Preserving Innovation While Navigating Payor Behavior and Prior Authorization Challenges: Key Takeaways from NYSCLA 2024

I had the privilege of joining diagnostic leaders at the New York State Clinical Laboratory Association (NYSCLA) 2024 Annual Meeting, where we discussed critical issues impacting the diagnostic market. My presentation focused on harnessing opportunities amidst regulatory and market shifts, including payor behavior and the systemic challenges tied to innovation, patient care, and access. Below is a summary of the key takeaways, particularly the dynamics of payor behavior, prior authorization, and the broader implications for innovation.

Evolving payor policies and behavior have placed significant administrative and financial strain on diagnostic providers. Medicare Advantage plans, in particular, present increasing barriers through stringent prior authorization requirements, which hinder operational efficiency and impede patient care and innovation. When coupled with inconsistent adherence to medical policy provisions for diagnostic providers and the potential cost share pushed onto those patients during a challenging clinical event, this all leads to challenges in bringing innovation into the market in a timely manner.

Medicare Advantage Programs Promote Savings but Are Shown to Limit Access

Medicare Advantage programs now cover 54% of eligible Medicare beneficiaries, which presents unique challenges for providers. As seen in the chart below, XiFin’s analysis shows that while traditional Medicare fee-for-service (FFS) pays, on average, 98% of clean claims, Medicare Advantage programs pay just 85%.

The discrepancy is even more pronounced for limited coverage tests, where Medicare pays 95% of claims, but Medicare Advantage programs pay between 75% and 85%, depending on the payor.

Medicare Advantage denials jumped by over 25% in 2022, with only a fraction (less than 10%) being appealed. This trend is alarming, considering that two-thirds of prior authorization denials that are appealed are eventually overturned. However, the overwhelming administrative burden discourages providers from pursuing appeals, leaving significant revenue on the table and reducing patient access to essential services.

This higher rate of denials, combined with more frequent prior authorization requirements, increases costs and delays patients’ access to services. With the number of Medicare Advantage beneficiaries projected to rise to 64% by 2034, this trend threatens to exacerbate the financial pressures on providers and limit the capacity for innovation.

Prior Authorization Requirements Create Administrative Burden and Limit Access: A Women’s Health Example

Prior authorization denials often stem from payor policies that lack standardization and do not align with documented guidelines. This inconsistency creates confusion and unnecessary hurdles for providers facing tight margins, delivers a poor patient experience, and increases operational costs. The impact of these policies extends beyond operational inefficiencies. Providers may be forced to opt for tests or therapies that are more likely to gain reimbursement approval than those clinically superior but with a higher risk of denial. This dynamic undermines patient care quality and slows the adoption of innovative diagnostic technologies.

One example of the burden of prior authorization is the struggle to meet the healthcare needs of women, particularly in rural areas. A recent Deloitte report found that 50% of women in the US skip or delay medical care due to affordability, access challenges, and negative past experiences. Women are significantly more likely to forgo care compared to men, with contributing factors being long wait times and transportation difficulties.

Providers can play a pivotal role in addressing this healthcare gap by leveraging technology and innovative approaches to deliver diagnostic results directly to pharmacists in rural areas. By empowering pharmacists with diagnostic insights, the healthcare system can significantly improve health equity and access, particularly for women’s health, where care is often delayed or overlooked.

The Innovation Imperative: Challenged by Rising Costs and Regulatory Burdens

Innovation is crucial in healthcare, given ongoing challenges of rising costs, regulatory burdens, and restrictive payor policies. This environment forces many providers to reduce their investment in new technologies and services, limiting their ability to deliver improved care. Addressing these challenges is essential for providers to continue advancing healthcare and offering life-saving services to those in need.

Providers must advocate for systemic reforms to overcome these barriers, especially concerning prior authorization and restrictive payor policies that hinder innovation. Collaborating with industry associations, sharing expertise, and pushing for the passage of legislation like the Saving Access to Laboratory Services Act (SALSA), which addresses pricing challenges created by the Protecting Access to Medicare Act (PAMA), are critical steps toward preserving innovation and maintaining access to advanced diagnostics.

Technology and automation are crucial in alleviating the pressures facing diagnostic providers. Implementing solutions that streamline claims submission, exception processing, and appeals management can significantly reduce administrative burdens and enhance financial performance. This, in turn, allows providers to reinvest in innovation and patient care.

We must not only adapt but also lead the charge for regulatory change. By embracing new technologies, advocating for systemic reforms, and discovering innovative ways to deliver care to underserved populations, we can ensure a sustainable future for advanced diagnostics.

I urge you to take action now. Connect with our XiFin experts to discuss the challenges you face and explore tailored strategies for success. Together, we can navigate the complexities of the healthcare landscape and drive meaningful change. Your engagement is essential in shaping a future where innovation and patient care thrive.