CBCS Prior Authorization and Referrals 2 — Questions and Answers
Question 1: Which payer type typically requires the most stringent prior authorization requirements?
- Medicare fee-for-service
- Medicaid managed care plans
- Commercial HMO plans (Correct answer)
- Workers' compensation payers
Correct answer: Commercial HMO plans
Commercial HMO plans tend to have the most stringent prior authorization requirements because the gatekeeper model is central to their design.
While prior authorization requirements vary by payer and plan, commercial HMO (Health Maintenance Organization) plans typically have the most stringent requirements because their entire model is built on gatekeeping and managing access to specialty services. Medicaid managed care plans also have significant requirements. Traditional Medicare fee-for-service has relatively limited prior authorization requirements, though Medicare Advantage (MA) plans — being privately managed — may impose requirements similar to commercial plans.
Question 2: What is the purpose of 'concurrent review' in utilization management?
- To review services after they have been completed
- To monitor ongoing inpatient care to verify continued medical necessity for continued stay (Correct answer)
- To approve services before they are performed
- To review a provider's billing patterns for compliance
Correct answer: To monitor ongoing inpatient care to verify continued medical necessity for continued stay
Concurrent review evaluates whether a patient's continued inpatient stay is medically necessary, typically conducted daily or every few days.
Concurrent review (also called continued stay review) is the process by which a payer's utilization management team evaluates whether an inpatient stay continues to meet medical necessity criteria. It typically occurs throughout a hospitalization — often daily for acute cases. If the clinical reviewer determines the patient no longer meets criteria for the current level of care, they may issue a denial for continued stay, potentially requiring a lower level of care.
Question 3: What is the consequence of billing for a service that required prior authorization but was not obtained?
- The claim is automatically resubmitted with a corrected authorization
- The claim will likely be denied, and the provider may not be able to bill the patient (Correct answer)
- The patient is responsible for the full cost of the service
- The payer pays at a reduced rate automatically
Correct answer: The claim will likely be denied, and the provider may not be able to bill the patient
Claims without required prior authorization are typically denied, and in many contracts, the provider cannot balance-bill the patient for the denied amount.
When a service that required prior authorization is rendered without obtaining authorization, the resulting claim is typically denied. Many provider-payer contracts include 'hold harmless' clauses that prohibit balance billing patients for services denied due to the provider's failure to obtain required authorization. This means the provider absorbs the financial loss. Exceptions may exist for true emergencies, and some plans have appeal processes for retroactive authorization in extenuating circumstances.
Question 4: What does the term 'medical necessity' mean in the context of insurance coverage?
- Any service a physician deems appropriate for a patient
- Services that are reasonable and necessary for diagnosis or treatment of an illness or injury based on established clinical guidelines (Correct answer)
- Any service covered under the patient's benefit plan
- Services performed in an acute care hospital setting
Correct answer: Services that are reasonable and necessary for diagnosis or treatment of an illness or injury based on established clinical guidelines
Medical necessity means the service is reasonable, necessary, and appropriate for the patient's diagnosis or condition based on evidence-based criteria.
Medical necessity is the standard used by payers to determine whether a service, procedure, or medication should be covered. A medically necessary service is one that is appropriate, reasonable, and necessary for the diagnosis or treatment of an illness, injury, condition, or disease. Payers use evidence-based clinical criteria (such as InterQual, MCG, or their own proprietary criteria) to evaluate medical necessity, which may differ from a physician's clinical judgment.
Question 5: Which of the following is a common reason for prior authorization denial?
- The provider is in-network with the payer
- The requested service is listed as covered in the patient's benefit plan
- Insufficient clinical documentation to support medical necessity (Correct answer)
- The patient has met their annual deductible
Correct answer: Insufficient clinical documentation to support medical necessity
Insufficient or incomplete clinical documentation is one of the most common reasons prior authorization requests are denied.
Common reasons for prior authorization denials include: insufficient clinical documentation to support medical necessity, the requested service is not covered under the patient's benefit plan, the patient has not tried less intensive treatments first (step therapy), the provider is out of network, the authorization request was for the wrong service or incorrect code, or the patient does not meet specific clinical criteria. Incomplete documentation is frequently cited as the leading cause of initial denials.
Question 6: What is a 'letter of medical necessity' (LMN)?
- A form signed by the patient authorizing treatment
- A physician's detailed statement explaining why a specific treatment is medically necessary for a patient (Correct answer)
- A payer's written approval for a service
- A legal document filed with the state insurance commissioner
Correct answer: A physician's detailed statement explaining why a specific treatment is medically necessary for a patient
A letter of medical necessity is written by the treating physician to explain and justify why a specific service is medically necessary for a particular patient.
A letter of medical necessity (LMN) is a document written by the treating physician that explains a patient's diagnosis, the proposed treatment or service, why that specific treatment is necessary for the patient, and why alternatives would be inadequate. LMNs are used to support prior authorization requests and appeals, particularly for services that require clinical justification such as durable medical equipment, specialty medications, or non-standard treatments.
Question 7: In which scenario would a 'retrospective review' occur?
- Before a planned elective procedure
- After emergency services are provided and stabilization has occurred (Correct answer)
- During an inpatient stay on a daily basis
- When a patient requests a referral to a specialist
Correct answer: After emergency services are provided and stabilization has occurred
Retrospective review occurs after services have been rendered, most commonly after emergency care when prior authorization was not possible.
Retrospective (or post-service) review occurs after services have already been rendered. It is most commonly performed after emergency admissions, where prior authorization was not possible because of the urgent nature of the care. The payer reviews the documentation after the fact to determine if the services met medical necessity criteria. Retrospective reviews can also be triggered by audits of provider billing patterns.
Question 8: When should a billing specialist begin tracking a prior authorization request?
- After the service has been performed and billed
- After the payer issues a decision
- Immediately upon submission of the authorization request (Correct answer)
- Only after a denial is received
Correct answer: Immediately upon submission of the authorization request
Authorization tracking should begin immediately upon submission so turnaround times, status updates, and expiration dates can be monitored proactively.
Effective authorization tracking requires logging the request from the moment it is submitted. Tracking includes recording the submission date, reference number, payer contact, expected turnaround time, and any follow-up contacts. Proactive tracking prevents services from being rendered without a decision, ensures authorizations don't expire before the service date, and allows timely follow-up when payers exceed their response timeframes. Many practices use authorization tracking logs or software modules for this purpose.
CBCS Prior Authorization and Referrals 2
Which payer type typically requires the most stringent prior authorization requirements?