Another non-solution for prior authorization

Policy wonks often offer greater transparency as the solution to problems like out-of-control prior authorization and predatory pricing. It's a start, not a solution.

If you can’t measure it, you can’t change it. That famous saying by the late management consultant Peter Drucker is frequently cited as justification for policy initiatives requiring greater disclosure of hospital prices, prior authorization requests and denials, drug and device company payments to physicians, and more.

And it’s true. If you don’t measure what is happening now, how will you know if a change made to solve a problem has the desired effect? Comparing a new now to the old baseline provides the tell.

But what does measurement achieve if an organization fails to make changes? There is no new now. There’s only the same old thing.

That is precisely what happened after the Trump administration’s Health and Human Services Department last year imposed a new rule requiring insurers disclose data on prior authorization. The initial disclosure, released at the end of March, showed what share of provider claims are denied by insurers; what share are appealed; and what share of appealed denials are overturned.

Dr. Archelle Georgiou, who a quarter century ago served as UnitedHealth’s chief medical officer, took a close look at the data on her most recent substack post. Her findings are disturbing, to say the least. Denial rates average 10% for the six insurers in her sample. Two-thirds of those denials are overturned on appeal.

The most frustrating finding is that just 7% of denials are appealed. Few patients or their providers are willing to go through the long and complicated process of filing an appeal. They simply accept the denial of care.

By applying the same two-thirds overturn rate to the much larger claims-denied-but-not-appealed cohort, Georgiou estimates that four of the six insurers (two did not disclosure the actual volume of denials, only the rates) pad their profits by $100 million to $500 million a year.

A recent review of 23 studies associated greater claims denials with higher rates of hospitalization and lower rates of disease-free survival, she wrote. She questioned the Trump administration expanding prior authorization to the traditional Medicare program in six states through its WISeR (Wasteful and Inappropriate Service Reduction) pilot project.

“Why are we accepting a prior-authorization system that causes demonstrable harm?” she asked. “Why are we now running it at scale, with AI, before fixing the incentive structure underneath it?” (The WISeR model uses AI to flag questionable service requests, which are then thrown over to a private contractor to decide. That private contractor earns a fee or a portion of the savings from any denial.)

Unfortunately, the former insurance industry executive failed to offer a meaningful solution to the literally hundreds of millions of people in privately-run Medicare Advantage, Medicaid, employer-based and individual plans that use prior authorization. She merely called for greater disclosure and, until that happens, greater vigilance on the part of providers and patients.

Appeal every denial, she advised. Here’s how, she wrote:

• 1. Get a written copy of the denial letter and look for the specific reason cited for the denial.

• 2. Appeal every denial in writing. Provide specific information that counters the reason they cited.

• 3. Ask your physician’s office to submit an appeal on your behalf and get a copy for your records. This is not duplicative; your appeal letter is complementary to your physician’s.

• 4. Track deadlines aggressively. Both initial decisions and appeal reviews are subject to regulatory time frames that insurers are required to meet.

• 5. If your appeal is denied, escalate to your state insurance commissioner. Regulators notice patterns.

To which I respond, good luck with that (as if you didn’t have something better to do with your life, like dealing with your disease after being denied necessary care).

A better way

As I wrote a little over a month ago (“Can prior authorization be fixed? Should it be?”), I believe we need to take prior authorization entirely out of the hands of the insurance industry. For-profit insurers (and surplus-maximizing non-profit insurers like many Blue Cross-Blue Shield plans) have a structural conflict-of-interest. The more they deny, they more profits they make.

One way to end prior authorization is to put all providers on budgets and give them the flexibility to decide how to deploy their resources in the most health-improving manner and at the lowest possible cost. When on a budget, keeping people out of the hospital makes an organization more profitable (or generates more surplus in the case of non-profit providers).

At-risk insurers get their payments on a monthly or annual per capita basis. Why can’t they turn around and do the same with providers? Let’s put clinical decision-making in the hands of the people who are supposed to be making those decisions — clinicians.

It is the job of provider organizations’ managements to determine if there is wasteful care in the system. When they are constrained by capped annual budgets, they are incentivized to perform that vital function. They no longer profit from allowing physicians to pad their personal income by ordering unnecessary procedures or the most expensive drug when something cheaper and equally efficacious is available.

It is a physician’s job to first do no harm. Unnecessary care is, by definition, unbeneficial care. And where there is no possibility of benefit, there is only the possibility of harm. Physician organizations that have measured the choices and patient outcomes for individual physicians and shared that data within the organization have found that those doctors who most closely adhere to accepted clinical practice guidelines have the best outcomes. When shown that data, physicians rapidly adjust their own decisions to more closely adhere to the best-performing physicians within the practice.

Why is that? Physicians are trained to follow the data. When shown the data, they change. On the other hand, when they are told they can’t do what they think best (with no data or explanation from either the insurer or their organization), they rebel. When repeatedly told no, they burn out and quit. Putting organizations on budgets and physicians on salaries contributes to solving a host of problems.

Of course, putting providers on budgets and physicians on salaries is the long-term solution. In the short run, rather than asking physicians and patients to appeal every prior authorization denial, insurers who want to deny a claim should be required to kick the claim over to an independent board comprised of independent, salaried clinicians to rapidly make a final decision. Clinicians and patients should have the right to appeal. These independent boards should be funded by a small per capita tax on every insurance plan, operate as non-profits, and have absolutely no financial stake in the outcome of their decisions (no shared savings with insurers).

I’m a great believer in transparency. The decision-making process at independent boards should be totally transparent. But it is no substitute for radically changing the rules under which they operate.