What Is Prior Authorization?
Prior authorization is the payer's process of pre-approving a planned service, procedure, medication, or admission before it is rendered, based on medical-necessity criteria; without an approved PA where required, claims typically deny under CARC 197.
- Build a payer-specific PA requirements matrix into scheduling.
- For high-PA-volume specialties (cardiology, oncology, orthopedics, behavioral health), invest in dedicated PA staff with payer portal access and clinical-criteria training.
- Do not plan around the CMS Interoperability and Prior Authorization final rule as though it covers every plan you bill.
- Those payers have had to give a specific reason for a PA denial since 2026 and must run a FHIR prior-authorization API from 1 January 2027.
Prior Authorization
Also known as: Prior Auth; PA; Precertification; Predetermination
Prior authorization is the payer's process of pre-approving a planned service, procedure, medication, or admission before it is rendered, based on medical-necessity criteria; without an approved PA where required, claims typically deny under CARC 197.
Definition
Prior auth applies most commonly to advanced imaging (MRI, CT, PET), inpatient admissions, surgeries, specialty drugs, behavioral health visits beyond a threshold, and DME. Each payer sets its own PA list, medical-necessity criteria, required documentation and submission portal, so there is no single national turnaround clock — the deadline that binds is the one in that plan's contract or in the rule that governs that plan type. Medicare Advantage is the line of business with a published federal clock. Under 42 CFR 422.568 an MA organization has 14 calendar days for a standard organization determination, but beginning 1 January 2026 only 7 calendar days where the item or service is subject to the prior-authorization rules at 42 CFR 422.122; an expedited request gets 72 hours under 42 CFR 422.572. Either clock may be extended by up to 14 calendar days in the circumstances those rules list. Part B drug requests run on their own clock — 72 hours standard, 24 hours expedited — and neither may be extended.
Example
An advanced imaging request for a Humana Medicare Advantage patient: the provider submits the PA through Humana's portal with clinical documentation supporting medical necessity (failed conservative treatment, examination findings, the diagnosis codes the plan's criteria call for). Humana approves the request and returns an authorization number, and the practice schedules the scan. Where the plan wants that number on the claim it goes in the prior-authorization field — item 23 on the CMS-1500, or the matching reference segment on the 837P — but the field does not behave the same way everywhere. On a Medicare claim the Medicare Claims Processing Manual, chapter 26 (revision 12779, issued 9 August 2024; read 17 September 2026) reserves item 23 for a specific list: a Quality Improvement Organization prior-approval number, an Investigational Device Exemption number, a CLIA certification number, the home health or hospice NPI for care plan oversight, or the point-of-pickup ZIP on an ambulance claim — and states the item can carry only one of those conditions. Read the plan's own claim instructions before populating it.
Common Misconceptions
PA is not eligibility — an active member can still have a PA denied, and a denied PA can sometimes be overturned on peer-to-peer review with the plan's medical director. Nor does PA approval settle payment as a general matter: the claim still has to clear eligibility, coverage and coding at adjudication. The exception worth knowing is qualified by plan type rather than universal. Under 42 CFR 422.138, where a Medicare Advantage coordinated care plan has approved an item or service through prior authorization or a pre-service or concurrent determination, it may not later deny coverage for lack of medical necessity, and may reopen that decision only for good cause or on reliable evidence of fraud or similar fault.
Practical Application
Build a payer-specific PA requirements matrix into scheduling. For high-PA-volume specialties (cardiology, oncology, orthopedics, behavioral health), invest in dedicated PA staff with payer portal access and clinical-criteria training. Do not plan around the CMS Interoperability and Prior Authorization final rule as though it covers every plan you bill. It reaches Medicare Advantage organizations, state Medicaid and CHIP fee-for-service programs, Medicaid and CHIP managed care plans, and Qualified Health Plan issuers on the Federally Facilitated Exchanges; commercial group and self-funded plans sit outside it, and its prior-authorization provisions exclude drugs. Those payers have had to give a specific reason for a PA denial since 2026 and must run a FHIR prior-authorization API from 1 January 2027. MA organizations must also publish PA metrics, including the share of requests approved, denied, and approved after appeal, under 42 CFR 422.122 — pull a plan's published numbers before modeling the PA workload it will create.
Related Terms
CARC 197
CARC 197 is the X12 claim adjustment reason code a payer returns when the plan’s own prior-approval step for a service was not completed before the claim was adjudicated; the remark codes alongside it usually indicate which approval the payer was looking for.
Read definitionEligibility Verification
Eligibility verification is the process of confirming a patient's insurance coverage is active for the date of service, determining the plan benefits (deductible, copay, coinsurance, covered services), and identifying any prior-auth or referral requirements before the encounter.
Read definitionMedicare Advantage
Medicare Advantage (Part C) is coverage offered by private insurers under contract with CMS, through which a beneficiary receives their Medicare Part A and Part B benefits instead of through Original Medicare — most often as an HMO or PPO product with a provider network and prior-authorization requirements, paid for by a risk-adjusted capitation from CMS.
Read definitionDenial Rate
Denial Rate is the percentage of claims (or claim dollars) denied by payers on initial adjudication, calculated as Denied Claims ÷ Total Claims Adjudicated × 100, typically tracked monthly and segmented by payer and denial reason category. Claims rejected before adjudication sit in neither the numerator nor the denominator — a rejection is not a denial.
Read definitionWhere This Applies on MedPrecision
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