Why the future of prior authorization is automation

Several Kodiak Healthcare Summits ago, Eric Boggs, Vice President, Revenue Cycle, here at Kodiak was one of the first—if not the first—industry revenue cycle leader to coin the phrase “battle of the bots.”

Eric was referring to payors’ use of artificial intelligence-powered technology to review claims submitted by providers, and providers’ use of AI technology to submit those claims to payors. The ensuing “battle” over whether claims are paid in full, in part, or not at all increasingly will be between “bots,” not humans.

Eric’s words were prophetic.

Fast forward to this year’s Kodiak Healthcare Summit held in Nashville and virtually in September:

• As part of our pre-Summit coverage, we wrote about the Centers for Medicare & Medicaid Services cracking down on Medicare Advantage plans misusing AI-powered prior authorization technology to deny claims..”
• At Summit, we facilitated a detailed breakout session on year-to-date revenue cycle trends. We shared the latest data from Payor Market Intelligence that showed a rise in initial rates generally and a rise in both request for information and PA/precertification denials specifically. Read more about that session in our “2024 Kodiak Healthcare Summit event summary.” You also can check out our latest monthly executive market update report with the latest data on 10 industrywide revenue cycle key performance indicators. 

If we take a step back from the “battle of the bots” between providers and payors on the front lines, the broader industry question is whether PA and AI-powered automation technology are right for each other. Is automating PA good for providers, payors, and, most importantly, patients?

Interestingly, four researchers from Harvard University, McKinsey & Company, Stanford University, and the National Bureau of Economic Research attempted to answer that question in a new study. The study is based on a survey of 1,005 patients, 1,010 provider employees, and 115 private payor employees. The study, “Perceptions of prior authorization burden and solutions,” appears in the September 2024 issue of Health Affairs Scholar.

The researchers asked each set of respondents a series of questions about their feelings toward PA. Most of the questions were distinct for each pool, but three questions overlapped the three groups. The researchers asked the three groups their level of agreement with the following statements:

• Automating prior authorization would improve the quality of patient care.
• I would trust advanced tech tools for automation of the prior authorization process.
• Advanced tech tools such as AI would solve many of the errors in prior authorization and accelerate the process.
  
  

As the following three charts illustrate, payors are much more bullish on automating PA with AI than providers and patients. The percentages total the percent of respondents who said they “somewhat agree,” “agree,” or “strongly agree” with each statement.

The question then becomes why are payors more bullish on automating PA than providers or patients? We can find at least part of the answer in how the payor and provider respondents answered another question. (The researchers did not ask patients this question.)

Nearly twice as many payor employees said they believe PA is necessary than did provider employees. You’re going to invest more automation dollars in something you believe in rather than in something you don’t.

What about the “battle of the bots” that Eric prophesized? It’s happening. And it looks like payors have a slight advantage.

It’s clear from the survey results that payors believe in PA, they believe in AI to automate PA, and they intend to press forward with their PA automation plans. Providers may not believe in PA, but they’ll have to keep pace with payors in terms of automating the PA process with AI technology lest they lose the battle of the bots with payors over PA.

Many of your peer provider organizations are automating components of their revenue cycle, including their PA processes. Your best opportunity next year to learn firsthand what they’re doing will be to attend one or more in-person or Kodiak events. Watch our events page for more details.

You never know what we’ll prophesize for your revenue cycle performance in the future.


Looking for more insights from this year’s Kodiak Healthcare Summit? Check out our latest pre- and post-event Healthcare Summit coverage.

• Read “5 questions (and answers!) about net revenue”
• Read “Six months after the fall"