the local level. Currently, nine states have passed comprehensive PA legislation, and numerous bills are in progress across 30 states. Each state offers varying provisions regarding prior auth response times, data requirements and exceptions. Some are even exploring “gold carding,” which exempts providers with high approval rates from needing prior authorizations for certain services.
While state legislations vary, the CMS rules outline clear provisions for prior auth processes. Here is a high-level look at the requirements under the CMS rule:
- Specific timeframes for prior auth responses: Beginning in January 2026, payers will be required to send prior auth decisions within 72 hours for urgent cases and seven days for non-urgent cases.
- Enhanced transparency and data: Payers will need to identify the reason a claim has been denied and detail the appeals process. They will also need to collect data regarding the percentage of approved and denied requests, how many requests were approved after appeal, submission time period, etc.
- Electronic interoperability: By 2027, health plans will need to electronically exchange prior auth information via an API.
- Provider requirements: Providers will face new requirements under the Merit-based Incentive Payment System (MIPS) to report on prior authorization measures affecting their Medicare reimbursement.
Application of legislation
While the recent flurry of legislative activity is promising, it creates confusion due to varying state and federal requirements. Understanding and applying state and federal regulations is crucial, especially for multi-state health systems. This involves determining which regulations to follow and how to adjust internal processes accordingly.
The CMS governs impacted plans through its final rule, but state-level variations create difficulties for hospitals operating in multiple states. Contracts between payers and providers and the language used within them become key when determining the governing body. When negotiating payer agreements upfront, it’s important that contracts include clear, mutually agreed-upon expectations and allow for exhibits that can be amended as state laws change, making it easier to update requirements without renegotiating the entire contract.
Impact of legislation on administrative teams and patient access
Although not all prior authorization regulations feature identical requirements, the overarching goal is to reduce administrative burdens and improve patient access to care by standardizing processes. In general, prior auth legislation will make requests easier and, in some cases, unnecessary, allowing for potential restructuring of administrative teams and increased efficiency.
It will be crucial for teams to monitor KPIs and data points related to prior authorization processes once these rules go into effect to showcase the impact and help inform future legislation. This includes tracking the timeline of authorizations and analyzing authorization denial rates and reasons. Although the exact impact of the legislation on patient access to care is still uncertain, as many rules are not yet in effect, the outlook is promising.
Room for improvement looking ahead
With the increased attention on prior authorization legislation, there is also heightened awareness of what is missing from the proposed regulations. Recent legislation aims to streamline processes and reduce denials but does not yet cover all scenarios, such as changes in medical necessity during procedures. Further legislative efforts are needed to address these gaps and reduce the administrative overhead associated with prior authorizations.
Luckily, increased prior auth advocacy and reform efforts are making headlines, including the #FixPriorAuth campaign led by the AMA. As an industry, we’re all passionate about delivering the best patient care possible. Streamlining the prior authorization process is a critical step in achieving that goal, making care delivery more efficient for all settings and specialties.
Steve Kim is CEO and cofounder of Valer, a vendor of prior authorization and referral management automation technology.