The Payers’ Playbook

Prior Authorization: Do Insurers Pay Bonuses for Denying New-Drug Requests?

A MedPage Today blog post suggests that they do. Industry veterans say they’re unaware of bonuses for denials but agree prior auth processes should be more transparent.

Joseph Burns
Contributing Editor

For patients and physicians, prior authorization is an opaque process. They want to know how and why health insurers decide which patients get approved for which treatments and procedures. The answers to the questions are almost always unsatisfactory.

Now we can add to that discontent a new and deeply concerning question: Do health insurers pay bonuses to those who make prior authorization decisions?

Here’s how it happened:

In November, MedPage Today, a respected news site for physicians, published a blog post by Milton Packer, MD, a distinguished cardiologist at Baylor University Medical Center who also does some paid consulting work for pharmaceutical companies.

Milton Packer, MD, of Baylor University Medical Center, caused quite a stir not long ago with a blog post in which he related stories told to him about how insurers purposely make it difficult for doctors to get prior authorization.

Packer described giving a presentation at a medical meeting about new medications for heart failure and getting into a discussion with members of the audience, who he said were older physicians, working for insurers in prior authorization roles. He asked if the points he raised about new drugs were useful. In Packer’s telling, the doctors said, “We’re asked to approve their use for patients all the time. But we don’t approve most of the requests. Nearly all of them are outside of the guidelines that we are given.”

If that was it, Packer’s piece would have been no big deal. Physicians may not like it, but health insurers deny coverage when such requests do not meet their guidelines.

But then he ventured into more controversial territory. Packer wrote that he asked about the evidence he presented showing that new medications make patients feel better and live longer. “But the drugs are too expensive. So we typically reject requests, at least the first time,” the doctors told Packer, according to his blog post. “We figure that, if doctors are really serious, then they should be willing to make the request again and again.” And, the doctors added—wrote Packer—“if we approve expensive drugs, then the system goes broke. Then no one gets health care.”

This is a cynical view of how insurers operate—saying “no” simply to wear physicians down—but it is widely held. And there’s a nugget of truth that gatekeeping does help prevent the health system from going completely broke.

But then, in Packer’s account, came the comment from an audience member that put prior authorization in a new—and even more unfavorable—light:

“Plus, if I approve too many expensive drugs, I won’t get my bonus at the end of the month.”

Stirred up

A torrent of online comments followed. Most were somewhere on the spectrum of outraged. “No longer is it about patient care; it’s about the bottom line,” wrote one MedPage Today reader who said he once worked for a pharmacy benefit manager. “Just further indication of how health care in the U.S. is controlled by insurance carriers, who also control costs which improves their bottom line,” wrote another who described himself as a 91-year-old general practitioner.

A smaller group came to the health insurers’ defense. One theme: Doctors need to explain their requests for treatment in more detail and to follow health insurers’ guidelines closely. One commenter (identified only as MFMD) said he (or she) once worked for a health insurer in prior authorization: “I have been amazed how often physician documentation is lacking to support a valid request for treatment!” Several who said they worked for health insurers disputed the description of prior authorization from Packer’s attendees. One called the article “highly suspect,” saying much of it was not true and that to require physicians to make requests again and again “is completely ludicrous.”

Three weeks after the blog post, weighed in., which bills itself as “your health news watchdog,” critiques the veracity and completeness of health news. “We’ve tried to track down the source of the account—apparently an attendee at Packer’s talk—because we agree that Packer’s depiction, if verified, is shocking and should be investigated,” wrote Mary Chris Jaklevic, a freelancer for the website. “In an email on November 17, Packer said he was traveling and could not provide the names of either the person who invited him to speak at the meeting or any of the attendees. He said he would look up this information when he returned to his office and added, ‘The story occurred exactly as I said it did.’”

In response to my request for an interview, Packer said he would love to talk but was swamped due to a family illness.

Like Packer’s original post, the HealthNews article generated a lot of comments from readers, many of whom wanted more transparency from health insurers. Certainly, this idea has merit but it’s unclear if busy physicians would care much.

The three health care executives I contacted for this article said they had never heard of insurers paying bonuses in the kind of quid pro quo way that Packer’s blog post suggested happens.

“I have worked for a health plan, a PBM and now for a medical benefit management company,” says Lon Castle, MD, chief medical officer for molecular genetics, specialty drug and personalized medicine at eviCore healthcare, one of the nation’s largest prior authorization vendors. “I have never been compensated, nor have the medical directors who work for me ever been compensated with a bonus of any kind based upon their denial rates. I would be surprised if this does happen, based on my experience.”

Paul von Ebers

“I would never approve (and no one ever suggested) a compensation system with bonuses based on rejections for prior auth staff,” says consultant Paul von Ebers, who led prior authorization efforts at three different health plans.

Consultant Paul von Ebers, the president of Prospective Health LLC, agreed, saying, that before starting Prospective Health, he managed the prior authorization efforts at three different health insurers. “I would never approve (and no one ever suggested) a compensation system with bonuses based on rejections for prior auth staff,” he says. Some of those who work in prior authorization might get a financial incentive based on broad goals for the entire health plan, but not for their specific work in reviewing treatment requests. “I cannot say, categorically, that no health plan ever does something like this, but, honestly, I have never been aware of a health plan (especially in the Blues) that had a bonus system like this,” said von Ebers.

More disclosure, less discord

One other health insurance executive responded not in his official role but as an individual who asked not to be named simply because going through media relations would be too time consuming. “I can tell you without hesitation that there are no bonuses being paid as a reward for saying no to anything,” he said.

“The problem as I see it is that there is literally no comparative effectiveness data for any of the new pharmaceuticals that come to market,” he added. “Compared to nothing (placebo) the drug performs as it performs. Does it work better than other drugs currently available? Who knows? We only know that it works better (sometimes only marginally) than doing nothing.” Health insurers struggle to pay for new drugs while trying to maintain reasonable and affordable premiums for members, he noted.

Perhaps more insurers should adapt programs that some health systems have used, said von Ebers. Some integrated health systems such as Kaiser Permanente and a few, well-organized accountable care organizations have teams of physicians and pharmacists that decide on formularies and clinical protocols on the use of drugs, he explained. Once physicians comply with the plan’s formularies and protocols, then a request could proceed without the need to make an ad hoc prior authorization request. Such an approach would limit variation in what doctors could prescribe and could slow the introduction of expensive new medicines, but it would eliminate the onerous nature of asking for permission each time, von Ebers said.

Health insurers have pharmacists and physicians who make coverage decisions. More disclosure about how these teams work would ease some of the discord among physicians making prior authorization requests. Clearly, health insurers need to make the process less opaque or prior authorization will continue to be in the news for all the wrong reasons.

Editor's note: An earlier version of this story mischaracterized the work Milton Packer, MD, does for pharmaceutical companies. He does consulting work for several companies.

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