Prior authorization (PA) is a requirement imposed by health insurance companies that mandates approval before a patient can receive coverage for certain medical services, procedures, devices, or prescription drugs. This administrative step acts as a gatekeeper, ensuring the proposed treatment aligns with the payer’s standards for medical necessity and cost-effectiveness. Because this concept is central to the modern healthcare system, it is referred to by a variety of names across different health plans and provider settings. The underlying process remains consistent: a formal request must be submitted and approved by the payer before the service is rendered to guarantee coverage.
Alternative Terms for Prior Authorization
The most common alternative term used interchangeably with prior authorization is pre-authorization. These two terms are functional synonyms, both referring to the prospective review of a medical service by an insurer. Another frequently encountered term is pre-certification, which also signifies the need for the payer to review and approve a service before it is provided. Some health plans may use “pre-certification” specifically for the administrative review of hospital admissions or elective surgeries.
Similarly, the terms pre-approval and predetermination are also widely used to describe this prospective review process. In practice, a health plan’s use of one term over another often depends on internal billing or administrative protocols rather than a fundamental difference in the required action. For instance, a payer might use “predetermination” to refer to an optional step that clarifies patient cost-sharing and coverage before a service. The goal across all these terms is the same: the provider must obtain affirmative consent from the insurer to secure coverage for the treatment.
The Mechanics of Prior Authorization
The process begins when a healthcare provider determines a patient needs a specific treatment, such as an advanced imaging study, a specialty medication, or a non-emergency surgical procedure. The provider’s administrative staff must first check the patient’s health plan policy to confirm if the service requires prior authorization. If it does, the provider’s office then prepares and submits a formal request to the payer, which includes detailed clinical documentation to support the claim of medical necessity.
This documentation typically includes the patient’s diagnosis codes, proposed procedure codes, and clinical notes that justify why the treatment is the most appropriate option. The payer then reviews this submission against its established coverage criteria, which are often based on evidence-based guidelines and clinical standards. A team of reviewers, which may include nurses, pharmacists, or physicians, evaluates the request.
The payer will then render a decision: approval, denial, or a request for more information, which initiates a communication cycle. Approval results in an authorization number that confirms the service will be covered, though this does not guarantee the full cost will be paid. The rationale for this mechanism is two-fold: it helps control healthcare expenditures by preventing unnecessary or expensive treatments, and it promotes the selection of medically appropriate and cost-effective alternatives.
Differentiating Related Utilization Management Tools
Prior authorization is a type of Utilization Management (UM), which is the umbrella term for techniques health plans use to evaluate the appropriateness of healthcare services. UM is a system designed to ensure that care is neither overused nor underused and is delivered efficiently. While PA is a prospective review, meaning it occurs before the service is delivered, other UM tools operate at different points in the care timeline.
Step therapy is a UM tool specifically focused on prescription drugs. It requires a patient to first try a less expensive, often generic, medication proven effective for their condition. The patient must demonstrate that the initial, lower-cost drug failed to work or caused unacceptable side effects before the insurer will cover the more expensive, provider-prescribed drug. This “fail first” approach is distinct from PA, which is a gatekeeping approval for a specific service.
Another UM tool is retrospective review, which occurs after the medical service has been provided and paid for. In this process, the payer audits the patient’s medical records and billing claims to determine if the treatment was medically necessary and appropriate. If the payer determines the service was not justified, they can seek to recoup the payment from the healthcare provider.
Finally, a formulary exception is a specific administrative procedure used to request coverage for a medication not listed on the plan’s approved drug list, or formulary. While this process often involves a PA-like review of medical necessity, it is distinct because the provider is specifically requesting an exception to the standard list. These utilization tools are applied at different stages and for different purposes within the continuum of patient care.
How Prior Authorization Affects Healthcare
The PA system generates significant impacts across all healthcare stakeholders. For patients, the most notable effect is the potential for delays in receiving necessary medical treatment. Survey data shows that these delays can negatively affect clinical outcomes and, in some cases, lead to the patient abandoning the recommended course of treatment entirely.
Healthcare providers and their staff face a substantial administrative burden, dedicating significant time and resources to completing and tracking authorization requests. This overhead is a source of frustration and can divert staff attention away from direct patient care. Payers benefit from the system by using it to manage costs and promote the use of lower-cost alternatives, which results in considerable savings. The system aims to strike a balance between fiscal prudence and ensuring patients receive appropriate, evidence-based care.