10 Things Payers Need to Know About Electronic Prior Authorization

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By Jocelyn Keegan, Payer Practice Lead

Payer interest is growing in electronic prior authorization (ePA). Initially, in many organizations, automation largely replicated the paper process requiring duplicate entry of information. But now there continues to be real progress towards a standards-based, real-time ability to prospectively handle prior authorizations (PAs) electronically as part of the electronic prescribing process. Industry efforts, provider pushback and regulations are accelerating adoption.

Integrating ePrior AuthThese activities are reviving interest among most payers, but many don’t know where to focus. In fact, the landscape is dotted with plans at various points in the ePA evolution. In reality, there are early adopters, mature automated payers and payers whose maturity can vary widely based upon line of business. And, to be frank, not all these transitions are going as well or smoothly as they could. Progress in the industry is accelerating, with new standards and use cases emerging to solve some existing challenges and medications left out of the process, not to mention the increasing impact of federal and state mandates.

So, where do payers start? Here are 10 things payers need to know to successfully implement ePA. Payers must understand:

  1. The definition of PA. Many payers think PA is a monolithic activity, which has impeded progress. In fact, PA should be viewed as a multi-transactional and evidenced-based utility to reduce costs — not just adding administrative steps, using incentives, or a combination of the two. Progressive payers have prioritized automating ePA across a myriad of business and technology drivers, lines of business and customer-specific constraints. Overall ePA strategies must take these complexities into account. Successful strategies recognize that not all ePA is equal.
  1. The costs of not implementing ePA. Manual PA is costly for payers on a number of fronts. First, there are significant administrative costs. Research by the Council for Affordable, Quality Healthcare (CAQH) reveals that each manual prior authorization for medical care costs $3.50 for plans and $6.61 for providers. Going electronic brings that down to $2.80 per transaction for payers and $0.03 for providers. All in all, the study found that transitioning to ePA could create $278 million in annual savings for providers and $139 million for health plans.

Further, the time and costs associated with PA will increase along with the rapidly accelerating growth of expensive specialty medications. These are being developed and dispensed to treat an increasing population with chronic conditions, which also is on the rise. Some 60% of Americans have a chronic disease and 40% have two or more. Although specialty medications make up only about 1% of prescriptions, they result in between 32% (Medicare) to 41% (Medicaid) and 42% (Commercial) of drug spend. Nearly all require PA that remain almost exclusively manual in nature due to the lag in adoption in ePA by medical payers for complex medications.

And, as always, there is medication nonadherence. PA plays a role. Some 37% of PA requests (roughly 75 million) annually are abandoned due to complex PA procedures and policies and the hassle factor. As a result, patients do not benefit from their ordered therapies. According to a recent estimate, medication nonadherence causes some 125,000 deaths, untold disabilities, as well as 10% to 20% of hospitalizations and nursing home admissions each year. This adds up to between $100 billion and $289 billion annually. These economic burdens fall heavily on payers’ shoulders.

  1. What success looks like. Payers must be able to define—and ultimately measure—return on investment and other measures of success. They may vary across different lines of business and locations. Knowing what is working and not working--and what data are needed—can be challenging. The ability to share and process the right codified data is critical to success. 
  1. Where utilization management (UM) programs can be streamlined. Payers view UM as a valuable tool to reduce costs and ensure appropriate treatment. Providers and patients view it as an unnecessary pain point, which reduces speed to therapy and possibly creates patient safety issues. Going forward, ePA can help payers and pharmacy benefit managers revamp their UM programs. In fact, evidence suggests payers can, in certain scenarios, eliminate the need for provider-initiated PAs by extracting the required data from the patient record automatically without provider input/action, allowing the payer to process the prior authorization in the background and seamlessly send the approval to the pharmacy. While this “automatic” ePA may seem futuristic, it is being done today for generic and lower cost medications as payers move to API based integrations with their provider partners leveraging standards like HL7 FHIR. The goal is to achieve a balance: UM processes must have enough complexity to increase transparency; evaluate, reduce and remove ePA where possible; and be incorporated into the prescriber workflow. As a result, providers and vendors should be key partners in the process.
  1. Who needs to be on board. Payers need to figure out what staff and vendors need to participate in the transition to ePA. This may vary by site and the company’s place in the EHR acquisition/replacement cycle. Payers struggle with integrating ePA into internal systems — whether they are installed as software or home-grown utilization management systems. Vendors offer varied capabilities and there are hundreds out there to choose from. In short, do you have the right people on the bus to transform your solutions with your provider partners? 
  1. The role of intermediaries. Pharmacy benefit managers (PBMs) are gatekeepers in the PA process. As such, they also have a significant role in streamlining the content and documentation requirements for PA. But a sea change is occurring and PBMs are embracing ePA. For example, several national, regional and local PBMs and health plans representing virtually all U.S. patients recently have signed on to one vendor’s tool. 
  1. What drives provider adoption. Traditional wisdom holds that providers are motivated by traditional carrots (incentives) and sticks (reductions in payments). While that may be true, with ePA there are other drivers. More recently, burden and workflow integration have emerged as drivers for physician adoption, ironic though that may be. Three-quarters of physicians (specialists and primary care) report the burden of PA is high. But PA isn’t going away. According to the American Medical Association (AMA), the PA process exemplifies the kind of clerical work that now consumes about half of physicians’ time in the office, while less than 30 percent of the day is spent on direct clinical care. These growing diversions from patient care serve as physicians’ biggest source of professional dissatisfaction. Portals don’t achieve the full value of ePA for providers. They offer a more automated solution, they still require providers to log into and navigate a different online system associated with each health plan for each patient. These factors are increasing demands by provider associations, particularly by the AMA, for an ePA solution. 
  1. The value and opportunities of various stakeholder initiatives. There are numerous stakeholder collaborations in the market aimed at streamlining PA, accelerating adoption of ePA and reducing provider burden. In fact, much of the current public- and private-sector interest in ePA stems from collaborative, multi-stakeholder efforts by such groups as the eHealth Initiative, AMA and the HL7 Da Vinci Project. Plans need to participate to have a voice in the dialog and learn what’s on the horizon to facilitate planning. 
  1. The regulatory landscape. There are differing and ever changing ePA mandates and implementation timelines across states or between state and federal regulations. Payers need to keep abreast of these evolving requirements and developments. Recent examples include if recent regulatory guidance is adopted, Medicare Part D will require ePA, based on the NCPDP SCRIPT 20170701, beginning on January 1, 2021. States also are jumping on the bandwagon. Nearly half the states have adopted ePA or allow it; many others have such a mandate under consideration. However, requirements vary all over the map. These variations may significantly challenge plans operating in multiple states. The February CMS NPRM includes significant requirements for payers to be able to share clinical data across member’s other payers including decision criteria for prior authorizations.  
  1. The need to improve benefit information accuracy in workflow. After years of investment, payers still struggle to ensure correct information is available at the moment of prescribing and care decisions to support ePA. Potential inaccuracies concerning PA in electronic prescribing work flows — such as the need for PA for a particular patient or particular treatment —are often confusing or inconclusive for prescribers. PA “flags” are often missing. Providers won’t use ePA if they perceive it is based on faulty data, thus mitigating the intent and benefits of ePA.

Want to know more? Point-of-Care Partners (POCP) is actively involved in both pharmacy and medical ePA development. We are monitoring growth across the technology landscape and have unveiled a value model based on adoption horizons as well as an in-depth report on ePA. Our Regulatory Resource Center is tracking ePA legislation and regulations at the state and federal levels. Send the staff an email (regulatory@pocp.com) for a consultation. POCP is uniquely positioned to help your organization better understand ePA and make it work for you. Let me know how we can help. Reach out to me at jocelyn.keegan@pocp.com.