4.2 Referrals and Prior Authorization
Key Takeaways
- A referral is a request from one provider to another to evaluate or treat a patient — required by HMO and some POS plans
- Prior authorization (preauthorization) is approval from the insurance company before a service, procedure, or medication is provided
- CMAAs typically initiate the referral and prior authorization process, gathering necessary clinical documentation and submitting requests
- Common services requiring prior authorization include MRI/CT scans, specialist consultations (in HMO plans), surgical procedures, certain medications, and DME
- Failure to obtain required authorization can result in claim denial and the patient being responsible for the full cost
- Referral tracking systems help ensure referrals are completed and patients do not fall through the cracks
Referrals and Prior Authorization
Managing referrals and prior authorizations is one of the most critical administrative functions in a medical office. Errors in this process can result in claim denials, delayed patient care, and financial liability.
Referrals
What Is a Referral?
A referral is a formal recommendation or request from one healthcare provider (usually the PCP) for a patient to see another provider, typically a specialist.
When Are Referrals Required?
| Plan Type | Referral Required? |
|---|---|
| HMO | Yes — must have PCP referral before seeing a specialist |
| PPO | No — patients can self-refer to specialists (though in-network is cheaper) |
| EPO | Generally no — but check the specific plan |
| POS | Yes — for out-of-network specialists; may or may not need for in-network |
The Referral Process
| Step | CMAA Action |
|---|---|
| 1 | Verify insurance — Confirm the patient's plan type and referral requirements |
| 2 | Obtain referral order — The provider completes a referral request with diagnosis and reason |
| 3 | Contact insurance — Submit the referral request to the insurance company (if required) |
| 4 | Obtain referral number — Record the authorization/referral number provided by the insurer |
| 5 | Schedule the specialist appointment — Contact the specialist office and provide referral details |
| 6 | Notify the patient — Provide the patient with the specialist name, address, appointment date/time, and any preparation instructions |
| 7 | Document — Record the referral in the patient's chart and referral tracking system |
| 8 | Follow up — Ensure the specialist report is received and filed in the patient's chart |
Referral Tracking
A referral tracking system monitors the status of all referrals to ensure:
- The patient scheduled and attended the specialist appointment
- The specialist's report was received by the referring provider
- Follow-up actions recommended by the specialist are completed
- No patients "fall through the cracks"
Prior Authorization (Preauthorization)
What Is Prior Authorization?
Prior authorization (also called preauthorization, precertification, or prior approval) is the process of obtaining approval from the insurance company before a service, procedure, medication, or equipment is provided or prescribed.
Common Services Requiring Prior Authorization
| Category | Examples |
|---|---|
| Imaging | MRI, CT scan, PET scan |
| Procedures/Surgery | Elective surgeries, endoscopy, colonoscopy |
| Specialist visits | In HMO plans or for certain specialists |
| Medications | Brand-name drugs, specialty medications, high-cost drugs |
| Durable Medical Equipment (DME) | Wheelchairs, CPAP machines, hospital beds |
| Mental health services | Inpatient psychiatric care, intensive outpatient programs |
| Physical/occupational therapy | After a certain number of visits |
| Hospitalizations | Non-emergency inpatient admissions |
The Prior Authorization Process
| Step | CMAA Action |
|---|---|
| 1 | Identify the need — Determine if the ordered service requires prior authorization based on the patient's insurance plan |
| 2 | Gather documentation — Collect clinical information to support medical necessity (diagnosis, relevant history, previous treatments, provider notes) |
| 3 | Submit the request — Contact the insurance company via phone, fax, or electronic portal to submit the authorization request |
| 4 | Record the authorization number — If approved, document the authorization number, approved services, number of visits/units, and expiration date |
| 5 | Handle denials — If denied, notify the provider and patient; the provider may file an appeal with additional documentation |
| 6 | Schedule the service — Once authorization is obtained, schedule the service and inform the patient |
| 7 | Communicate the authorization — Provide the authorization number to all relevant parties (specialist, hospital, patient) |
Authorization Status Types
| Status | Meaning | CMAA Action |
|---|---|---|
| Approved | Service is authorized | Proceed with scheduling; document the auth number |
| Denied | Service is not authorized | Notify the provider; discuss appeal options |
| Pending | Under review | Follow up regularly; do not schedule until approved |
| Partially approved | Fewer services than requested are authorized | Notify the provider; may need to appeal for additional services |
Consequences of Missing Authorization
| Consequence | Impact |
|---|---|
| Claim denial | Insurance refuses to pay for the service |
| Patient liability | Patient may be responsible for the full cost |
| Provider financial loss | Practice absorbs the cost if the patient cannot pay |
| Delayed care | Patient may need to reschedule and wait for authorization |
| Compliance risk | Repeated failures may trigger insurance audits |
Exam Tip: Prior authorization questions are common on the CMAA exam. Remember: always verify authorization requirements before scheduling a service, and never assume a service is covered without checking.
A patient with an HMO plan calls to schedule an appointment with a cardiologist. What must the CMAA verify before scheduling?
A provider orders an MRI for a patient. The CMAA submits a prior authorization request and receives a "denied" status. What should the CMAA do?