Have you ever heard of "authorization" in medical billing?

It might sound like medical jargon, but it’s just a fancy word to say your doctor needs approval from your insurance company before moving forward with certain treatments or procedures.

But what exactly does it mean? Why do some medical treatments require this extra step? And how does it impact your healthcare experience? 

Let’s explore!

What is Authorization? 

Authorization in medical billing is when a healthcare provider gets approval from an insurance company before doing certain services. This approval confirms that the insurance of the patient will pay for the treatment. 

Some procedures need pre-authorization from the insurance provider. 

During eligibility verification, we must find out which services require this. The approval depends on the patient’s insurance plan. Based on the plan details, the insurance company decides whether to approve the request. 

Once approved, the insurance provider gives an authorization number. This number must be included in the final claim form, which is submitted after the treatment.

Types of Authorizations in Medical Billing

Let’s explore different types of authorization, which are important for navigating the billing process.

Prior Authorization

Prior Authorization (also called Pre-authorization) is when an insurance company gives approval before a treatment or service is provided. This is common for surgeries, certain tests, and medications. If the medical situation is an emergency, prior authorization is not needed.

To get prior approval, the healthcare provider submits the medical details of the patient to the insurance company. The insurer then checks if the treatment is necessary and whether it is covered by the patient's plan or not.

Services that need prior authorization are:

• Admission to a hospital or skilled nursing facility

• Planned surgeries

• Imaging tests like MRIs or CT scans

• Certain medications

• Durable medical equipment (e.g., wheelchairs or prosthetics)

Some prescription drugs require prior authorization if:

• They are expensive or have serious side effects

• They are for non-medical purposes, like hair growth

• Higher-than-normal doses are needed

If a prescription is denied, the provider and patient can appeal or choose an alternative. Authorization is usually needed before or within 14 days of the service. 

Concurrent Authorization

Concurrent Authorization is needed when a treatment is ongoing. It is often used for care that lasts a long time, like hospital stays or long-term treatments.

Situations that require concurrent authorization:

• Extended hospital stays

• Ongoing therapies like physical therapy or chemotherapy

• Home healthcare visits

This type of authorization ensures that care continues without interruptions. Delays or denials can lead to treatment gaps, slowing recovery.

If concurrent authorization is delayed or denied, it can have a negative impact on the patient’s care.

Retroactive Authorization

Retroactive Authorization is used when approval is needed after treatment has already been provided. This often happens in emergencies or situations where the provider couldn’t get prior approval before delivering services.

Retroactive authorization may be used if:

• A patient is unconscious or in an emergency

• The provider didn’t have time to get approval

• The patient is switching insurance plans

• The provider didn’t know prior approval was needed

It ensures providers get paid even if they can’t get prior authorization.

Specialty Authorization

Specialty Authorizations are required for treatments by specialists. These approvals make sure services are necessary and covered by the patient’s insurance.

Specialty authorizations apply to:

• Specialist visits (e.g., cardiologists, dermatologists)

• Advanced tests (e.g., MRIs, CT scans)

• High-cost surgeries (e.g., orthopedic or fertility procedures)

• Specialized therapies (e.g., physical therapy)

• Expensive medications for conditions like cancer or arthritis

Not getting these authorizations can lead to denied claims and extra costs for the patient.

Referral Authorization

Referral Authorization is a process where an insurance company confirms that a primary care physician (PCP) has referred a patient to a specialist, and the service is covered under the patient’s plan.

Certain services require both a referral and prior authorization, such as:

• If you are visiting a specialist

• Getting surgery or specialized tests

• Visiting an urgent care center

• Admitted to the hospital 

The Importance of Authorization in Medical Billing

Let’s explore why authorization matters in medical billing:

• Authorization confirms that the insurance company agrees the service is necessary.

• It prevents the approval of unnecessary or inappropriate treatments.

• Without prior authorization, claims are more likely to be denied.

• Getting authorization early helps ensure timely reimbursement and avoids delays.

• It improves revenue cycle management by predicting reimbursement and avoiding appeals.

• It ensures compliance with insurance company policies and avoids penalties.

• It protects patients by confirming their care is covered by insurance.

• Without authorization, patients may need to pay out of pocket for services.

Key Challenges in the Authorization Process

Getting the right diagnosis and using the correct medical codes is important for authorization. It’s important to code and document everything before treatment, but it can be tricky. Coders have a big impact here.

Sometimes, treatments are planned, and prior authorization is obtained. However, when treatment is given, other procedures may be needed based on the patient’s condition. If these additional procedures are done without authorization, the payment may be declined. It’s better to secure authorization for treatments that may be required to prevent claim denials. There’s no penalty if a procedure is authorized but not completed.

In emergency cases, treatment usually starts before authorization. This happens when an accident or illness occurs on weekends or at night. In these situations, the healthcare provider should contact the insurance company as soon as possible to get the necessary authorization.

Conclusion

Authorization is an essential component of the medical billing process. 

By adhering to authorization requirements and implementing efficient processes, healthcare providers can improve their reimbursement rates, reduce denials, and enhance financial stability.

At Dilijent Systems, we understand how important prior authorization is in medical billing. Our team can make the process easier and more efficient. Whether it’s improving your workflow, ensuring accurate coding, or reducing claim denials, we offer the support and tools you need to navigate the challenges. Contact us today for a free consultation. 

FAQS

What Is Medical Necessity?

Medical necessity refers to services, supplies, or treatments needed for diagnosis or treatment. It is based on evidence and clinical guidelines.

Can A Patient Appeal A Denial of Authorization?

Yes, a patient can appeal if prior authorization is denied, following the insurer's process.

How Long Does It Take To Get Authorization?

The time depends on the insurance provider and the complexity of the treatment.

Can Authorization Be Denied?

Yes, it can be denied if the insurance company determines the treatment is not medically necessary or covered.