Revenue Cycle Management Glossary
A plain-English guide to the terms, metrics, and workflows that power modern RCM operations.
Pre-authorization
What is Pre-authorization?
Pre-authorization (also known as prior authorization) is a requirement by health plans for patients or providers to obtain approval before a specific service or medication is provided. It serves as a guarantee that the payer will cover the service, provided all other clinical conditions are met.
Why Pre-authorization is Critical for CFOs and Financial Leaders
Pre-authorization is a vital front-end safeguard against predictable revenue loss.
- Reducing "Avoidable" Denials: Claims submitted without required authorization are almost always denied, and these denials are often impossible to appeal successfully.
- Improving Patient Throughput: Delays in authorization can lead to cancelled or rescheduled appointments, impacting both provider productivity and patient satisfaction.
- Margin Protection: Authorization ensures that high-cost procedures are pre-approved for payment, protecting the organization from uncompensated care.
Use Cases: Automating the Authorization Workflow
- Automated Status Monitoring: RPA bots can automatically check payer portals for authorization approvals, alerting staff only when a request is pended or denied.
- Requirement Identification: AI-driven systems analyze appointment types and payer rules to instantly notify the front-office if a scheduled procedure requires pre-authorization.
Pre-authorization vs. Eligibility Verification
- Pre-authorization: Confirmation that a specific service is approved for payment.
Eligibility Verification: Confirmation that the patient has active coverage on the date of service.