What is "prior authorization" in insurance?

Prior authorization is a process where a healthcare provider must obtain approval from a health insurance company before performing a specific service or procedure. This requirement is in place to ensure that the requested treatment is medically necessary, appropriate for the patient’s condition, and meets the insurer's standards for coverage. By implementing prior authorization, insurance companies aim to manage costs and ensure patient safety by preventing unnecessary treatments.

The importance of this process lies in its role in controlling healthcare spending and guiding providers toward evidence-based care options. Providers must submit information detailing the patient’s medical history and the rationale for the proposed treatment, which the insurer reviews before granting approval.

This process significantly affects the delivery of healthcare services, as it can lead to delays in treatment or require providers to justify their decisions to the insurance company, thereby impacting both the provider's workflow and the patient's experience.

In contrast, requiring hospitals to get patient consent for treatment involves legal and ethical considerations but is not specifically related to insurance companies. The parameter that determines payment rates by insurers relates more to reimbursement models rather than prior authorization. Lastly, appealing denied claims is a process separate from prior authorization; while it relates to coverage disputes, it occurs after a service has been rendered and payment denied.