On average, private practice physical therapists lose $250,000 in revenue annually due to unpaid claims. Learn how to maximize your practice’s profitability by securing pre-authorization and holding insurers accountable.
Pre-Authorization: What It Is and Why It’s Important
Often called prior authorization, pre-authorization is permission from an insurance company that is required before a patient can receive a certain type of treatment, care, or service. Virtually every payer requires pre-authorization for physical, occupational, and speech therapy. In most cases, if pre-authorization is not secured, services will not be covered by insurance. Most often, either the provider or the patient will be stuck with the bill for the entire cost of care.
Following a referral from a primary care provider, the insurance company may only approve 6 visits. The patient is not limited to only 6 visits or sessions. However, the provider or staff will need to submit updated information in 6 visits in order to obtain a new authorization. Most authorizations will also come with a time limit on how long you have to complete the 6 visits.
In order to obtain pre-authorization, front office staff must submit the correct CPT code to the insurance company along with a request form and other supporting documentation. Within five to ten business days, the request will either be approved or denied. If it’s denied, the staff may ask for a review of the decision or recommend an alternative course of treatment.
The process of pre-authorization, though, is often very costly and time consuming. In a 2017 AMA study, 84 percent of the participants said the burden of pre-authorization on physicians and office staff was high or extremely high. A 2011 study published in Health Affairs notes that physicians spend around 20 hours per week and $83,000 annually interacting with insurers. This costs the U.S. healthcare system over $20 billion every year.
For each of these problems, however, there’s an even better solution. In what follows, we will explore four highly effective strategies to make sure your practice obtains pre-authorization.
Become an expert in your (top) payers’ pre-authorization policies
According to a study from the American Medical Association (AMA), 78 percent of physicians reported that delayed pre-authorization for physical therapy can lead patients to abandon treatment, costing therapists in private practice as much as $2.5 million in revenue each year.
A big reason many therapists fail to secure pre-authorization is because they are unfamiliar with the authorization policies of insurance providers. This is mainly due to the fact that very few health plans have similar guidelines, and pre-authorization guidelines frequently change. A study from McKesson analyzed 23 different health plans—1,300 policies in total—and found only 8 percent of those policies shared common components.
It is solely up to the practice to understand the details of each plan’s policy, and if the proper process to obtain approval is not followed, insurers are under no obligation to pay a therapist for his or her services.
Therefore, therapists and front office staff should familiarize themselves with insurers’ pre-authorization policies, especially those of top payers, as these providers deliver a major source of revenue. Doing so will allow therapists to secure pre-authorization on time, ensuring patients receive the care they need and insurance reimburses therapists accordingly.
Some forms of treatment may require pre-authorization, while others may not. A practice can familiarize itself with these policies by looking on an insurer’s website or calling a payer directly; this information can also be found in payer contracts.
For example, United HealthCare’s website links to a tool that allows a practice to determine whether or not a course of treatment requires pre-authorization; those who use United Healthcare’s services can also request this information by calling the member services number provided on the back of the insurance card.
Most insurers provide regional-specific guides with a policy that details a list of services that plan offers, which services require pre-authorization, and what CPT codes, if any, must be submitted.
Establish and maintain a foolproof insurance verification process for all patients
According to the U.S. Department of Labor, around 14 percent of all medical claims submitted yearly are rejected. There are 1.4 billion claims submitted every year, so that means 200 million, or one in every seven, claims are denied annually.
This is in large part because insurance verification is not always properly completed. Insurance verification is the act of contacting the insurer to determine if the patient is eligible and is covered by that payer and plan. When insurance is not properly verified, therapists cannot receive proper reimbursement for their services, leading to decreased profitability for their practices.
The optimal time to learn about a payer’s policy is when verifying a patient’s eligibility. When a provider verifies patient insurance coverage, it is common to inquire about pre-authorization, notification and referral needs. This information should then be documented and continually updated in order to know what to ask for when dealing with that insurer in the future, leading to a reduction in denied claims.
In addition, 90 percent of patients want to know upfront what portion of treatment costs they must pay. Failure to verify insurance coverage leaves patients with 100 percent of the cost for treatment, leaving patients dissatisfied and less likely to use a particular therapist’s services in the future.
Therefore, it is crucial that therapists and front office staff work together to verify a patient’s insurance coverage. Doing so will lead to faster and more efficient payments, fewer denials, and increased patient satisfaction.
Here are the three crucial steps for proper insurance verification:
Collect “Key Details” of Patient Insurance – It’s simply not enough to ask a patient “Do you have insurance?” or “Who is your insurance provider?” Therapists and front office staff need to know other important details about a patient’s insurance coverage to ensure claims are properly processed, so therapists are compensated for their services and patients do not pay more than is necessary for treatment.
Key information includes:
Insurance name, phone number, and claims address
Insurance ID and group number
Name of insured, as it isn’t always the patient
If the insured is not the patient, relationship of the insured to the patient
Effective date of the policy
Whether coverage is currently active
Whether your practice participates with the plan
Get a copy of a patient’s insurance card – Although a patient’s insurance information can be entered into a database, it’s a good idea to keep a copy of a patient’s insurance card handy to check against existing information and, if necessary, correct any errors. Make sure to get an image of both the front and the back of a patient’s insurance card, even if the patient claims his or her insurance hasn’t changed recently. When it’s time to send insurance companies a claim, make sure the ID number on the card is accurate. This will help to reduce the number of claim denials, ensuring that patients receive the benefits of their insurance policies and therapists are reimbursed accordingly.
Contact a patient’s insurance provider – There are several methods to verify a patient’s insurance and receive an explanation of benefits (EOB). If you utilize a payer’s website or call line you can gain details about pre-authorization.
Keep an open line of communication between insurers, office staff, and therapists
The process of obtaining pre-authorization encomapasses more than submitting CPT codes and required forms, and it demands open communication between all involved.
When referred by a primary care physician a patient is often “pre-authorized” for their initial sessions. The patient is not limited to just these initial sessions, the provider will need to perform re-evaluations and submit updated information in order to obtain authorization for more sessions. If a patient is seen without authorized sessions, many payers don’t issue retro authorizations, even when the failure to get pre-authorization was a mistake. Some may overturn a denial on appeal, but they’re under no obligation to make payment if the proper process was not followed. In many cases, the practice won’t bill the patient to cover the cost, and as a result, the practice incurs a loss for that session.
Oftentimes, practices are forced to track the number of sessions through Excel or Google Sheets. However, modern practice management systems like PatientStudio allow therapists and office staff to track authorizations alongside sessions, leaving little room for error.
The proper CPT code(s) must be reported in order to obtain pre-authorization. This requires extra attention and communication between staff and therapists. Front office staff must check in with a therapist to learn all possible courses of treatment he or she is considering providing.
For example, a therapist has recommended a Corticosteroid injection to treat osteoarthritis but ends up prescribing Hyaluronic acid (HA) injection instead. Both of these options were discussed when front office staff inquired about possible courses of treatment, but the therapist is not yet sure which one he will use. Failing to submit CPT codes for both options runs the risk of therapists operating without authorization from insurance, depriving therapists of compensation for their services and forcing patients to pay the full cost of treatment.
Therefore, front office staff should submit the CPT codes for both of the injections to ensure the therapist receives payment and insurance covers most of the costs, putting forth an image of responsibility for the practice. This will, in turn, increase the likelihood patients will continue to use that therapist’s services in the future.
Use electronic pre-authorization software
A 2019 AMA study found that 64 percent of healthcare providers say they have to wait a full business day to receive pre-authorization from insurers, and 29 percent say they have to wait three business days or more. In total, 91 percent of healthcare providers say that pre-authorization delayed patient care, with 24 percent saying these delays led to adverse health outcomes for patients.
Physical therapists should consider the benefits of investing in electronic pre-authorization software (ePA). Integrated into electronic health records (EHRs), these systems eliminate the time-consuming tasks of filling paper forms, sending faxes, and making phone calls by allowing all necessary codes and documentation to be submitted to insurance companies electronically in real time.
According to MetroHealth Systems, practices that implement such technology experience as much as an 80 percent reduction in workload. The Council for Affordable Quality Healthcare (CAQH) reports that electronic pre-authorization software could save the medical industry as much as $454 million each year. These systems have also been shown to speed up the process of pre-authorization by over 60 percent.
Incorporating electronic pre-authorization software into a therapist’s practice will help to reduce and simplify administrative tasks, shorten the time between approval and therapy, and increase patient satisfaction, accelerating the process of pre-authorization.
Ready to get timely and proper reimbursement from insurance? Patient Studios integrated and automated practice management system tracks information on individual patients and different insurance providers, limiting errors made in regard to pre-authorization. Schedule a demo today.