The true costs of prior authorizations

At a recent meeting, I was just pondering whether prior authorizations really save insurance companies money. As defined by, “prior authorizations” are a cost-containment procedure that requires a prescriber to obtain permission to prescibe a medication prior to prescribing it” [my emphasis].

Insurance practices, like prior authorizations, clearly cost physicians money in terms of the amount of time they spend trying to get approvals. According to a national study (What Does It Cost Physician Practices To Interact With Health Insurance Plans?) of nearly 900 U.S. physicians and medical administrators, it costs $31 billion or $68,274 on average per physician, per year! To reduce that cost would cut into the ever increasing costs of healthcare.

Prior authorizations, according to Dr Charles R. D’Agostino, “strikes fear in the hearts of doctors across the country”:

Either insurance companies don’t trust physicians to be honest with their requests or they have devised the most vile and devious of means to put up every roadblock in their power to save money. Either way it is a sad state of affairs. Obviously, we cannot put this kind of effort into every prescription, test, or procedure that I believe my patients need, and they know that. Translation: money saved [for the insurer].

By just putting obstacles in the way of the prescribing physician, as Dr D’Agostino relates in his story of the impact of the prior authorization process on one patient and his medical practice, insurers are decreasing their costs related to that particular treatment.

However, as to be expected when a non-medically trained person practices medicine, overall costs increase. In other words, by denying patients treatment as recommended by their doctor, costs increase somewhere else in the healthcare system — or at least that was the hypothesis that was tested by a bunch of researchers from Harvard University, Eli Lilly and the Centers for Disease Control and Prevention. In their study (Use Of Atypical Antipsychotic Drugs For Schizophrenia In Maine Medicaid Following A Policy Change) published in the journal Health Affairs, “prior authorization results in the intended effect — a decrease in the expensive medications — but also unintended effects — increase discontinuation of the less effective medications and virtually no greater cost savings.”

Now I realize the limitations of this study (on psychotics, pharmaceutical involved …) but it makes sense — deny doctor recommended treatment to save costs on that particular treatment results in expenditure somewhere else (extra doctor visits, extra tests, extra emergency room visits …)

Seems short sighted on the part of insurers – what do you think?

One Response to “The true costs of prior authorizations”
  1. I had no idea that prior authorizations were that big of a financial burden on physicians. This system has become excessive and overly burdensome for everyone involved in processing these prior authorizations. The insurance industry is setting up needless roadblocks in front of patients delaying them from receiving their medication. It is a shame but that’s the way it is right now. The insurance industry has a stranglehold on the healthcare system.

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