What is Authorization in Medical Billing & Types

Since there are various tasks and rules in medical billing, it is necessary to do things correctly to get paid promptly by insurance companies.

Authorization plays a key role in this system and is usually called prior authorization or pre-authorization. When you know what it is, the differences between types and their value, it can be avoided by both patients and healthcare providers.

In this post, we’re going to talk about what is authorization in medical billing, different types of authorization, how important it is, and how authorization differs from referral. No matter if you are a healthcare worker, a billing expert, or a patient, this knowledge is necessary to work with healthcare reimbursement.

What is Authorization in Medical Billing?

A healthcare provider is required to seek authorization from a patient’s insurance company to deliver particular services. This part is important as it gives proof that the procedure is what the policy covers and is really required.

Insurance companies might refuse to reimburse for the services, so the patient or the provider has to pay if authorization wasn’t obtained first. With authorization, everyone knows what the insurance company will and won’t pay for.

Services regularly requiring authorization are:

• Surgeries
• Specific tests such as (MRI) and (CT).
• Items of durable medical equipment (DME)
• Admitting patients to the hospital
• Medications that your doctor gives you

Usually, before authorization, the patient’s medical history, doctor’s diagnosis, and proposed treatment plan are submitted to the insurance company. After that, the insurance company analyzes the request to see if it fits their criteria for necessary medical care.

Different Types of Authorization in Medical Billing

Five different types of authorization apply to medical billing. Although a summary is all we’re going to discuss here. Each account type has a unique function in billing.

• Pre-authorization: Much of the time, prior authorization is needed before services like surgeries, major medications, or in-depth testing can be used. If you do not have this approval, your claims may be declined.
• Retroactive Authorization: Sometimes, providers will deliver health services without having prior authorization. So, these situations arise, and they need retroactive permission to treat the patients, usually because of emergencies.
• Concurrent Authorization: It is used when a patient is in the hospital to support longer treatment past the initial approval. This is done in the situation of inpatient stays and long-term treatment.
• Specialty Authorization: You need this type when obtaining treatment for oncology, cardiology, or behavioral health problems. To control money spent and promote responsible use, insurance companies normally require tougher rules for getting specialist services.
• Referral Authorization: It is a term used for when a referral from the PCP also includes insurance authorization. It is needed when a specialist visit through a managed care plan can only happen if the insurance company agrees with the recommendation prior to the visit.

They exist to keep misunderstandings about billing from affecting patients and their treatments.

Why Authorization Matters in Medical Billing

Authorization goes beyond paperwork; it helps guarantee that a medical practice operates and finances well.

Here’s what makes authorization so essential:

1. Lowers the number of denied claims

Not getting authorization before giving care could allow claims to be denied, so the provider does not get reimbursed, and the patient may have to pay what is owed.

2. Review medical services

Popularly, many medical treatments are required to pass an approval process, which means they must be considered medically necessary by the insurance company. This holds down the number of excessive or pointless procedures.

3. Helps to manage business work

If authorizations are taken care of promptly, the whole billing process becomes smoother, and there is less paperwork to address when things are approved.

4. Improves patient experience

Having insurance coverage for approved procedures prior to the visit helps patients avoid expensive, sudden bills. Hence, they feel relaxed and satisfied.

5. Protects against a loss of revenues

Proper and prompt authorizations allow practices to receive payments more quickly and prevent wasteful write-offs.

6. Working under the law

A lot of payers will not provide payment unless they see a letter of authorization following the rules. Following the rules keeps providers safe from legal claims.

Difference Between Authorization and Referral

Even though authorization and referral are terms you’ll hear used together in medical billing, they actually have their own purposes and roles. Knowing how each is defined helps you select appropriate insurance and avoid the risk of your claims being rejected.

While authorization means the insurance company permits certain services, a referral is a request from your primary care doctor for you to see a specialist. Managed care models usually require both steps, as this depends on a patient’s insurance plan.

Here’s a comparison to make the differences easier to see:

In short, a referral introduces you to a specialist, but you still need the authorization from the insurance company to pay for it.

Let DWP Medical Take Care of Your Authorization and Billing Needs

Going through the process of authorizing medical billings can be both slow and stressful. Having to handle delays, denied claims, and misunderstandings with insurance providers may negatively affect both your profits and the way you practice.

That’s when DWP medical comes to the rescue!

Skilled people on our team handle authorizations, confirm insurance details, and submit claims that will be paid the very first time. You don’t have to handle prior authorization, Concurrent Authorization, or Referral Authorization because we take care of it for you.

DWP Medical will handle your medical billing, and you’ll see fewer denials, faster payments, and can focus more on your patients.