Utilization management is crucial to ensure people have access to the appropriate care in the right place and at the right time. The value-based care strategy includes utilization management (UM) reviews. They want to know if patient care is appropriate, efficient and connected to better patient outcomes. The insurance company’s UM processes include prior authorization, predetermination, and post-service evaluation.

A UM review uses evidence-based clinical standards of care to assess whether the health plan covers treatment. Utilization Management entails the following:
- Prior authorization.
- Predetermination
- Post-service review
Prior Authorization
Prior authorization, also known as prior approval or prior authorization, is a pre-service medical necessity evaluation. Prior authorization is the procedure through which we determine whether a requested service or medicine is medically required and covered by the member’s health plan. Not all treatments and medications require prior authorization.
If the member sees an in-network provider, the provider is responsible for obtaining prior authorization before conducting a service. A plan may require a member to acquire prior service authorization at times. The available benefits are determined by the terms of the member’s plan.
Many stakeholders are getting prior authorizations granted, including patients, healthcare providers, and the patients’ health insurance companies.
Importance Of Prior Authorization
- It helps to limit expenditures and manages the risk of overprescription.
- Ensures that the service or medicine requested by the physician is genuinely medically essential.
- Ensures the service is not repeated, particularly when numerous professionals are engaged.
- Determines if the recurring or continuous service is genuinely advantageous to the patient’s treatment.
If you don’t have prior authorization for the services and drugs, you can face the following issues:
- The service or medicine may not be covered, and the member or the in-network ordering or servicing provider will be held liable.
- If you do not get prior authorization for a service or prescription on our prior authorization list, you will not get reimbursed and will not be able to bill for that service or drug.
Predetermination
A predetermination is a formal examination of a patient’s desired medical care compared to their insurance company’s medical and payment policies (MGMA). The goal is to establish if the due care meets the medical necessity criterion.
Predeterminations are not required for services that are not considered life-threatening. The majority of services that need a formal predetermination are experimental, investigational, or aesthetic.
Importance of Predetermination
Insurance companies do not usually demand predeterminations, although they do so for a variety of reasons, including:
- Predeterminations are necessary before giving services to determine medical necessity (in addition to checking eligibility and benefits).
- If the provider is unsure about coverage for a service, predeterminations may be employed.
- The amount the insurance will reimburse for the service is confirmed via predetermination.
- If a medical operation, treatment, or test is not covered, the member or the in-network ordering or servicing provider is liable for paying the charge.
- Predeterminations may do away with the necessity for a post-service evaluation (requesting medical records and reviewing claims).
Difference between Prior Authorization and Predetermination
Preauthorization and predetermination are both UM processes used by insurance companies to assess if a treatment is covered under the health plan and whether it is medically necessary or not. They are different in the following ways.
Pre Authorization Predetermination
- Preauthorization allows providers to get insurance company clearance before providing treatments. Predetermination confirms that the patient is a covered member of the insurance plan and that the patient’s treatment plan is a covered benefit.
- It is necessary for some patients/services/drugs before rendering services to validate medical necessity as specified by the patient’s health benefit plan. It is optional but suggested for understanding coverage for experimental or investigative services provided for other purposes.
- It may take up to 30 days to get approved. Its approval might take up to 30 to 60 days.
- It does not ensure reimbursement. It confirms the percentage of fees that will be reimbursed.
- Failure to get preauthorization may result in financial liability for the patient or provider. It is not required for treatments and substances on the prior authorization list or non-life-threatening services.
Prior authorizations and predeterminations are both time-taking and laborious processes. Outsourcing preauthorization and predetermination processes to an insurance authorization company with trained staff can reduce the risk of the insurer denying payment for treatments, submitting predetermination requests for complex, costly procedures to the insurer soon as possible, and providing prompt patient care. Avoiding excessive patient expenses, assisting practices in increasing income and obtaining faster reimbursement.
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