Pros and Cons of Prior Authorization for Value-Based Contracting

Pro: prior authorizations are often implemented in value-based contracts

Prior authorizations has functioned well within value-based contracts, payers have argued.

“Prior authorization is often part of a broader medical management strategy that includes offering providers evidence-based resources, comparisons to their peers, and incentives to provide value-based care,” the AHIP study found.

In fact, 86 percent of the health plans used value-based contracts in order to bring down unnecessary healthcare spending on tests, treatments, and procedures. Nearly half of the participating plans considered prior authorization automation as a major opportunity to increase provider participation in risk contracts (49 percent).

Pro: prior authorization supports quality, affordability, safety goals

According to the AHIP survey, plans delineated four primary value-based care goals with which prior authorization programs align.

First, these programs aim to better the quality of care and support evidence-based care. For 98 percent of the participants, this was the main objective. However, not far behind, plans also used prior authorization to ensure patient safety (91 percent), to provide intervention in areas that were vulnerable to misuse such as drugs susceptible to substance abuse (84 percent), and nearly eight in ten plans (79 percent) used prior authorizations to lower healthcare spending.

And according to respondents, prior authorization programs did exactly what they were designed to do. Over 90 percent of the plans reported a positive impact on quality of care and affordability. Eight-four percent said that they saw a positive impact on safety as well.

In 2018, the GAO conducted a report which supported this argument. GAO studied Medicare’s use of prior authorizations in which CMS implemented prior authorizations to limit expenditures and enhance quality of care. The agency concluded that prior authorizations played a role in increasing CMS savings to between around $1 million and $2 million and urged CMS to continue the prior authorization programs to support these value-based care goals.

Pro: prior authorization reinforces evidence-based care with provider input

Prior authorizations seem to also enforce the evidence-based care goals of value-based care.

In the AHIP survey, nearly all of the participating plans (98 percent) developed their prior authorization programs using peer-reviewed studies. The majority of plans also relied on federal studies or guidelines from agencies like the Centers for Disease Control and Prevention (CDC) or CMS, internal data, public clinical guidelines, or vendor-provided, evidence-based resources.

Furthermore, many of these programs may reinforce the payer-provider relationship that is so key to value-based care. In the process of developing the list of drugs and procedures that require prior authorizations, most plans reported that they

• Spoke to specialists about the list
• Used providers’ clinical guidelines
• Used vendor-provided guidelines that incorporated provider perspectives
• Used contracted providers’ input
• Used perspectives from medical society and medical professional association members

Con: prior authorization places undue administrative burden on providers

One of the major goals of value-based contracts and systems is to reduce unnecessary paperwork so that providers can dedicate more time to high-quality patient care.

However, providers have found that prior authorizations often stand in the way of this aim.

In a 2018 survey of physicians, 91 percent found that prior authorizations have some level of significant negative impact on patient outcomes. Around 75 percent said that the delay in waiting for authorization—typically taking one to three business days—contributes to negative treatment and medication adherence among patients. For 28 percent, that delay even had more serious medical impacts.

Prior authorizations take up on average almost two business days—14.9 hours—each week to complete. This leads to hiring staff who are dedicated solely to processing prior authorizations.

Not only do these requirements have a negative effect on patients, but 86 percent of physicians found the demands of prior authorizations to be “high,” speaking to the impact on provider well-being.

Providers were not alone in recognizing this conflict. The plans in AHIP’s survey did not portray prior authorization program implementation as a flawless solution.

Plans recognized the burden that prior authorization placed on providers and saw technology as the key to solving this excess administrative responsibility.

Many plans expressed that they were working on incorporating technology into their prior authorization programs. Almost 85 percent of the respondents saw prior authorization automation as a key point of collaboration with providers. Around 90 percent of plans said that they were streamlining prior authorization processes for prescription medications (91 percent) and medical services (89 percent), primarily relying on electronic prior authorization in each scenario.

Con: prior authorization is not affordable for payers, providers

However, other research has demonstrated that these technologies can prove costly for providers, potentially working against value-based care aims of lowering unnecessary spending particularly if these programs are ineffective at increasing quality of care.

Specifically, prior authorizations are providers’ most costly transaction, the 2019 Council for Affordable Quality Healthcare, Inc. (CAQH) Index report found. Each manual prior authorization cost an average of about $11—a little less than twice the cost in 2018.

Any kind of electronic health record adoption—partial or full—brought that number down to around $4 or $2 per prior authorization transaction.

This is why, to payers, provider EHR use stood in the way of prior authorization automation. Nearly 60 percent of the plans said that providers not using EHRs that were enabled for electronic prior authorization was a roadblock for streamlining the process.

But payers also had their own cost-related concerns with the prior authorization process. The  AHIP survey uncovered that the cost of enabling prior authorization rules and information delivery was also a barrier to payers. About a third of the participating plans said that there were not enough prior authorization automation options available.

Con: prior authorization may support discriminatory patient care disparities

Another element of value-based care is to ensure that patients receive appropriate care and reduce any care disparities by addressing social determinants of health. However, recent research demonstrated that in some cases prior authorizations may be weaponized as tools for discrimination instead of serving the patient population as designed.

In the South, some qualified health plans on the Affordable Care Act have been shown to place prior authorizations on PrEP therapy for HIV patients.

Plans in the South were 16 times more likely to place a prior authorization on the HIV therapy, when compared to plans in the Northeast where prior authorizations for these therapies were lowest.

This move is unnecessary because prior authorizations are typically only applied when there are multiple drugs to choose from for a particular condition, but until recently there was only one medication option for HIV patients.

The debate over prior authorization has been a long-standing conflict that continues into 2020. Listening to both the pros and cons and aligning incentives amongst stakeholders will be crucial to moving forward.