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Increase in Prior Authorization Automation Has Potential for Major Cost Savings

Analysis  |  By Jay Asser  
   February 23, 2022

The 2021 CAQH Index finds automation of prior authorization jumping to 26%, while the cost savings opportunity increases to $437 million annually.

Automation of prior authorization remains on the rise, but fully electronic adoption could result in hundreds of millions in savings annually for the medical industry, according to the 2021 Council for Affordable Quality Healthcare Inc. (CAQH) Index.

Following the COVID-19 surge and its burden on the U.S. healthcare system, providers and health plans have worked together to conduct administrative functions more efficiently, particularly remotely. The result, the Index observed, is an increase in automation of transactions, with prior authorization seeing one of the most significant improvements, jumping from 21% in 2020 to 26% this past year.

Researchers also found that despite spending associated with prior authorizations decreasing 11% to $686 million due to decrease in volume and increase in automation, the cost savings opportunity from switching to electronic methods increased to $437 million annually, from $417 million in 2020.

The increase in automation, however, doesn't just save money, but time as well. According to the Index, providers saved, on average, 16 minutes per transaction by conducting prior authorizations electronically.

Finding ways to cut down on money and time spent on prior authorization should be a priority, as the process is often considered an administrative hindrance and one of the most costly and time-consuming transactions to conduct among those studied, according to the Index. To alleviate the stress on staff and streamline care for patients during the pandemic, prior authorization requirements were even suspended or waived, which researchers found contributed to a 23% decrease in prior authorization volume.

"The 2021 CAQH Index uncovered important shifts in healthcare administrative operations during the pandemic, some of which could have lasting implications," said April Todd, CAQH senior vice president, CORE and Explorations, in a press release. "Social distancing, remote work and an increase in the use of telemedicine have resulted in greater levels of automation today and additional opportunities for savings in the future."

Jay Asser is the contributing editor for strategy at HealthLeaders. 

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