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What is authorization in medical billing?

HMO Dental Insurance Plans
May 26, 2022
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Pre-authorization or prior authorization is an integral part of the revenue cycle management process. Certain services may need approval from the insurance companies before receiving the care.  Authorization entails a lot of hassles, and that is why the insurance verification process forms the base for pre-authorization to reduce denials and follow-ups on the same.

Authorization in medical billing refers to the process where the providers determine the coverage, and the payer authorizes them to pay for the rendered service or treatment. The approval from the insurance payer depends on medical necessity, benefit limits, and medical appropriateness before agreeing to pay.

It takes five to thirty days for a pre-authorization from an insurer, depending upon the patient’s insurance plan. Therefore, it is better to secure authorization to avoid any denials.

Significance of Authorization

It does not guarantee any payment. However, the absence of authorization can lead to unnecessary denials. The authorization number gets provided after the approval from the insurance company. This number helps you prepare an appeal letter for the claims denied due to the lack of medical necessity.

Submission for Authorization Request 

You can submit the authorization request online or offline, depending on the insurance company. The following details are required irrespective of the type of request:

  • Demographic information like the patient’s name, date of birth, and insurance ID number.
  • Service Provider details like NPI number, Tax ID number, phone number, fax number, and address.
  • Provide specific and correct CPT and HCPCS codes for clean claims.
  • ICD codes with descriptions corresponding to diagnosis.
  • Service address where treatment happened.
  • Length of stay for inpatient requests.
  • The insurance company may ask for more information on previous treatment and the type of service provided.
  • Medical notes for further clarification.

Services where authorization is needed 

Each insurance plan requires authorization for specific services. However, risky and expensive treatments require pre-approval from the insurance company, as those treatments absorb the cost resulting in financial loss and affecting the revenue cycle.

  • PPO ( preferred provider organization) requires the provider’s end to pre-authorize inpatient hospital admissions on inpatient rehab, acute care, etc.
  • Skilled nursing visits, and home infusion therapy, also require pre-authorization for the treatment offered.
  • MRAs, MRIs
  • PET scans
  • CT, CTA scans
  • DME (durable medical equipment)
  • For medications and the use of a particular drug, the provider must send an authorization request to the insurer.

Outpatient emergency services and post-stabilization care services do not require pre-authorization in any emergency department.

Challenges in Authorization 

Capturing the diagnosis and providing the correct CPT codes is the key to timely authorization. As per AMA, the authorization process involves administrative hassle with very lengthy paperwork,  repeated phone calls, and mounting claim piles that can disrupt a patient’s access to vital care.

At times, based on the procedures, prior authorization gets obtained. But during the rendered treatment, some medical procedures are undertaken without pre-authorization, which may lead to payment denial. It is better to secure authorizations for a particular patient, whether the treatment gets completed.

For emergency cases, treatment commences without prior authorization, which later leads to obtaining at the earliest.