Prior authorization takes command

Diagnostic Imaging, Diagnostic Imaging Vol 30 No 11, Volume 30, Issue 11

During tens of thousands of patient consultations every day, physicians make bad decisions about ordering diagnostic imaging. They may prescribe brain MRI because it is faster to write an order than to conduct a routine neurological exam. They may call for an abdominal CT without realizing that diagnostic ultrasound is cheaper and equally effective.

During tens of thousands of patient consultations every day, physicians make bad decisions about ordering diagnostic imaging. They may prescribe brain MRI because it is faster to write an order than to conduct a routine neurological exam. They may call for an abdominal CT without realizing that diagnostic ultrasound is cheaper and equally effective. They may give in to a patient's pestering for a shoulder MR prescription because of advice drawn from the Internet. They may ask for imaging to protect themselves against malpractice, or maybe they churn out orders because they own the equipment.

"You've got a multitude of factors," said Don Ryan, CEO of CareCore National, a radiology management company. "Some of it is consumer demand. Some of it is marketing. Some of it involves physician financial incentives. Some of it is just a lack of careful consideration about the potential value of a study."

All these factors have contributed to dramatic growth for high-tech imaging. In a July 2008 study, the Government Accountability Office found that Medicare Part B spending on diagnostic imaging had more than doubled, to $14.1 billion, from 2000 to 2006 (Figure 1). High-tech MR, CT, PET, and nuclear medicine were the biggest contributors to that growth. (A follow-up report from the GAO found that Medicare costs then fell $3.1 billion in 2007 because of rate cuts ordered by the Deficit Reduction Act of 2005.)

Commercial insurers see the same pattern. Their imaging-related costs have increased from 15% to 25% per year since the beginning of the decade. Though some growth is explained by new imaging applications and an aging population, most stems from nonmedical causes. In response, private payers are turning to prior authorization to get imaging costs back in line.

As of mid-September, about 109 million privately insured Americans were subject to prior authorization for imaging, mainly for CT, MR, PET, and nuclear cardiology. Insurers serving 55% to 65% of the commercial health-care market now require referring physicians to check with them first before ordering high-tech imaging.

Though imaging-related prior authorization has been in use for at least 15 years, most insurers have only recently adopted the strategy. CareCore added more than 14 million lives to its rolls from 2006 to 2007. Prior author-ization provider American Imaging Management (AIM) expanded from five million covered lives in 2004 to 29 million lives in 2007, when it was acquired by WellPoint and that company's 12-state network of Blue Cross and Blue Shield health plans. Based in Indianapolis, WellPoint bought into imaging utilization management because of unrelenting double-digit percentage increases in its imaging costs.

"That was the deciding factor," said Robert McIntire, senior vice president of healthcare management.

A high ratio of benefits to costs has also sold insurers on the concept. Though program features vary among the five largest radiology management companies, they generally charge $0.15 to $0.32 per member per month for imaging prior authorization services. In interviews, they disclosed that prior authorization reduces the monthly reimbursement costs for MR, CT, PET, and nuclear cardiology between $1 and $4 per member per month.


Prior authorization may seem like an easy choice, but insurers had to overcome public and physician opposition to the approach. Few chapters in the history of the health-care insurance industry have aroused more public concern than the rise of managed care and its adoption of prior authorization as instruments of cost containment in the mid-1990s. Physicians were infuriated. Patient health was sometimes jeopardized, and consumers were appalled at the wide use of prior authorization to regulate access to sometimes life-saving procedures.

Physicians in Minnesota revolted in early 2007 when three large health plans-Blue Cross of Minnesota, Medica, and Health Partners-implemented prior authorization for imaging. Physicians who had partici-pated in a test of a program the summer before found that preauthorization was an expensive drag on their time, said Dr. Barry Bershow, medical director for quality and informatics at Fairview Health Services in Minneapolis. Staff members who phoned in orders were placed on hold for up to 40 minutes, and the receipt of a prior notification number was not a guarantee of reimbursement.

The experience led Dr. Joseph Tashjian, president of St. Paul Radiology, an 85-member group, to conclude that prior authorization is a punitive way to discourage physicians from ordering diagnostic imaging.

"It is not an approach that has any interest in educating the physician or making sure the correct procedure is done," he said.

"Its primary goal is to decrease uti-DOUBLED FROM 2000 TO 2006 lization by placing barriers in front

Still, prior authorization stirs controversy wherever it is implemented. Dr. Stephen M. Koller, chief of radiology at the 25-bed Porter Medical Center in Middlebury, saw abuses as the policy was introduced to his home state of Vermont.

"You battle for the exam. Multiple physicians go to bat. You spend hours talking to folks. These risk managers at these companies that take care of the approval process-they will begrudgingly approve a study only to deny payment later," he said.

Dr. David Steinberg, managing partner of Steinberg Diagnostic Imaging in Las Vegas, says that prior authorization is also unpopular in Nevada. Primary care physicians, in particular, are feeling the strain of flat reimbursement and rising costs. With crowds of patients in their waiting rooms, they cannot afford to spend uncompensated time on the phone, he said.

One of Steinberg's referring physicians even resorted to trickery that was discovered after several patients with various imaging needs appeared at his imaging center with the same authorization number.

"After we were stiffed a couple times, we realized he was making it up because he didn't have the time, energy, or staff to honestly afford to get the prior authorization," he said.

Radiologists complain about the vulnerability of prior authorization to gaming. Physicians can corrupt the system by learning and reporting the clinical criteria that produce an approval, even when the patient's indications don't actually apply to the case. One source said that he knew of a referring physician who prepared cue cards to guide a secretary as she input orders into the prior authorization system. Others say physicians who engage in in-office imaging tend to repeatedly order the same applications, which allows them to memorize the key words that secure approvals.

Dr. James Thrall, president of the American College of Radiology, criticizes prior authorization for oversimplifying the practice of medicine. Prior authorization is organized as an entirely transactional process, he said.

"There are a lot of intangibles, subtleties, and nuances that frankly cannot be captured in a brief conversation between a referring physician who is taking care of a patient and someone on a telephone hundreds or thousands of miles away who has no knowledge of the patient, the patient's condition, or possibly the practice of radiology itself," he said.


Most radiology management companies use similar procedures to evaluate physician orders. Approval rates at each step are also about the same from firm to firm, according to Victor Panza, vice president of business development for Care to Care, a radiology benefits management company in New York City.

Orders may be filed by phone, over the Internet, or via fax, but in most cases they are submitted by a physician's secretary or assistant. Physicians themselves are rarely directly involved initially. Orders arrive in the cubicle of one of hundreds of clinical reviewers employed by each radiology management company. That person determines whether the order is complete and processes it through proprietary decision-making software that compares the order indications against the firm's clinical criteria. The system may feed the reviewer a few questions to pose to callers, but the reviewer has little decision-making power. Based on the automated review, about 60% of all orders are approved at this initial level, Panza said.

The other 40% are referred to a second-level clinical reviewer. These reviewers are usually registered nurses or registered radiologic technologists. After receiving the correct response to a few clinical questions, they typically approve half of the orders that come to their attention.

About 20% of the original orders are transmitted from the nurse to a physician for final review, Panza said. At this point, the call is transferred at the provider's end to the ordering physician for a direct consultation with a member of the radiology management company's own physician staff. The ordering physician is asked to describe the clinical indications and professional rationale that led to the order. Its appropriateness is established after the physician reviewer describes the relevant clinical criteria and payment policies.

In most instances, the referring physician voluntarily withdraws an order when it is deemed inappropriate.

"When physicians are forced to make more cognitive decision-making relative to these procedures, they stop shooting from the hip," Panza said.

Hard denials are issued in response to 2% to 10% of orders, depending on the company and modality. Most insurers permit hard denials, though some will still authorize payment for orders that the physician deems medically necessary even after review.


The first-year impact of prior authorization varies among radiology management companies. They then consistently see growth rate percentages for their clients drop to single digits in the second year.

At MedSolutions, a radiology benefits management company in Franklin, TN, CEO Curt Thorne said it is not unusual for his commercial customers to see their high-tech imaging use drop by 30% in the first year. At AIM, commercial customers realize a 10% to 25% decrease, according to Boris Spevak, AIM vice president of economics. Dr. Thomas Dehn, medical director of Magellan-National Imaging Associates (NIA), said his customers typically experience 15% annual increases in utilization before prior authorization and single-digit percentage growth after. The typical first-year decline among CareCore's customers is from 15% to 18%, Ryan said.

Data from HealthHelp, a radiology benefit management company in Houston, show first-year utilization declines of 8% to 23% for CT and MR for five commercial insurers (Figure 2). In the second year, utilization fell 5% to 17% for the two modalities.

HealthHelp's experience with PET utilization was extremely variable. For an insurer with no previous prior authorization experience, PET utilization fell 37% in the first year and another 29% in the second year. For two other clients, PET use rose in the first year and then fell sharply in the second year.

Cherrill Farnsworth, CEO of HealthHelp, credits her firm's emphasis on physician education for sustained improvement.

"We are actually seeing changed behavior. Our approach brings some value back to the doctor," she said.


The financial benefits of prior authorization arise mainly from voluntary withdrawals, or a sentinel effect that discourages referring physicians from submitting orders, Panza said. Physicians may order more carefully or less frequently because they learn that inappropriate orders will force them to spend unproductive time on the phone with the radiology management company. Hard denials have only a slight effect.

Certification rates depend on the modality, Ryan said. At CareCore, 80% of PET, 78% of nuclear cardiology, and 81% of MR angiography orders are approved for its commercial clients. The certification rates for CT and nuclear medicine are 87% and 82%, respectively, and the rate for MRI is 85%.

Experience with a specific modality and set of applications increases the probability that orders will be approved. Orthopedic surgeons, neurosurgeons, and neurologists had the highest order approval rates for MRI at CareCore through the first half of 2008. Oncologists, hematologists, and general surgeons had the highest approval rate for PET (Figure 3). Internists and general PET ordering.

In-office self-referral is problematic but not a primary cause of inappropriate referrals, said Magellan-NIA's Dehn. In-office self-referral accounts for about 10% to 13% of commercial insurance spending on diagnostic imaging. Inappropriate in-office imaging is responsible for no more that 5% of the company's imaging-related outlays.


The experience of UnitedHealthcare, based near Minneapolis, illustrates how some insurers downplay utilization management. UnitedHealth officials do not call their imaging management program prior authorization. They prefer the term "advance notification." Orders are reviewed and physician-to-physician discussions to educate referrers about preferred practices are employed, but hard denials are not. The final choice of exam is left to the referring physicians.

"This is consistent with our philosophy," said Dr. Lewis Sandy, senior vice president for clinical advancement at UnitedHealth Group, the firm's parent company. "We believe strongly in supporting the physician-patient relationship and the professionalism of the physician."

Advance notification is one of several components of a broader program that has been applied to 18 mil-lion beneficiaries of a variety of UnitedHealthcare's commercial insurance plans beginning in 2007. Other components included physician profiling and facility accreditation.

More than 77,000 physicians, who have achieved "two-star" status in UnitedHealthcare's Premium Designation program, were exempted from advance notification. The program helps beneficiaries choose a doctor from the plan's preferred network. It profiles the doctors according to vari-ous quality criteria, including compliance with appropriateness criteria, when they order imaging.

Facility accreditation is another component. Facilities that provide out-patient CT, MRI, PET, nuclear medicine, nuclear cardiology, and echocar-diography are obligated to apply for accreditation from the ACR or the Intersocietal Accreditation Commission by the fourth quarter of 2009.

AIM's OptiNet program aims at quality and efficiency improvements. Outpatient imaging services and physicians who bill participating insurers for imaging are required to complete a detailed survey. The program collects data on equipment, staff, ownership structure, leasing arrangements, licensures, accreditations, safety proce-dures, and customer service standards.

A year of claims experience for the facility's applicants is also evaluated, said Paul Danao, vice president of business development. This information is combined with historical pricing data to generate quality data scores allowing comparisons between services. About 30% of AIM's customers use the service.

WellPoint Blue Cross and Blue Shield plans in five Midwestern states use OptiNet to identify top-performing services, said Robert McIntire, senior vice president of healthcare management for WellPoint.

"We use it when a physician calls in for a specific procedure, such as a knee MRI," he said. "Our folks can see, based on a particular zip code, which imaging center will give him the best buy in terms of cost and quality."


MedSolutions began evaluating radiology costs from claims in data in 2005. Based on embedded data processing algo-rithms, Predictive Radiology Intelligence analyzes past claims data to assess the ordering physician's ability to com-ply with the company's clinical guidelines. Physicians who consistently order the right test are exempted from future prior authorization requirements for specific procedures.

The program enables MedSolutions to approve about six of 10 orders without collecting clinical information, CEO Thorne said. For the other four that are processed, two will probably be deemed inappropriate.

Introduced earlier this year, RadAlert strengthens HealthHelp's ability to identify physician fraud. Working transparently with the firm's prior authorization program, the software applies management-by-exception principles to physicians who are suspiciously adept at securing authorizations. Unusual behavior leads to chart reviews and corrective action.

"Some have been turned over to the fraud unit of the cian's contract after learning about the behavior," Farnsworth said.


Prior authorization efforts aimed specifically at cardiac imaging have uncovered extraordinary waste. Just in general terms, nuclear cardiology is an expensive item that can cost insurers $1 per member per month, according to CareCore's Ryan. This one modality alone can involve more than 30 exams per 1000 members per year.

"Nuclear cardiology is heavily self-referred. There is more gaming going on with the clinical criteria for it than [for] any other modality," he said.

CareCore's ability to manage nuclear cardiology improved after the American College of Cardiology pub-lished robust appropriateness criteria for nuclear cardiology in 2005. The firm also began collecting more clinical documentation and evaluating ordering patterns.

CareCore received nearly 33 requests per 1000 beneficiaries for nuclear stress tests in 2005 while the program still used proprietary criteria from an outside supplier (Figure 4). The authorization rate was about 30 per 1000. By 2007, when the ACC appropriateness criteria were in place, requests and authorizations dropped to 27 and 19 per 1000 beneficiaries, respectively, Ryan said.


A proposal to extend prior authorization to Medicare's 44.1 million beneficiaries has drawn stiff opposition. The same GAO report that described the swift growth of Medicare Part B imaging also recommended prior authorization and physician privileging and profiling.

The Department of Health and Human Services and imaging advocates criticized the plan. IHHS raised concerns about the administrative burden and noted that no independent analysis was performed to verify the radiology management company claims that influenced GAO recommendations.

America's Health Insurance Plans, an insurance industry lobbying group, criticized GAO analysts for not considering market-based incentives, such as equipment leasing deals, for encouraging in-office imaging. The ACR reiterated its support for facility accreditation and alternative strategies, such as imaging order entry. Thrall noted that the ACR's positions are already federal law. A Medicare bill passed in July will make accreditation a precondition for Medicare payment for MR, CT, nuclear medicine, and PET in 2012. The law also allocated $10 million for demonstration projects on appropriateness criteria. No provisions were made for preauthorization. "Congress's position reflects the ACR's position,” Thrall said.

Although Medicare Part B does not sponsor prior authorization, the concept has infiltrated the Medicare Advantage managed care program through commercial insurers that sponsor Medicare HMO plans. Magellan- NIA's experience with one such program shows that preauthorization works favorably for Medicare, Dehn said. Utilization rates decreased for all but one big-ticket imaging modality in the two years after the rcompany established prior authorization for a Medicare Advantage plan (Figure 5). The plan's advanced imaging costs rose 13% per year in 2003 and 2004 but fell 6% after ordering physicians became subject to prior authorization.

"We know that among Medicare beneficiaries, we have been able to really reduce those trends," Dehn said.