Skip to main content
Premium Trial:

Request an Annual Quote

Prior Authorization a Growing Headache for Labs as Payors Clamp Down on Molecular, Genetic Testing


NEW YORK – Prior authorization has in recent years become a more common feature of the clinical laboratory landscape as insurers look to control costs, particularly of newer genetic and molecular tests.

This development has presented challenges to laboratories as they must consider both provider and patient needs and their ability to get paid, often while having limited insight into and control over the prior authorization process.

Prior authorization "is probably the largest or one of the largest growing areas that we deal with," said Heather Agostinelli, VP and head of strategic revenue operations at lab consulting and revenue cycle management firm Xifin, noting that insurers are increasingly using it as a tool to manage lab spending.

Stan Schofield, managing principal of lab trade federation The Compass Group and former president of the Maine-based regional laboratory system NorDx, echoed Agostinelli, noting that at a recent Compass Group meeting, discussion of prior authorization and denials was a major theme of conversation.

Prior authorization requires providers to obtain approval from an insurer before performing a particular service or procedure. It has been common in other areas of medicine for years but has only recently become a regular part of the clinical lab business, largely following the rise of genetic and molecular testing. Agostinelli said that BRCA testing was the first item in the lab and pathology space for which she recalls having to obtain prior authorization. Since then, the requirement has become more widespread as advanced testing has come to be an increasingly large part of the lab business.

Post-COVID-19, payor use of prior authorization in the lab space has further accelerated, said Ann Lambrix, VP of RCM solutions at lab consulting firm Lighthouse Lab Services, attributing this in part to the explosion in molecular testing during the pandemic and labs' continued use of such testing since then.

"PCR became a common household word, and so labs took that methodology and were able to develop additional tests," she said.

In 2022, CPT code 81479, for unspecified molecular pathology procedures, was the second-ranked lab procedure by total CMS payments at $470.2 million. That was up roughly three-and-a-half times from $132.6 million in payments in 2018, when it ranked 10th. Spending on molecular infectious disease testing has risen even more dramatically. In 2018, CMS spent $49.2 million on CPT code 87798 for unspecified infectious disease detection by nucleic acid. By 2022, that had jumped more than fourfold to $221.6 million.

Use of large genetic testing panels has also expanded rapidly in recent years. For instance, spending on CPT code 81455, for cancer genetic testing of 51 or more genes, rose more than threefold, from $21.3 million in 2018 to $73.6 million in 2022.

Lambrix said that with the country having come out of the public health emergency, many payors are now looking more closely at utilization of these tests and seeking to slow down spending.

In an email, James Swann, director of communications and public affairs for health insurance industry organization AHIP, said that prior authorization "is used for a limited set of medical services — most often for treatments, tests, and certain medications that are high-cost and/or high-risk" and added that it is "designed to ensure that clinical care aligns with evidence-based recommendations — not to deny or discourage patients from getting the care they need."

Prior authorization typically requires that a provider submit information to the payor detailing why a particular service is medically necessary and why the patient is eligible to receive it. It can be an administratively complicated process due to the fact that different payors may want different information submitted using different paperwork.

Further complicating the process for clinical labs is the fact that prior authorization requests come not from the lab but from the ordering physician. This means that labs have little control over submission of these requests and, in the case of time-sensitive testing, may be expected to perform the test before the payor has given approval.

The lab "is relying on the provider's office to send them a lot of documentation," said Nikki Martin, director of precision medicine initiatives at lung cancer nonprofit Lungevity Foundation. "But a lot of provider offices have limited staff, and from what I understand, it is a very onerous process, the collection of the data that is needed and the back and forth."

Schofield said that some labs have begun refusing to perform or send out tests until the ordering doctor receives prior authorization.

"They may take the sample … but they are not going to eat $3,000 or $4,000 or $5,000" processing a test that doesn't ultimately receive payor approval, he said.

Agostinelli likewise said that in the last few years she has seen labs start to hold testing for prior authorization, which she called a "huge" decision on the part of the lab.

"They can't continue to afford to not be paid on these tests," she said.

Holding tests for prior authorization, however, can put patients, ordering physicians, and labs in a difficult position, Schofield said. "You get the doctors mad and the patients mad because, you know, if you've got lung cancer, you don't want to wait around. It's a tough situation."

Martin said that, indeed, payor prior authorization policies are a challenge in lung cancer where mutation testing is commonly recommended to guide patient treatment, particularly in the case of late-stage disease.

She noted that while testing for a variety of mutations, including relatively rare mutations, is recommended by National Comprehensive Cancer Network guidelines, testing for mutations outside of ALK and EGFR commonly runs into prior authorization requirements.

Martin said that in her experience labs will sometimes run such testing even before prior authorization has been received, which then places them "in a position where they have to do a retroactive prior authorization, which insurers hate," she said.

Schofield said that in the case of labs within healthcare systems, it may in some cases make sense to perform testing even before getting prior authorization just to keep the patient in the system. He cited the example of cancer testing and treatment where a center is unwilling to perform ordered testing until a prior authorization comes through. In such a case, it may lose patients and all the downstream revenue associated with their treatment to another center that will do the testing.

Such tests become a loss leader of sorts for health systems, helping them keep the patient within the system, Schofield said.

When, for instance, a cancer patient leaves a system, it loses "all the infusion money, all the chemo money, all the radiation money," he said. "Sometimes you just have to eat [the cost of unpaid testing] to keep the patient there."

Schofield said that NorDx launched an intensive provider outreach and education effort to make sure ordering physicians were submitting the appropriate information for tests requiring prior authorization.

"We just kept saying in many, many, many notices — emails, letters, sales reps making calls — you have to get this information. You have to have the staging information. You have to do all these things. Otherwise we aren't going to send [the test] out," he said. "It was like a two-year battle."

The effort worked, Schofield said, noting that the prior authorization problem was "about 95 percent contained."

New tests and new test providers are always entering the market, though, meaning the provider education process is an ongoing one, he said.

Agostinelli said Xifin similarly works to inform ordering physicians about what information they need to submit when ordering a test where prior authorization is needed.

"We use what we call welcome letters where we identify consistencies across [payor] policies to at least inform the ordering physician [that] this is what we are going to need when you send that specimen in," she said. "Working with ordering physicians to set the stage at a high level of what needs to come in with that specimen [is necessary] just to have a shot at getting a prior authorization approved."

Payors are continually changing their prior authorization policies, as well, Agostinelli said.

While labs try to keep up with payor policies regarding prior authorizations, inevitably there will be changes that they won't be aware of, she said, adding Xifin reviews all denials due to prior authorization on a quarterly basis to stay on top of shifts in payor policy.

Currently, Agostinelli said the company is seeing dramatic increases in prior authorization requirements for whole-exome testing and minimal residual disease testing. On the other hand, prior authorization is slowing down in more established areas like hereditary cancer testing and noninvasive prenatal testing, she said.

AHIP's Swann likewise observed that prior authorization is less commonly required for more established services, noting that "where the data on patient safety and outcomes are proven, the use of prior authorization has fallen sharply."

Another step Xifin took to help manage its lab clients' prior authorization challenges was to hire a genetic counselor to help manage these requests.

"When you actually look at the payor policies and the clinical questions that are being asked for the prior authorization, in many instances, it really requires someone with a [genetic counseling] type of background," Agostinelli said. "It's not something that a [medical coder] can easily navigate at all."

New regulations and pending legislation could streamline the prior authorization process. In January, the US Centers for Medicare & Medicaid Services (CMS) put into place the CMS Interoperability and Prior Authorization final rule, which requires payors participating in various federal health insurance programs to accelerate and simplify their prior authorization decisions for expedited requests to within three days and for regular requests to within seven days. The rule covers Medicare Advantage, Medicaid and the Children’s Health Insurance Program (CHIP) fee-for-service programs, Medicaid managed care plans, CHIP managed care entities, and issuers of Qualified Health Plans offered on the Federally-Facilitated Exchanges.

The new rule goes into effect starting in 2026. According to the US Department of Health and Human Services, for some payors this will cut their existing prior authorization approval times in half. Payors will also have to implement automated, electronic prior authorization systems and report metrics on their prior authorization programs.

Meanwhile, the Improving Seniors' Timely Access to Care Act would address prior authorization in Medicare Advantage programs, requiring participating payors to report to CMS on their levels of prior authorization use and rate of approvals and denials as well as establish an electronic prior authorization system to speed up the process. The bill was initially introduced in 2021 and was passed by the House of Representatives in 2022 but was not passed by the Senate. In 2023, it was included in the Health Care Price Transparency Act of 2023.