What is Preauthorization in Medical Billing

CMS defines preauthorization as “a process through which a request for provisional affirmation of coverage is submitted to CMS or its contractors for review before the item or service is furnished to the beneficiary and before the claim is submitted for processing. It is a process that permits the submitter (e.g., provider, supplier, beneficiary, etc.) to send in medical documentation in advance of providing and billing for an item or service, to verify its eligibility for Medicare claim payment. Contractors shall, at the direction of CMS or other authorizing entity, conduct prior authorizations and alert the submitter of any potential issues with the information, as submitted.”

In other words, preauthorization is the process of getting the insurance payer to sign an agreement authorizing the payment for medical service(s) being received by the insured patient.

The term preauthorization is also referred to as authorization or prior-authorization or precertification.

Understanding Preauthorization Request Submission

While filling the preauthorization request form providers must pay attention to the required information and fill it correctly. The incorrectly filled request form may result in rejection of the preauthorization request. Therefore make sure to provide information such as correct information of the patient (name, date of birth, address, and insurance ID number, etc), details of both referring and servicing providers (address, phone number, fax number, tax ID number, and national provider identifier number), and the location of services being performed (address, phone, and fax number, NPI and tax ID number).

In addition to this, you must give information such as diagnosis, medical services provided along with right CPT/HCPCS codes, and the length of an inpatient’s stay in the hospital. However, the insurance payer may ask for additional documents along with the mentioned documents. So the provider must ensure to cross-check the required documents/information with the insurance payer and provide the same along with the preauthorization request form.

Role of Preauthorization in medical Billing

• Insurance Verification: It is important to note that preauthorization is a process that is a part of the insurance verification process itself. Therefore it ensures that the insurance details of the patient are valid.
• Assurance of Reimbursement: Preauthorization is one way to have an assurance that the payer is obliged to pay the reimbursement amount as per the signed agreement.
• Prevention of Denied Claims and Fraud: Preauthorization helps in verifying insurance details and thus prevent insurance fraud by eliminating false insurance claims. Also, it helps in preventing denials by making the insurance payer sign a legal document ensuring that the payer can’t deny the payment.

Tips to Prevent Denials

• Submitting Preauthorization Request Beforehand: Provider must submit the request before performing the medical procedures. Getting a prior authorization for the required procedures is the only way to secure reimbursement.
• Preauthorization Number is Important: Sometimes, providers forget to mention the preauthorization number on the claims form. Missing preauthorization number may result in denial of claims because it indicates you performed the procedure(s) without having authorization. Therefore always make sure to mention the preauthorization number.
• Double Check the Request Form for Errors: Errors in the preauthorization request form can cause two problems—firstly, your preauthorization request may be rejected and secondly, it can also delay reimbursement.
• Submit all the Required Documents: It is essential to submit all the documents that are demanded by the insurance payer to support the medical services/procedures being provided to the patient.