What is Authorization in Medical Billing

Definition of Authorization

The term authorization refers to the process of getting a medical service(s) authorized from the insurance payer. The term authorization is also referred to as pre-authorization or prior-authorization.

It is a legal obligation to ensure that the insurance payer pays for the specific medical service mentioned in the medical claim form. Without authorization, the insurance payer is free to refuse the payment of a patient’s medical service as part of the health care insurance plan.

The medical coder and the health care provider work together to get the medical service authorized. However, the medical coder is responsible to assign the correct CPT code to the medical procedure received by the patient. Nonetheless, the medical coder must not take his/her responsibility lightly because assigning the wrong CPT code can lead to denial.

As for the authorization of the medical procedure, the responsibility goes to the health care provider. The provider must apply for authorization before performing the procedure. Once approved, the payer then provides the health care provider with an authorization number for any further references.

Authorization Request Submission Process

The health care provider may submit authorization requests both manually and electronically. Offline and online forms are available to submit a written authorization request. Whereas fax and mail are used to submit an electronic authorization request.

The requirements for authorization requests vary across insurance companies. However, the following information tends to remain similar while submitting authorization requests.

• Patient’s Demographic information (name, date of birth, and insurance ID number, etc) during the insurance verification process
• Information of the Provider (both referring and servicing provider)
  1. Address
• 2. Tax ID Number
• 3. National Provider Identifier (NPI) number
• 4. Phone and fax numberr

• The location where the service will be performed
  1. Address
• 2. Tax ID Number
• 3. NPI number
• 4. Phone and fax numberr

• Requested procedure/ medical service along with correct CPT/HCPCS codes
• Diagnosis (corresponding ICD code and description)
• Length of hospital stay requested in case of inpatient requests

In addition to the above, the payer may ask for additional documents as per their requirement.

Preventing Denials Related to Authorization

Pre-authorization is a vital step in the insurance verification but it does not guarantee reimbursement. Here are a few tips to prevent claims denial due to authorization.

• Early Submission of Authorization Request: It is important to submit authorization requests before treatment. Early submission helps in obtaining the authorization number to determine the payment.
• Mention Authorization Number: While processing the claims make sure to include the authorization number to prevent rejection of claims. This establishes that you have received prior authorization.
• Double Check Codes: To avoid claims rejections make sure to double-check CPT/HCPCS codes for the mentioned treatment.
• Check Explanation of Denials: If the claims are rejected for an unexplained reason and there is no error from your side then you must contact the payer.

The above tips are quite important to prevent authorization related denials but outsourcing insurance verification services can guarantee early authorization of medical service without any failure.