CMS finalizes prior authorization rule expected to save $15B

CMS predicts that by finalizing this regulation, which would enhance the electronic sharing of health information and expedite the prior authorization process, it will save $15 billion over the course of ten years.

According to a CMS news release dated January 17, the requirements pertain to qualified health plan insurers on the federally facilitated exchanges, Medicaid managed care plans, CHIP-managed care entities, state Medicaid and Children’s Health Insurance Program agencies, and Medicare Advantage organizations. In December 2022, the agency proposed the regulation.

Some payers will have to provide a reason for a request denial, disclose some prior authorization metrics publicly, and respond to requests for urgent care within 72 hours and for routine requests within seven calendar days, starting mostly in 2026.

In order to facilitate electronic prior authorization, the regulation also mandates that impacted payers establish a common application programming interface (API) for Health Level 7 Fast Healthcare Interoperability Resources.

“Together, these new requirements for the prior authorization process will reduce administrative burden on the healthcare workforce, empower clinicians to spend more time providing direct care to their patients and prevent avoidable delays in care for patients,” according to a release from CMS.

The final API standards are also included in the rule, which aims to “increase health data exchange and foster a more efficient healthcare system for all.” The dates for compliance are being postponed by CMS from January 1, 2026 to January 1, 2027. Affected payers will have to create a provider access API that allows clinicians to access patient claims, encounter, clinical, and prior authorization data, as well as enhance their present patient access API to incorporate information regarding previous authorizations, starting in January 2027. When a patient switches payers or has many concurrent payers, CMS is requiring impacted payers to share much of the same data using a payer-to-payer FHIR API with the patient’s consent.

For qualifying hospitals and critical access hospitals under the Medicare Promoting Interoperability Program, as well as for qualified physicians under the Merit-based Incentive Payment System’s promoting interoperability performance area, the regulation also introduces a new electronic prior authorization measure.