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May 7, 2020

Is Electronic Prior Authorization the Next Health Mandate?

Updated May 24, 2022  |  Published May 7, 2020 by Helen Farnen


Prescription prior authorization (aka precertification or pre-approval) is one of the most criticized processes in healthcare today. Prior authorization is required by most insurance companies as a safety and cost-saving measure. 

But it’s not popular with prescribers. A study conducted by the American Medical Association (AMA) reported that 92% of physicians feel that prior authorizations negatively affect clinical outcomes. The same survey found that 78% of doctors say prior authorizations can lead to patients abandoning treatment. 

Prior authorization is also expensive. A report by Health Affairs determined that the cost of prior authorizations to the U.S. healthcare system is between $23 and $31 billion a year. And that doesn’t include indirect costs associated with time away from patients, increases in administrative tasks, and less time to grow the practice. 

Is electronic prior authorization the solution? 

Electronic prior authorization (ePA)—a feature included in some Electronic Prescribing (eRx) and Electronic Health Records (EHR) systems—reduces the time and cost of prior authorization by eliminating paper forms, faxes, and phone calls. 

For example, the AMA study found that providers took 14.6 hours on average (about two business days) to complete a prior authorization request manually. This is followed by the time it takes an insurance company to approve or deny the request. With a manual approach, 30% of prescribers report that the average wait time for a determination is three days. Conversely, data from CoverMyMeds shows that 62% of ePA requests return a determination within two hours and 43% receive an immediate determination

There is also a cost advantage to ePAs. According to the Council for Affordable Quality Healthcare, Inc. (CAQH), the medical industry could save as much as $454 million by using ePA. CAQH also found that the cost of a single ePA transaction was $3.32 on average in 2019 verses $10.92 for manual prior authorization. However, despite the savings, ePA usage stayed flat from 2018 (12% of providers) to 2019 (13% of providers). 

Governments are legislating for ePA 

In 2019, the Centers for Medicare and Medicaid Services proposed ePA regulations for Medicare Part D (Medicare prescription coverage). If finalized, Part D plans will be required to support ePA standards developed by the National Council for Prescription Drug Plans (NCPDP), beginning in January 2021.

In addition, over a dozen states have mandated ePA; many of which are subject to NCPDP standards, while other states have legislation proposed. And still others are using guidelines from the AMA to add more transparency to prior authorizations.  

What does this mean for the future?

Many EHR and eRx systems already include ePA functionality, including RXNT’s solutions. Surescripts®, the nation’s largest prescription clearinghouse, has recently announced technology updates that simplify prior authorization for specialty drugs. So it’s not a huge leap to see an increase in customer demand for ePA capability within eRx and EHR systems. Similarly, more state governments are likely to add laws requiring ePA in the not-too-distant future. 

The bottom line: first-time buyers of eRx/EHRs and those who are considering an upgrade should think about adding ePA to their list of “must-have” features. See how it works in real life—request a demo.

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