Prior Authorization Changes could save Physician Practices $15 billion in 10 years

The CMS Interoperability and Prior Authorization final rule (CMS-0057-F), published on January 17, 2024, will require certain payers and providers to use standardized and interoperable APIs to automate and streamline prior authorization processes. The AMA estimates that the rule will reduce administrative burden and save physician practices $15 billion over 10 years.

The final rule is expected to result in net savings of approximately $15 billion over 10 years for impacted payers and providers, as well as additional savings for patients and other stakeholders. CMS also anticipates that the final rule will foster innovation and competition in the health IT market, as developers and vendors will have more opportunities to create and offer interoperable solutions that meet the needs and preferences of payers and providers.

The final rule will take effect on January 1, 2026, for most of the provisions. However, some of the API development and enhancement requirements have a later compliance date of January 1, 2027, or later, depending on the type of payer. CMS encourages payers and providers to begin implementing the final rule as soon as possible to realize its benefits and prepare for the compliance dates.

The rule is part of CMS’ efforts to advance interoperability and improve prior authorization processes for Medicare Advantage (MA) organizations, state Medicaid and CHIP Fee-for-Service (FFS) programs, Medicaid managed care plans, CHIP managed care entities, and issuers of Qualified Health Plans (QHPs) offered on the Federally Facilitated Exchanges (FFEs). The rule builds on the CMS Interoperability and Patient Access final rule (85 FR 25510), which required impacted payers to implement and maintain certain HL7® FHIR® APIs to give patients access to their health information. The final rule also incorporates the feedback that CMS received from individuals and groups on the CMS Interoperability and Prior Authorization proposed rule (85 FR 82586), which was withdrawn by CMS.  

The final rule includes the following provisions:

• API Requirements: In order to facilitate the electronic exchange of health care data and streamline prior authorization processes, CMS requires that impacted payers implement and maintain an API that enables the electronic submission and exchange of prior authorization requests and decisions between providers and payers by January 1, 2027. The API must also provide a clear and specific reason for any prior authorization denial and instructions on how to resubmit the request or appeal the decision. CMS also sets deadlines for payers to respond to prior authorization requests: within 72 hours for urgent requests and within seven days for standard requests. These deadlines are consistent with existing federal and state laws and regulations. In addition, CMS requires that impacted payers add prior authorization information (excluding those for drugs) to the data available via the API by January 1, 2027. This will help patients and providers understand the payer’s prior authorization process and its impact on patient care. CMS also requires that impacted payers report annual metrics to CMS about API usage, beginning January 1, 2026.

• Promoting Interoperability Program Measure: To incentivize providers to adopt electronic prior authorization processes, CMS adds a new measure for eligible clinicians and hospitals under the Medicare Promoting Interoperability Program. The measure, called the Electronic Prior Authorization Support measure, will evaluate whether providers use a certified electronic health record technology (CEHRT) to generate and transmit prior authorization requests and receive prior authorization decisions from payers. The measure will be optional for the 2026 performance period and required for the 2027 performance period and beyond. Providers who report the measure will earn five bonus points under the Promoting Interoperability performance category of MIPS or the Medicare Promoting Interoperability Program, respectively.

The AMA, which has been leading the advocacy efforts to reform prior authorization, welcomed the final rule as a major victory for physicians and patients. The AMA estimates that the final rule will reduce administrative burden and save physician practices a significant sum of money in 10 years.