Prior authorization is one of the most common and most frustrating parts of medical billing. It affects clinics, behavioral health practices, hospitals, and specialty providers across the country. Understanding how prior authorization works can help you reduce delays, avoid denials, and get paid faster.
In this guide, we break down the prior authorization meaning, why health plans require it, and how the full process works. We also explain how a medical billing partner like Hometown Billing helps providers manage prior authorizations efficiently and accurately.
What Is Prior Authorization?
Prior authorization is a requirement from health insurance companies that providers must obtain approval before delivering certain services, treatments, procedures, or medications. Without this approval, the insurance company may refuse to pay.
In other words, prior authorization in medical billing is a way for insurance companies to decide whether a service is medically necessary, cost-effective, and covered under a plan. If the insurer does not approve the request, the claim may be denied, even if the provider has already rendered care. This is why understanding prior authorization is essential for clean claims and steady cash flow.
Why Do Health Insurance Plans Require Prior Authorization?
Insurance companies use prior authorization to:
- Control Costs: Insurers want providers to use the most affordable and appropriate treatment options. Prior authorization allows them to verify that a service meets their guidelines.
- Confirm Medical Necessity: Insurance companies want proof that the treatment or test is needed based on the patient’s symptoms, diagnosis, and history.
- Reduce Overuse of Certain Services: Some services, like MRIs and medications, are expensive. Prior authorization ensures they are used appropriately.
- Prevent Fraud and Billing Errors: By reviewing requests up front, payers can catch coding mistakes or incomplete documentation before claims are submitted.
While insurers argue that prior authorization ensures high-quality, cost-effective care, many providers experience the opposite. Delays, extra paperwork, and increased administrative burden are common issues that result from prior authorization requirements.
Do Medicare and Medicaid Require Prior Authorization?
Medicare
Medicare has historically required fewer prior authorizations than private insurance, but this is changing. Medicare requires prior authorization for some services, such as certain durable medical equipment (DME) and some hospital outpatient services.
Medicare Part D prescription drug plans commonly require prior authorization for specific medications. Nearly all Medicare Advantage (MA) plans require prior authorization for certain healthcare services, as well (much more frequently than traditional Medicare).
Medicaid
Medicaid plans frequently require prior authorization for select medications, medical services, and procedures. These can vary by state and by managed care organization (MCO). Some services that commonly require prior authorization include:
- Non-emergency medical transportation
- Durable medical equipment (DME)
- Rehabilitation services
- Inpatient hospital stays
- Nursing facility services
Because Medicaid rules change often, practices must stay up to date with requirements to avoid denials.
Which Medications and Services Require Prior Authorization?
Every health insurance plan should have a catalog of medications and services that generally need prior approval. Patients can access this list in their plan documents. Because requirements vary widely, many providers rely on billing teams to track changes, verify rules, and submit correct documentation.
How Does Prior Authorization Work?: Step-by-Step Process
The prior authorization process involves several steps that require accuracy, timely communication, and careful follow-up.
1. Verify the Patient’s Insurance
Before treatment begins, the provider must confirm the patient’s benefits and determine whether prior authorization is required.
2. Gather Clinical Documentation
Insurers typically require supporting documents and other specific information, such as:
- Provider notes
- Diagnosis and procedure codes
- Patient medical records
- Previous therapies attempted
- A summary statement explaining clinical reasons for the requested treatment
3. Submit the Prior Authorization Request
To initiate a prior authorization request, gather patient and service details, fill out the required forms, and send them to the insurance provider.
4. Wait for the Insurance Review
The insurer will review the authorization request. They may ask for more documentation to determine if it meets their criteria.
5. Receive Approval, Denial, or Partial Approval
If approved, the provider may proceed. If denied, the provider or billing team can appeal. If a partial approval is the outcome, the insurer will notify the provider of which parts of the request are approved and which are not. From there, the provider can submit additional information or modify the request.
6. Save All Authorization Documentation
It’s important to save all prior authorization documentation. This typically includes:
- Initial request
- Supporting medical records
- Letters of medical necessity
- Insurer decisions
- Communication records with the insurer
- Any subsequent appeals or updated authorizations
Saving these documents is essential for legal compliance, billing accuracy, and future reference in case of audits or disputes. Proper documentation also supports claim submissions and reimbursements, helping to prevent denials or delays.
How Long Does Prior Authorization Take? Can You Appeal?
Many prior authorizations are approved within a few days, and urgent cases are expedited. More complex or appealed cases can take much longer. Utilizing electronic systems and submitting complete documentation can help speed up the process.
- Standard requests: 3–10 business days
- Expedited or urgent care requests: 24–72 hours
- Medicaid and Medicare: Often 7–10 days, depending on the service
If a request is denied, providers have the right to appeal. Appeals may involve:
- Sending additional notes
- Resubmitting documentation
- Writing a medical necessity justification
- Requesting a peer-to-peer review
Appeals require significant time and attention, making them difficult for busy providers to manage.
How Hometown Billing Helps Providers With Prior Authorization
Prior authorization can take up hours of administrative work. For many practices, it can feel overwhelming. Hometown Billing helps by managing the process from start to finish.
We assist with:
- Checking whether prior authorization is required
- Gathering the correct clinical documentation
- Submitting accurate requests
- Tracking the request and communicating with payers
- Following up to avoid delays
- Handling appeals and repeat submissions
- Documenting all approval numbers for claims
By managing prior authorization efficiently, we help providers reduce claim denials, save administrative time, improve cash flow, and focus on patient care. With more than 30 billing specialists and 36+ years of combined experience, Hometown Billing gives practices the support needed to keep revenue moving without interruption.
Get Support for Prior Authorization in Medical Billing
Obtaining prior authorizations is a common cause of administrative stress in healthcare. But with the right billing partner, it doesn’t have to disrupt your practice.
Whether you commonly handle Medicare prior authorization requests that are time-consuming or deal with coding errors, our team can help. Hometown Billing submits all types of medical claims, aids in reducing denials, and strengthens revenue cycle management. Contact us today to learn more about our medical billing services.
