Growing Scrutiny of Prior Authorization and Billing Practices in Healthcare
The focus on prior authorization and billing practices in healthcare has intensified, especially after the tragic murder of UnitedHealthcare CEO, Brian Thompson. While this increased scrutiny may benefit patients, smaller healthcare providers, such as individual doctors and small hospitals, could face significant compliance fines ($2,000 per incident) and administrative costs. Even before this incident, New York State enacted a law aimed at improving patient protection and financial transparency in billing practices. This article explores how this law impacts healthcare providers' daily operations and its potential for broader adoption in the U.S. and globally.
New York’s Landmark Legislation
Last year, New York State introduced General Business Law Section 519-a and Public Health Law Section 18-c. Key provisions include:
Healthcare providers cannot demand credit card pre-authorization or retain card details before delivering emergency or medically necessary services.
Patients must be clearly informed about the risks of using credit cards for medical payments. Each time a patient opts for this method, they must acknowledge these risks.
Payment consent must be obtained separately from treatment consent, only after discussing treatment costs with the patient.
Section 18-c, which mandates separate consent for treatment and payment, was originally set to take effect on October 20, 2024, but its implementation has been delayed due to operational challenges. These laws highlight broader issues in payment systems, paving the way for further reforms. Similar initiatives have already been implemented in countries like Australia, where patient consent regulations prioritize transparency and fairness in medical billing.
Challenges faced by our customers
Amid these changes, I spoke with a healthcare provider about their challenges in adapting to the new rules. These discussions revealed some key difficulties:
1. Streamlining Payment Collection
Many providers use the "Card on File" (COF) method for convenience, allowing follow-up appointments and ongoing treatments to be charged without requiring patients to repeatedly enter card details. However, the new law requires:
Informing patients that medical bills paid by credit card are not treated as medical debt.
Explaining that by using a credit card, patients waive certain protections, such as limits on interest rates and restrictions on wage garnishment.
Obtaining patient acknowledgment of these risks for every payment.
These requirements make auto-pay impossible and necessitate manual consent for each charge, complicating payment workflows.
2. Managing Pre-Authorization Holds
While the law prohibits pre-authorization for emergency services, it allows this practice for non-emergency care. Pre-authorization temporarily holds funds but expires after seven days, complicating payments if scheduling issues arise. Extending the hold period or introducing a smoother reauthorization process could mitigate these challenges.
3. Automating Receipts and Superbills
Automating receipts and billing summaries (superbills) can improve efficiency, enhance communication, and build trust by ensuring timely updates to patients.
The Future of Healthcare Payments
New York’s legislative changes are part of broader efforts to increase transparency and protect patients from financial difficulties. However, they also emphasize the need for innovation to balance administrative efficiency with patient-focused care.
Potential Changes:
Consent Process: Instead of using an all-in-one consent form, providers could separate treatment and payment consent. For example, initial consent could allow saving card details for the first appointment, with additional consent obtained for future charges.
Patient Communication: Providers might adopt real-time notifications for upcoming charges and disclosures about payment risks. Automated receipts and superbills could further enhance transparency and reduce disputes.
Summary
Countries like Australia already have healthcare payment regulations similar to New York’s, emphasizing transparency and fairness in medical billing. This trend is likely to expand to other U.S. states and globally. At Formesign, we aim to ease the compliance and administrative burden for healthcare providers. However, we view patient consent not just as a regulatory requirement but as an ethical responsibility. Our goal is to simplify compliance through automation, such as sending emails or notifications to obtain patient consent. Our upcoming payment features will reflect this commitment. If you have feedback on pre-authorization or card-on-file processes, please leave a comment below or contact me directly.
