Predetermination vs Prior Authorization

by | Published on May 31, 2022 | Insurance Verification and Authorizations

Prior Authorization
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Utilization management (UM) reviews are a component of the value-based care approach. They aim to determine if the care provided to patients is appropriate, efficient, and linked to improved patient outcomes. The UM processes of insurance companies include prior authorization, predetermination and post-service review. Prior authorization or “pre-auth” and predetermination occur before the clinical event or provision of the service. Insurance authorization companies help physician practices effectively navigate the challenges associated with these complex and time-consuming medical insurance coverage requirements.

Let’s take a look at the specifics of preauthorization and predetermination and the differences between these two types of reviews.

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What is Preauthorization?

Prior authorization, also known as preauthorization, prior approval, or precertification, is a process that insurance companies use to determine whether a patient is eligible to receive certain procedures, medications, or tests, except in an emergency. Prior authorization is done to determine whether a service, treatment plan, prescription drug or durable medical equipment (DME) is medically necessary. Types of treatments and medications that may require prior auth are:

  • Expensive medications and treatments
  • Drug interactions or combinations that can be unsafe
  • Relatively cheap available alternatives
  • Drugs and medical treatments specially prescribed for unique health issues
  • Drugs that are often misused or abused
  • Medical procedures such as surgeries, transplants, imaging and other tests
  • Behavioral services such as mental health, psychological testing and psychiatric care.
  • Drugs often used for cosmetic purposes

The insurer will review the requested service or drug to see if it meets certain criteria:

  • Is medically necessary
  • Is appropriate and follows up-to-date recommendations for the medical problem
  • Is the most economical treatment option available for the patient’s condition
  • Will be delivered in an appropriate setting
  • Is not being duplicated (for e.g., two CT scans ordered for the patient by different physicians)
  • If the ongoing or recurrent service (such as physical therapy) is actually helping the patient
  • Is covered under the patient’s health plan

Health plans have their own rules as to what services need prior authorization. Typically, high-cost medications and expensive treatments require pre-authorization. Outpatient procedures, certain invasive procedures, durable medical equipment (DME) and CT, MRI and PET scans are examples of services that may require pre-certification. Without this prior approval, the health plan may not pay for the treatment, and the patient or the in-network ordering or servicing provider would have to bear the cost.

Usually, requesting prior authorization is the responsibility of the provider if the patient is being treated by a physician in the plan’s network. Some plans require the patient to request prior authorization for services.

Insurance authorization companies manage prior authorizations by telephone or using web portals. Prior authorization requires information such as patient demographics, insurance information, and physician information as well as clinical review. Within 5-10 business days of receiving the prior authorization request, the insurance company will either:

  • Approve or deny the request
  • Ask for additional information
  • Recommend trying a less costly but equally effective alternative, before the original request is approved

Though the goal is to ensure that health care is cost-effective, safe, necessary, and appropriate for each patient, the use of prior authorization can pose a challenge to care delivery. For example, if a medication prescribed for a patient with an ongoing chronic condition requires prior approval, it can delay treatment and slow the patient’s progress.

In 2021, FierceHealthCare published a report on how prior authorizations can disrupt medically necessary care. Cataracts disrupt everyday activities, make it harder to drive or work safely, and increase the risk of falls and accidents. The report explained how a leading insurance company’s new prior authorization requirement deprived patients of getting cataract surgery. The prior authorization requirement covered all cataract surgeries, across all of its plans and regardless of patient health status. According to the report, within the first month that the policy went into effect, the cataract surgeries of thousands of patients were canceled. The report also pointed out that even with as the pandemic continues, the number of medical services requiring prior authorization is increasing, and getting worse across specialties such as oncology, rheumatology, and psychiatry.

What is Predetermination?

A predetermination is a formal review of a patient’s requested medical care compared to their insurance’s medical and reimbursement policies (MGMA). The aim is to determine if the intended care meets medical necessity requirements.

Insurance companies do not always require predeterminations, but they use for various reasons:

  • Predeterminations are required for the determination of medical necessity before rendering services (in addition to checking eligibility and benefits).
  • Predeterminations may be used if the provider is not sure about coverage for a service.
  • Predetermination confirms the amount that the insurer will reimburse for the service
  • If a medical procedure, treatment or test is not covered, the in-network ordering or servicing provider or the member will be responsible for paying the bill.

All patient clinical information to support the need for the intended procedure will be submitted by the provider’s office and the insurance company will be requested to review the patient’s conditions based on policy requirements.

Services that are not considered life threatening do not need predeterminations. Most services that require a formal predetermination include experimental, investigational, or cosmetic services. Examples of procedures for which a predetermination review is recommended:

  • Abdominoplasty
  • Bariatric Surgery
  • Blepharoplasty /
  • Ptosis Repair
  • Botox
  • Breast Reduction
  • dental surgery
  • liposuction
  • PET scans
  • orthotics
  • transplants
  • Varicose Vein Procedures
  • Sacroiliac (SI) Joint Injections

Predeterminations are not required for services and drugs that require prior authorization. Most dental insurance companies recommend submitting a dental predetermination for treatment plans over $300.

Predeterminations are extensive reviews and usually come with a turnaround time of 30 to 45 days, and even 60 days in some cases. Patients and providers need to be aware of the importance of waiting for these medical reviews to be approved for coverage.

Predeterminations inform patients about their insurance. Also, it can delay treatment for simpler dental restorative procedures – for some plans sending in a pre-determination is required because they follow a different fee schedule than what you expected. However, while the aim of filing predeterminations is get a better idea of how much the procedure costs and who (the insurer and patient) will be paying for what, the numbers may be inaccurate. Additionally, it does not guarantee approval from insurance companies to pay the claim. Insurance verification is the best way for practices to get a cost estimate by verifying information regarding the patient’s insurance coverage, payable benefits, co-pays and co-insurance, details on the plan related to coverage, date of coverage, type of plan, exclusions, deductibles, and other key details about the insurance plan.

Difference between Preauthorization and Predetermination

While both preauthorization and predetermination are UM processes used by insurance companies to determine whether a service is covered under the health plan and its medical necessity, they are different.


  • Allows providers to get approval from the insurance company before services are rendered
  • Is required for some patients/services/drugs before services are rendered to confirm medical necessity as defined by the patient’s health benefit plan
  • Does not guarantee reimbursement
  • Failing to get preauthorization could result the responsibility for payment falling on the patient or provider
  • Can take up to 30 days to get approved


  • Provides a confirmation that the patient is a covered member of the insurance plan and that the treatment plan for the patient is a covered benefit
  • Is optional, but recommended to understand coverage for services considered experimental or investigational when performed for other purposes
  • Is not needed for services and drugs on the prior authorization list or for services that are not considered life threatening
  • Can take up to 30 to 60 days for approval
  • Confirms the portion of the fees that will be reimbursed

Benefits of Preauthorization and Predetermination

Insurance companies use preauthorization and predetermination to ensure that patients receive only treatments and medications that are necessary. They will compare recommended treatments with industry practices and approve those treatments that are required for the patient’s health. If a more affordable, appropriate treatment is available, they will deny the claim. The benefits of preauthorization include:

  • Promotes safety
  • Supports cost minimization
  • Prevents drug misuse
  • Helps patients avoid unnecessary medical procedures

How an Insurance Authorization Company can Help Physician Practices

Understanding processes and how to submit requests to meet the requirements of insurance companies is essential for physician practices to avoid lost revenue and help patients get the care they need promptly and also avoid negative financial impacts.

Both prior authorizations and predeterminations are time-consuming, tedious processes. Partnering with an insurance authorization company that has professionals with expertise in managing preauth and predetermination processes can help practices:

  • Reduce the risk of the insurer denying payment for the treatments
  • Submit predetermination requests for complex, costly procedures to the insurer at the earliest time possible and provide prompt patient care
  • Avoid unnecessary costs to the patient
  • Help practices improve revenue and get quicker reimbursement

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Insurance verification specialists will verify patient benefits before services are provided to ensure accurate claim submission. They would also be up to date with the rules and requirements of different insurance companies in terms of what requires preauthorization. An expert can help practices compile a list of all the procedures that require prior auth from which payers and under what conditions. Once a request has been submitted, they will perform regular follow up calls, checking on the status of the request until the answer has been obtained. With expert support for managing prior authorizations and predeterminations, physicians can save time and money focus on their patients.

Loralee Kapp

Since joining our RCM Division in October 2021, Loralee, who is HIT Certified (Health Information Technology/Health Information Management), brings her extensive expertise in medical coding and Health Information Management practices to OSI.

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