Prior Authorization and Interoperability – Changing the Dynamics of Medicare

CMS and Medicare are trying to change the dynamics of American healthcare. No need to rehash the well-known issues but what is new is the change in the hotspot. For the last 20 years, Medicare Fee for Service has been the hotspot of spending and value. You’ve heard the mantra (which dates at least as far back as 1906 with George Bernard Shaw’s play, “The Doctor’s Dilemma”). If you pay a set rate the medical establishment has an incentive to increase volume. Now fast forward to today and Medicare Advantage has more beneficiaries. And the hotspot of healthcare economics has moved to Medicare Advantage (MA). 

MA plans are paid by capitation for each patient. Now the incentive, or as economists say the “moral hazard,” has shifted from doing more in Medicare FFS to doing less in MA. Capitated health plans can provide great care (disclaimer: I worked at Kaiser, the OG of capitated care, for several years). But we can’t ignore all the folks, including Don Berwick, former acting administrator of CMS, and my ONC predecessor David Blumenthal, suggesting that we are paying some MA plans far more than we should. 

CMS is at the center of our country’s efforts to fix healthcare. Which policies should CMS pursue and in particular what policy levers CMS has to address the clinically appropriate allocation of care.  The picture of this challenge is best crystalized in prior authorization policies that are designed, for better or worse, to limit care. And simultaneously we are in times where our lives are being transformed by digital technologies – a fact known to every reader of this piece. The team at CMS is aware of both of these dynamics and has been quite interested in leveraging the best of modern computing to bring value to the American public. Digitally, this started with the bi-partisan BlueButton™ initiative to allow Medicare beneficiaries access to their data.

CMS is now harnessing the power of digital interoperability to improve the accountability, transparency and ultimately availability of care, in particular in MA. In a move in the works for the last year, CMS just announced a new mandate to do just that: the Interoperability and Prior Authorization Rule Final Rule.

CMS has identified two pieces in this process. 

1. Doubling Down on API Implementation

First CMS is doubling down on APIs (application programming interfaces) to make payer data on the care rendered widely available. The new rule extends the current payer-side Patient APIs and adds new APIs to allow providers and other payers to get data from current or past payers. What makes these APIs technically feasible are the rapid advances in modern Internet API protocols (most notably the RESTful approach to programming) and refined JSON-based FHIR healthcare data standards which finally allow computing on claims and clinical data using a single data representation. (Sorry about the RESTful and JSON FHIR jargon but both terms are worth searching and understanding).

2. Modernizing Prior Authorization Processes

In parallel, CMS is saying “enough is enough” to the burdensome and antiquated prior authorization processes that are ensnaring doctors, hospitals, and most importantly patients throughout the country. In a push toward real accountability, CMS has put several requirements to achieve greater transparency into the new Prior Authorization and Interoperability Rule. 

Most immediately, CMS is requiring that by January 1, 2026, affected plans (MA plans, Medicaid/CHIP programs, QHPs on the FFE) need to answer “expedited” prior auth requests within 72 hours and “standard” requests within 7 days, and provide an explicit reason for any denials. All of this is also required to be publicly reported on the payer’s website though the reporting is in aggregated form. 

The real transformation will come a year later with the requirement for a Prior Authorization API and parallel incentives for doctors and hospitals to use this API. With this API, providers can get prior authorization of their non-drug orders digitally and bi-directionally. Currently Prior Authorization is done with flurries of faxes, phone calls, and private portal log-ins. An HL7 standards group FHIR accelerator called DaVinci is leading the way with specific technical implementation guides. DaVinci participants include many constituencies including payers and providers. Some of these standards will be an evolution and in progress over the next three years but care approval and payment is trending in the direction of the consumer economy where we can order and have almost anything delivered to our homes. 

At their face, these new CMS policies seem largely technical but the ultimate result will be a seamless digital healthcare with computational transparency and accountability. We are finally going to be able to get value-based care.

About Donald Rucker, MD

Donald Rucker, MD is Chief Strategy Officer for 1upHealth, where he is helping to set the direction for the company’s ongoing innovations in FHIR-enabled computing and bring these to customers to help them meet the evolving clinical, technical, and reimbursement demands for modern data. Prior to 1upHealth, Dr. Rucker was the National Coordinator for Health Information Technology at the U.S. Department of Health and Human Services, where he led the formulation of the federal health IT strategy and coordinated federal health IT policies, standards, programs, and investments. As part of his tenure with ONC, he led the development and issuance of the 21st Century Cures Act Final Rule, a pivotal mandate supporting patient access and interoperability of health data.