Prior authorization (PA) is a process mandated by health insurance companies requiring a physician to secure approval before a patient can receive certain medications, procedures, or medical services. Insurers use this mechanism to confirm the proposed treatment meets their criteria for medical necessity and is a cost-effective option before covering the expense. While intended to manage utilization and costs, this requirement has created a massive administrative bottleneck within the healthcare system. This burden raises the question of whether patients can be responsible for covering the non-clinical administrative costs incurred by medical practices. The administrative burden is often cited as a major driver of physician burnout and delays in patient care.
Understanding Prior Authorization Fees
A doctor’s office may consider charging a fee for prior authorization because the process demands a significant, uncompensated investment of time and specialized labor. The administrative work involved far exceeds a simple phone call or quick form submission. Practices report spending the equivalent of nearly two full business days each week dedicated solely to PA-related tasks. This volume translates to substantial annual costs, potentially reaching tens of thousands of dollars per physician each year in staff time alone.
The process requires specialized staff, such as medical coders or nurses, to compile detailed clinical documentation, including patient history, lab results, and the rationale for treatment. Submissions often involve multiple phone calls to the insurer’s utilization management department and lengthy negotiations with reviewers. If the initial request is denied, staff must dedicate further resources to the appeals process, preparing formal letters and submitting additional supporting medical records.
These complex tasks consume resources that are not directly billable to the patient or the insurer under standard medical service codes. Providers seek to recoup this non-reimbursed workload through an administrative fee charged to the patient. This fee represents the direct cost of maintaining the personnel and systems necessary to navigate the bureaucratic requirements imposed by the payer.
The Legality of Billing Patients for PA
The legality of billing an insured patient for prior authorization administrative work depends on the provider’s contractual relationship with the insurance company. For in-network providers, their participation agreement with the insurer universally prohibits charging the patient for administrative overhead. This prohibition is designed to prevent balance billing, where the provider attempts to collect the difference between their full charge and the amount the insurer has agreed to pay.
Prior authorization work is categorized as an overhead expense, similar to scheduling or billing, and is implicitly covered by the negotiated payment rate for the medical service. There are no specific Current Procedural Terminology (CPT) codes allowing a provider to bill a patient directly for the time spent on PA tasks. Using a clinical code, such as an Evaluation and Management code, to bill for non-clinical PA time is considered improper billing practice.
The core principle protecting the patient is the balance billing prohibition, which ensures the patient is only responsible for agreed-upon cost-sharing amounts, such as copayments, coinsurance, or deductibles. If an in-network provider attempts to charge an administrative fee for PA, that charge is typically a violation of the provider-payer contract. Therefore, the fee is not legally permissible under the terms of the insurance agreement.
Situations Where Patients Are Billed
Despite the general prohibition for in-network providers, specific circumstances allow a patient to legitimately receive a bill related to the prior authorization process. The most common exception involves patients seeing an out-of-network provider who lacks a contract with their insurance plan. Since no contract exists, the provider is not bound by the insurer’s rules regarding administrative overhead or balance billing prohibitions. They can therefore charge the patient for the administrative time spent securing the PA.
A bill may also occur if the prescribed service is not covered by the patient’s plan or is deemed not medically necessary by the insurer. For Medicare beneficiaries, an Advance Beneficiary Notice of Noncoverage (ABN) informs the patient that Medicare may not pay for the service. This transfers financial responsibility for the underlying service to the patient if they choose to proceed. The non-covered service can result in a bill for the entire cost, which includes the administrative work required for submission.
Uninsured or self-pay patients may also face administrative fees if they request the provider to submit documentation for a third party. If they request a Good Faith Estimate (GFE) for the cost of a service, the administrative work to generate that estimate could potentially be included in a separate charge. However, the patient is legally entitled to a GFE for the service, and a separate fee for the estimate itself is generally not permitted if the patient is disputing the cost under the No Surprises Act.
Steps to Take When Charged for Prior Authorization
If a patient receives a bill for a prior authorization fee, the first action should be a detailed review to determine exactly what the charge covers. It is important to distinguish between an administrative fee for the paperwork and a bill for the service itself due to a PA denial. For insured patients, the next step is to immediately contact the health insurance company.
The patient should ask the insurer to verify if the provider’s charge for the PA administrative fee complies with their contract. Specifically, inquire whether the fee violates the balance billing clause of the provider’s network agreement. If the insurer confirms the charge is a violation, the patient can request that the insurer intervene to adjust the bill.
If the provider refuses to remove the charge, the patient should formally dispute the bill in writing with the billing office, referencing the balance billing protections afforded by their insurance plan.
For uninsured or self-pay patients whose final bill is at least $400 more than the Good Faith Estimate (GFE), they may be eligible to initiate the Patient-Provider Dispute Resolution (PPDR) process under the No Surprises Act. This process involves an independent third party reviewing the bill to determine an appropriate payment amount.