How Prior Authorization Changes Are Affecting Medical Practices
Effects of Changes in Prior Authorization Process
Considering the fact that the revenue cycle process in the health care industry has increasingly become automated and open, it is important for all healthcare organizations, behavioral healthcare centers, physiotherapists, and others in the health care industry to be aware of any changes.
What Is Prior Authorization?
"Prior authorization," "preauthorization," or "precertification" is a term that refers to an approval step required by the health insurance plan prior to providing reimbursement for certain medical services, procedures, drugs, or devices.
In order to receive such an authorization from a payer, one needs to provide the following data:
Patient and insurance information
Diagnosis
Planned treatment or service
Clinical documentation
Medical-necessity information
Procedure codes
Supporting records
This is then reviewed by the payer, who either approves it, denies it, or asks for more information.
Prior authorization could have an effect on both patient treatment and the hospital’s billing cycle since a problem with the prior authorization could eventually lead to problems in services delivery or billing.
Why is Prior Authorization Important for Revenue Cycle Management?
Prior authorization is not something that is separated from medical billing.
It can influence many of the stages of the revenue cycle:
Eligibility → Authorization → Documentation → Coding → Billing → Payer Processing → Payment → A/R
To illustrate, let’s say there is a physical therapy company and they get a new patient.
They check the eligibility of the insurance, but do not find out that the patient’s insurance requires prior authorization for the certain amount of physical therapy sessions.
The patient gets treated but then the payer rejects the claim due to lacking the required prior authorization.
Now the billing team may need to:
Investigate the denial.
Review the patient's insurance requirements.
Contact the payer.
Review available documentation.
Determine whether additional action is possible.
Correct or appeal the claim when appropriate.
Track the account through resolution.
A problem that could have been addressed earlier has now become a revenue-cycle issue.
This is one of the reasons why prior authorization workflows should not be handled as an independent process but should be integrated into eligibility, documentation, claims, denial management, and A/R.
Changes in Prior Authorization that Occurred in 2026
The Centers for Medicare & Medicaid Services (CMS) issued the CMS Interoperability and Prior Authorization Final Rule (CMS-0057-F) in order to improve interoperability and automate prior-authorization processes for certain types of services.
The rule is applicable to specified Medicare Advantage Organizations, Medicaid/CHIP Programs, Medicaid Managed Care Plans, CHIP Managed Care Entities, and QHP Issuers on Federally Facilitated Exchanges.
Certain operational obligations have come into effect from January 1, 2026, for applicable impacted payers.
Prior-Authorization Decision Timeframes
For applicable medical items and services, excluding drugs, impacted payers generally must respond to:
Expedited requests: within 72 hours
Standard requests: within 7 calendar days
These criteria may vary depending on the program, and there may be some exceptions that apply to each program based on its own criteria. It is important to note that the application of these criteria does not imply that all health insurance providers and prior authorizations have the same deadlines.
Payers Must Provide Specific Reasons for Certain Denials
Another important change is greater transparency around prior-authorization denials.
As per the CMS rule, the Prior Authorization API has to provide information regarding whether the request has been approved, denied, or more information is needed. If the request is denied, then there will be a need for providing a particular reason behind the denial of the request.
This will help healthcare practices to know the exact cause behind the denial and take necessary action accordingly.
But the provider will still have to analyze the payer’s denial, documentation, and appeal process.
The Era of Electronic Prior Authorization Begins in 2027
Among many trends healthcare entities need to get ready for, the switch towards electronic prior authorization is definitely worth highlighting.
According to CMS, some affected payers will have to develop and maintain a Prior Authorization API as of January 1, 2027. The Prior Authorization API is aimed at enabling providers to check if prior authorization is needed, learn about document requirements, send requests and receive responses electronically.
The standard HL7 FHIR-based API is used by CMS. Traditional Prior Authorization Workflow
A practice may currently work through:
EHR → Payer Portal → Fax/Upload → Phone Follow-Up → Payer Review → Decision
Emerging Electronic Workflow
The goal is to move toward:
EHR/Practice System → Electronic Prior Authorization API → Payer → Electronic Response
The transition will not eliminate every manual step, and not every payer or service will immediately operate through the same workflow.
But the direction is clear: prior authorization is becoming increasingly digital and interoperable.
CMS is actively working with healthcare organizations and technology companies to address implementation barriers ahead of the 2027 requirements.
What Healthcare Practices Should Do Now
Healthcare organizations do not necessarily need to completely redesign their billing operations today.
Instead, practices can start by understanding where prior authorization currently creates delays or rework.
1. Identify Services That Commonly Require Authorization
Create a payer-specific workflow showing which services require authorization.
Requirements can vary based on:
Payer
Patient plan
Service
Provider type
Location
Diagnosis
Number of visits
Procedure
Avoid assuming that an authorization requirement for one payer automatically applies to another.
2. Verify Requirements Before Treatment
Eligibility verification and authorization verification should work together.
Knowing that a patient has active insurance does not necessarily mean that a particular service is authorized.
A stronger workflow checks:
Is the patient eligible?
Is the service covered?
Is prior authorization required?
What documentation is required?
How many visits or units are authorized?
3. Track Authorization Status
Authorization should not disappear after submission.
A practice should have a process for tracking:
Submission date
Authorization number
Requested service
Approved service
Number of approved visits/units
Effective dates
Expiration date
Payer response
Additional documentation requests
Follow-up dates
This can help prevent an authorization from quietly expiring while treatment continues.
4. Connect Authorization with Claims Management
Authorization information should be available when claims are prepared and submitted.
Before submission, billing teams can review whether:
The authorization exists.
The authorization covers the billed service.
Dates fall within the authorized period.
Units or visits remain available.
Required information is correctly reflected in the claim.
This type of workflow can help identify potential problems before they become downstream denials.
5. Monitor Authorization-Related Denials
Not every denial is an authorization problem.
But when authorization-related denials occur repeatedly, practices should look for patterns.
For example:
Problem
Possible Workflow Issue
No authorization
Authorization not verified
Authorization expired
Expiration not tracked
Incorrect authorization
Wrong service or provider information
Visits exceeded
Authorized units not monitored
Documentation missing
Required records not submitted
Payer mismatch
Incorrect payer or plan information
The objective should not simply be to work the denial.
The objective is also to understand why the denial happened and whether the
workflow can prevent it from happening again.
All State RCM's denial-management approach similarly focuses on identifying denial causes, prioritizing recoverable claims, coordinating payer follow-up, and
identifying recurring patterns.
Prior Authorization in Relation to Various Areas of Medicine
Prior authorization can be applied in many different fields of medicine.
Behavioral Health
The process of working with patients in the field of counseling, therapy, psychology, psychiatry, and other related areas may be influenced by payer-specific requirements regarding services, treatments, or continuation of care.
Physical Therapy
In cases of physical therapy, it may be necessary to control authorized visits, duration of treatment, and payer-specific requirements.
Medical Doctors and Specialists
Various procedures, imaging, medications, and other services may have payer-specific requirements of prior authorization.
ABA Providers
Applied Behavior Analysis practices may be involved in complicated workflows related to authorization and documentation.
How Prior Authorization Problems Can Affect A/R
One of the most important connections is between authorization and accounts receivable (A/R).
Consider this workflow:
Missing Authorization
↓
Claim Denial
↓
A/R Balance
↓
Payer Follow-Up
↓
Correction or Appeal
↓
Payment or Further Action
Every additional step requires staff time.
When such problems are experienced consistently, they can cause further work along the revenue cycle.
Therefore, revenue cycle management should be concerned with recovery and prevention.
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Prior Authorization Is Just One Aspect of the Revenue Cycle
Revenue cycle management in healthcare is much more than just submitting claims. A complete workflow may include:
Patient registration
Insurance verification
Benefits verification
Prior authorization
Charge entry
Coding review
Claim submission
Clearinghouse rejection management
Payer processing
Payment posting
Denial management
A/R follow-up
Reporting
All State RCM's current medical-billing workflow similarly covers eligibility verification, charge entry, coding quality checks, claims submission, rejection resolution, payment posting, denial management, and A/R/reporting.
How All State RCM Supports Healthcare Practices
Handling the revenue cycle internally can consume a lot of staff time if the practice deals with several payers, an increasing number of claims, high A/R, or denied claims.
All State RCM offers revenue cycle management services covering the billing process, medical billing, claims management, follow-up on denials, accounts receivable, payment posting, coding support, and provider’s credentialing.
Our services can be tailored around the actual needs of a practice rather than requiring every organization to outsource every part of its billing operation.
Medical Billing
Our team can take care of you from eligibility and coding review through claims, payment posting, denials and A/R follow up.
Learn More About Medical Billing Services
Denial Management
We can help you with analyzing the reason for denial, identifying and prioritizing recovery opportunities, following up with payers, and recommending improvements to deny workflow or upstream process changes, if appropriate.
Learn More About Denial Management Services
Provider Credentialing
We offer credentialing support services such as payer enrollment, recredentialing, CAQH, updating demographics, payer follow up, and electronic enrollment support.
Learn More About Provider Credentialing Services
Revenue Cycle Management
If you are looking for a broader spectrum of support, All State RCM helps organize and execute multiple revenue cycle functions specific to your practice, specialty, systems, payers and/or scope of work.
Learn More About Revenue Cycle Management
Explore All State RCM Services
Preparing Your Practice for the Next Phase of Healthcare Administration
The healthcare revenue cycle is moving toward greater automation and interoperability.
The CMS prior-authorization changes are one part of that transition.
For healthcare practices, preparation can start with simple questions:
Do we know which services require authorization?
Are authorization numbers and expiration dates being tracked?
Are authorization problems contributing to our denials?
Can our current EHR or practice-management system support electronic prior authorization?
How will our workflow change as payer APIs become available?
CMS specifically suggests that providers discuss with their EHR vendors on readiness, timeline for implementation, API capabilities, testing, training, and possible system upgrades ahead of the 2027 electronic prior-authorization requirements.
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The Future of Prior Authorization Is More Connected
The healthcare industry is evolving from disparate, manual processes to more connected systems.
That does not mean every prior authorization will become instant or completely automated.
Clinical review will be required for many requests and payer-specific requirements will still matter. CMS explicitly notes that electronic APIs do not necessarily mean real-time decisions for every request.
What is changing is how information can flow between providers, EHRs, and payers.
For healthcare organizations, that creates an opportunity to review their existing workflows now and identify what better documentation, tracking, automation, and follow-up can do for their revenue cycle.
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Frequently Asked Questions
What is prior authorization in medical billing?
Prior authorization is a payer requirement for approval prior to certain healthcare services, procedures, or other covered items being provided or reimbursed.
What changed with prior authorization in 2026?
For certain impacted payers, CMS established operational requirements beginning in 2026, including maximum decision timeframes for applicable medical-item and service requests and requirements related to denial reasons and prior-authorization metrics.
How long does a prior authorization decision take?
For applicable impacted payers, CMS specifies a maximum of 72 hours for expedited requests and seven calendar days for standard requests, subject to program-specific rules and potential extensions.
What is electronic prior authorization?
Electronic prior authorization allows providers and payers to exchange authorization information through standardized digital systems and APIs rather than relying entirely on manual portal, fax, or telephone workflows.
When do the new CMS Prior Authorization APIs begin?
Certain impacted payers are required to implement the Prior Authorization API beginning January 1, 2027.
Can prior authorization problems cause claim denials?
Yes. Missing, expired, incorrect, or insufficient authorization can be among the issues that result in claim problems, depending on the payer and service. Practices should review the specific denial reason and payer requirements rather than assuming every denial has the same cause.
How can an RCM company help with prior authorization?
Depending on the agreed scope, an RCM team can support eligibility verification, authorization workflows, claims management, denial follow-up, A/R management, payer communication, and reporting.
Prior authorization is becoming more connected to the broader healthcare revenue cycle.
The 2026 CMS requirements and the upcoming 2027 electronic prior-authorization APIs represent an important shift toward greater interoperability and more standardized digital workflows.
Healthcare practices that understand their authorization requirements, track requests carefully, connect authorization information with billing, and learn from recurring denials can create a more organized revenue-cycle workflow.
At All State RCM, our goal is to help healthcare practices manage the administrative work behind patient care from medical billing and claims to denial management, A/R follow-up, credentialing, and reporting.
Your patients come first. We handle the revenue cycle.
