AI Prior Auth: 30% Reimbursement Risk for 6 States

The CMS will soon make it more difficult for providers in six states to get reimbursed in Medicare for certain medical procedures it has deemed “low value,” but some stakeholders worry it could lead to worse healthcare access and quality.

Doctors in a select group of states will be required to secure artificial intelligence-powered prior authorization for some services in traditional Medicare as part of a new CMS pilot program, dubbed the Wasteful and Inappropriate Service Reduction, or WISeR, model. The program has lawmakers, provider groups and experts worried it could harm healthcare access, reduce care quality and increase the administrative burden on providers.

Prior authorization requires providers to obtain pre-approval for certain procedures, medications, devices or other healthcare-related products and services. Insurers claim it reduces unnecessary medical care and helps manage costs.

However, traditional Medicare only requires prior authorization under limited circumstances. Prior authorization has drawn scrutiny from the federal government for delaying or preventing necessary medical care and jeopardizing health outcomes, especially in Medicare Advantage plans.

In recent weeks, Democratic lawmakers have sent at least two letters to CMS Administrator Dr. Mehmet Oz, urging the agency to halt the pilot program and demanding more information about how the agency plans to protect beneficiaries and providers.

“The expansion of AI-fueled prior authorization will not improve program integrity in Traditional Medicare,” 42 Democratic members of Congress said in a July 31 letter. The pilot program “opens the door to further erosion of our Medicare system.”

WISeR aims for cost savings

The CMS’ Center for Medicare and Medicaid Innovation, also known as the CMS Innovation Center or CMMI, develops and tests healthcare payment and service delivery models to improve patient care, lower costs and align payment systems. It’s the driving force behind federal efforts to transition the U.S. healthcare system from fee-for-service reimbursement to value-based care.

Under the WISeR model, CMMI will contract with private companies, including Medicare Advantage plans, to pilot AI-powered prior authorization for low-value care, which are “services that provide little or no benefit to patients, have potential to cause harm, incur unnecessary cost to patients, or waste limited healthcare resources,” according to a 2019 systematic review published in Journal of General Internal Medicine. The pilot affects traditional Medicare services in six states: Arizona, New Jersey, Ohio, Oklahoma, Texas and Washington.

It aims to reduce healthcare spending by curbing medically unnecessary care, which the CMS said cost it up to $5.8 billion in 2022.

The new model’s approach is consistent with the agency’s renewed emphasis on managing costs, experts said.

The CMMI’s current focus on cost savings is a pivot from the Biden administration, which focused on improving care quality in models, partly because it’s challenging to achieve net cost savings and expand a pilot model under the Affordable Care Act, which created the innovation center.

But the WISeR model has the potential to be expanded, said Amy Bassano, former deputy director at CMMI and managing director for Medicare at Health Management Associates.

Bassano said the WISeR model builds upon past successful pilot programs, including the non-emergency transport model, “which was certified and expanded under the Innovation Center authority after Congress stepped in and directed the agency to do it. So there is precedent there.”

The model is mandatory

Unlike other CMMI demonstrations, providers in the test model’s six states are required to participate in the WISeR model, which will take effect in January and run through 2031.

To receive payment, providers and suppliers serving individuals with traditional Medicare in covered regions will have to submit a prior authorization request or undergo a post-service and pre-payment medical review, according to a CMS fact sheet.

A licensed clinician will review all claim denials, per the fact sheet.

However, despite the safeguards, the mandatory model has drawn the ire of provider groups who oppose prior authorization, including the Medical Group Management Association.

“The WISeR model is a misguided effort, and the expansion of prior authorization in traditional Medicare will only exacerbate administrative burden for practices and risk delays in patient care,” Anders Gilberg, SVP of government affairs at the MGMA, said in an email. “Prior authorization continually ranks as the number one administrative burden facing medical groups, and one of the hallmarks of traditional Medicare has been the ability for physicians, not government, to determine what’s clinically appropriate for their patients.”