🔒A $250M cost: Insurers say prior authorizations reduce unnecessary care. Hospital leaders say new reforms could ease the administrative burden.

Prior authorizations cost UMass Memorial Health up to $250 million annually, said President and CEO Dr. Eric Dickson. That might be an underestimate, he said.

Healthcare leaders across Central Massachusetts are looking to Gov. Maura Healey’s reforms announced in January for relief from insurers’ requirements of proof procedures or medications are necessary before approving coverage. The insurance industry warns their removal could lead to misuse of the medical system and rising costs, and insurers can alleviate some burdens on healthcare providers without government intervention. “We are most excited about the work we are doing today with a few provider partners to reduce administrative burden for clinicians,” Dr. Sandhya Rao, chief medical officer and senior vice president of Blue Cross Blue Shield of Massachusetts, wrote in an email.

Cost of authorization

Across the U.S., 92% of medical practices have needed to hire additional administrative staff to handle the increase in prior authorizations, and 97% of surveyed respondents said prior authorizations delayed or denied necessary care, according to a 2026 review published by the The American Journal of Medicine. To address these concerns, Healey announced Massachusetts would eliminate prior authorizations for primary care, chronic care, occupational and physical therapy, and certain medications. The Healey Administration hasn’t specified a timeline for the reforms' implementation. “We will never make any progress to delivering higher, more affordable health care until we take this head on,” said Dickson. The $250 million prior authorizations cost UMass Memorial annually on comes mostly from reduced physician productivity, along with administrative expenses and provider turnover, he said. The expense accounts for 2% of the Worcester-based hospital system’s $5 billion in annual revenue and represents almost 100% of UMass Memorial’s $105.6-million operating loss between fiscals 2020 and 2024, according to the Center for Health Information and Analysis. Gardner-based Heywood Healthcare has staff working on prior authorizations at all of its 15 healthcare sites, including hospitals, primary care facilities, and urgent care centers, said John Bujak, the system’s CFO. Not only will reform alleviate cost burdens, but it will return a certain amount of trust to doctors who feel handcuffed to the bureaucratic measures of health insurers, said Bujak. The American Medical Association found 95% of U.S. physicians say prior authorizations somewhat or significantly increase their experience of burnout as they average 43 prior authorizations per week. “They've been trained. They've got the experience. They know what they're doing,” Bujak said. “It would be wise to entrust in them that the right thing is being done for the patient at the end of the day.” Ambulatory services face the highest rates of required prior authorization at UMass Memorial and Heywood. Primary care and imaging services, such as ultrasounds and MRIs, are heavily impacted by prior authorization. Imaging prior authorizations can be so difficult to obtain in outpatient settings that some doctors delay discharging medically ready patients out of concern they won’t receive needed care, Dickson said.

Eliminating unnecessary procedures

The prior authorization system inherently saves patients money on premiums, said Rao from BCBS.

BCBS’ prior authorizations are estimated to save patients nearly $5 billion in out-of-pocket costs over 10 years, by cutting down on unnecessary health care, she said. In 2023, a study commissioned by Blue Cross Blue Shield Association from Seattle-based consulting firm Milliman concluded U.S. insurees would experience an annual premium increase between $43 billion and $63 billion because insurers would be forced to pay for more services if prior authorizations went away. Prior authorizations are important for services with the potential to be over-utilized or misused, such as radiology, surgeries, and prescription drugs, said Rao. Still, in order to reduce the administrative burden, BCBSM in January 2024 removed 14,000 required prior authorizations for commercial members, cutting an additional 13,000 authorizations that September. A member of Healey’s Health Care Affordability Working Group, BCBSM does not require prior authorizations for 98% of its claims, she said. All of its plans are accountable to strict turnaround time requirements. “We currently exceed those expectations in most cases. Approximately 85% of our decisions are reached within seven days, and our turnaround time for urgent cases is one to two days, including approvals for post-acute care,” Rao wrote. Those decisions, particularly denials, lead to additional costs for healthcare providers, said Dickson. At UMass Memorial, about 20% to 25% of commercially insured claims get denied. Heywood has an entire team dedicated to working on issues such as denied claims, prior authorizations, and issues of medical necessity, estimated to cost the system between $200,000 and $300,000 a year. The turnaround time from when Heywood sends bills to insurers to when they’re paid is between 30 and 40 days. During this time, the system is footing the bill for patients’ care, said Bujak. If that claim is then denied, it’s an additional 30 to 40 days to work through the appeal process. “All the costs associated with that would go away if we didn't have the denial to start,” said Bujak.

Hope in reform

The elimination of prior authorizations for primary care will significantly impact Federally Qualified Health Centers, community-based facilities providing care regardless of an individual’s ability to pay, said Steve Kerrigan, president and CEO of Worcester-based Edward M. Kennedy Community Health Center.

“It's a game changer for us as a health center, and I would be willing to bet for health centers in general,” he said. The elimination would immediately impact the health center’s administrative processes, allowing physicians to provide more care through more patient visits. “Those are billable visits, and help us not just care for our patients, but also bring in the revenue related to that,” said Kerrigan. Mica Kanner-Mascolo is a staff writer at Worcester Business Journal, who primarily covers the healthcare, manufacturing, and higher education industries.