Prior Authorization Sneaks into Medicare Rule

| Brittany McCullough
doctor with paperwork for senior patient

CMS has released a proposed rule to update payment rates for Medicare beneficiaries in hospital outpatient settings and ambulatory surgical centers for CY 2020. The proposal has received a lot of attention because it incorporates the President’s executive order to increase price transparency. Under this new proposed policy, hospitals would be required to post their negotiated prices for all items and services starting January 1, 2020. The White House believes that “if patients [knew] the costs of health care services upfront, it could help prevent surprise medical bills,” which as we all know has become a key focus of Congress and the Trump Administration. For a refresher on where Congress is on surprise medical bills, see our previous coverage on the issue.

While many are focused on the provision forcing hospitals to disclose their prices, one section of this proposal that caught my attention was the inclusion of prior authorization for certain outpatient services. While prior authorization has long been a part of managed care, there has always been controversy around the practice with providers deeming it unnecessary and insurers being in strong support. In the proposed regulation, CMS notes that they routinely analyze data, such as claims information associated with the Medicare program, to “ensure the continued appropriateness of payment for services furnished in the hospital outpatient department (OPD).”

As part of this analysis, CMS chose to focus on cosmetic surgical procedures that are often done in conjunction with or disguised as therapeutic care. After reviewing over one billion OPD claims from 2007 to 2017, CMS determined that the payment allowed by Medicare increased by 34 billion in raw dollars over this time period. On the contrary, the number of Medicare beneficiaries only increased by roughly one percent per year on average. As such, it seems obvious that the volume of OPD services has drastically increased.

After review, CMS determined that the OPD categories with higher than expected increases in volume were blepharoplasty, botulinum toxin injections, panniculectomy, rhinoplasty and vein ablation. To help control unnecessary utilization in these service categories, CMS is proposing to require prior authorization for reimbursement. This new prior authorization requirement would start for dates of service on or post July 1, 2020. In their proposal, CMS states that this new requirement is “[patterned] after the prior authorization program that we have already established for certain durable medical equipment, prosthetics, and supplies.”

Under this new proposal, providers would have to submit a prior authorization request and appropriate documentation to demonstrate that the service meets the pertinent Medicare coverage, coding and payment rules. The prior authorization request would have to be submitted prior to providing the service and before a claim is submitted. Any claims that are submitted for services that require prior authorization and did not have an associated provisional affirmation of coverage from CMS would be denied.

As defined in this proposal, a provisional affirmation is a preliminary finding that a future claim for this service meets Medicare’s coverage, coding, and payment rules. In essence, when a provider submits a prior authorization request, CMS must acknowledge that this service is in scope, and if it is, they will provide the provider with a provisional affirmation which allows them to provide the service.

For those of you familiar with utilization review and prior authorization, you know that a key component of this are the timelines by which a decision must be rendered. Under this proposal, CMS would have to issue a decision on the prior authorization request within 10 business days of receipt. For situations that pose a threat to the beneficiary’s life, an expedited review would be initiated, and CMS must issue a provisional affirmation or non-affirmation within two business days.

CMS will allow providers that receive a non-affirmation to resubmit their request barring the claim has not yet been submitted and denied. However, non-affirmations would not be able to be appealed because they are not considered an initial determination. Furthermore, all claims associated with a denied claim relating to the aforementioned OPD categories, would also be denied on the groups that these services were unnecessary because the central service was not approved. CMS notes that associated services include but are not limited to items like anesthesiology, physician care and/or facilities.

Comments on the proposed rule are due September 27, 2019.

For curious minds who want a refresher on the CY 2019 rule, click here.


Brittany McCullough photo

Brittany McCullough, Manager, Health Policy and Government Programs.

Brittany McCullough, URAC's Manager of Health Policy and Government Programs, tracks and analyzes legislation and regulations of importance to URAC stakeholders. She also helps manage URAC’s public policy external affairs portfolio and oversees compliance with government deemed programs. Most of her policy and research work has been related to the ACA, Medicaid managed care, Part D, telehealth and mental health parity. She holds a B.S. in Neuroscience and a Master of Health Administration.

Views, thoughts and opinions expressed in my articles belong solely to me, and not necessarily to my employer.

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