Administrative Burden and Costs of Prior Authorizations in a Dermatology Department

Question  How common and costly are prior authorizations (PAs) in 1 dermatology practice?

Findings  In this cross-sectional study at a large academic department spanning 11 clinical locations in Utah, PAs were found to impose a substantial burden, with median administrative costs per PA of $6.72 overall, and $15.80 for biologics. Most PA appeals were subsequently approved.

Meaning  Reforms to the PA system might increase practice efficiencies, decrease administrative costs, and improve patient outcomes.

Importance  Insurance companies use prior authorizations (PAs) to address inappropriate prescribing or unnecessary variations in care, most often for expensive medications. Prior authorizations negatively affect patient care and add costs and administrative burden to dermatology offices.

Objective  To quantify the administrative burden and costs of dermatology PAs.

Design, Setting, and Participants  The University of Utah Department of Dermatology employs 2 full-time and 8 part-time PA staff. In this cross-sectional study at a large academic department spanning 11 clinical locations, these staff itemized all PA-related encounters over a 30-day period in September 2016. Staff salary and benefits were publicly available. Data were analyzed between December 2018 and August 2019.

Main Outcomes and Measures  Proportion of visits requiring PAs, median administrative time to finalize a PA (either approval or denial after appeal), and median cost per PA type.

Results  In September 2016, 626 PAs were generated from 9512 patient encounters. Staff spent 169.7 hours directly handling PAs, costing a median of $6.72 per PA. Biologic PAs cost a median of $15.80 each and took as long as 31 business days to complete. The costliest PA equaled 106% of the associated visit’s Medicare reimbursement rate. Approval rates were 99.6% for procedures, 78.9% for biologics, and 58.2% for other medications. After appeal, 5 of 23 (21.7%) previously denied PAs were subsequently approved.

Conclusions and Relevance  Prior authorizations are costly to dermatology practices and their value appears limited for some requests. Fewer unnecessary PAs and appeals might increase practice efficiency and improve patient outcomes.