An extra test here, an additional procedure there, one more prescription drug to take, just to be sure — pretty soon, it starts adding up, and it doesn’t improve care. Rather, it leads to care of questionable quality and to a healthcare cost crisis, swallowing the budgets of families and small businesses.
It’s obvious that rising prescription drug prices and the monopoly power of many hospitals are driving costs up, but patients also bear an enormous cost from overutilization of tests and procedures, as well as overprescribing.
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Even doctors admit it. A 2017 survey found that 65% of physicians reported that at least 15%-30% of all medical care is unnecessary. A recent study in JAMA found that up to $57 billion was wasted on low-value procedures and prescribing by doctors, leading to higher premiums and out-of-pocket costs, and those billions of dollars affect every patient through higher premiums and out-of-pocket costs. In addition, medically unjustifiable testing, treatment, and prescribing may be harmful, even causing serious complications.
Providers run more tests or order additional procedures for a variety of reasons: patient demand as a response to direct-to-consumer advertising, to protect themselves from malpractice litigation, because they lack the full picture of a patient’s medical history, or because of financial incentives to administer more expensive care. This is why, for a limited number of services, health insurance providers use a tool called prior authorization.
Prior authorization is designed to protect patients as well as to avoid the cumulative effect of unnecessary costs. Instead of relying solely on a provider’s intuition, insurance providers and claim administrators sometimes require preservice review of potentially low-value services and medications before they will be covered. Generally speaking, a limited number of services require prior authorization, and this process is usually reserved for cases where drug interactions could be dangerous, a treatment could harm the patient, testing has no proven value, or the risk of addiction looms. Prior authorization can literally help save lives as well as dollars.
With the country reeling from skyrocketing healthcare costs, which in part are the consequence of the ordering of services without clear medical value, prior authorization provides real value. By working with specialty societies and organizations such as the American Pharmacists Association, the Medical Group Management Association, and physician groups, insurance providers have developed smart strategies to improve prior authorization. Insurance providers typically stop requiring prior authorization of services where denial rates are low and are working to automate the process to deliver quicker resolutions. These changes will continue to improve outcomes for patients and reduce costs.
By using data and expert knowledge to determine which procedures fit the profile of appropriate care and which need further examination, insurance providers work to help ensure that patients receive coverage for safe, effective, and necessary care. Insurance providers have the evidence-based resources, insight into medical claims histories, and a 360-degree view of the healthcare system needed to help ensure patients are getting covered for the right care, at the right place, at the right time.
A study from Johns Hopkins suggests that medical errors, including “unwarranted variation in physician practice patterns that lack accountability,” are now the third-leading cause of death in the United States. As medical officers of health insurance providers, we have seen firsthand how prior authorization effectively saves lives. Unnecessary testing, treatments, and procedures have real consequences for patients. It serves everyone to have a system of checks and balances in place to help mitigate potentially dangerous unintended consequences.
An efficient healthcare system is all about aligning incentives. Delivering real value to patients means making smart decisions about how they access and obtain coverage for that care. For services where prior authorization is required, it’s an important extra step that holds everyone accountable, safeguards patients, and helps ensure coverage for appropriate, high-quality care. By working together, every stakeholder can make the process better. Getting rid of prior authorization would be both dangerous and expensive for patients.
Stephen G. Friedhoff, M.D., is the chief clinical officer for Anthem, Inc. Jeffrey F. Hankoff, M.D., is a medical officer for Cigna HealthCare. Michael S. Sherman, M.D., is a senior vice president and the chief medical officer at Harvard Pilgrim Health Care.
