What Is Precertification in Medical Billing?

Understanding Precertification

Precertification in medical billing refers to a formal process where a healthcare provider obtains approval from a patient’s insurance company for a specific medical service, procedure, or piece of equipment before it is provided. This step ensures the planned service aligns with the insurer’s guidelines for medical necessity and coverage. Insurance companies require precertification to manage healthcare costs and confirm that services are appropriate for the patient’s condition.

This administrative requirement is initiated by the provider’s office on behalf of the patient. The process involves submitting detailed clinical information to the insurer for review. Precertification is an approval for the service itself, not a guarantee of payment. Final payment is contingent upon the patient’s remaining benefits, deductibles, co-pays, and co-insurance at the time of service.

Services Requiring Precertification

Services frequently requiring precertification include:

• Elective surgeries, such as joint replacements or bariatric procedures, which are planned in advance.
• Inpatient hospital admissions, even for planned procedures, including extended stays for recovery or complex medical management.
• High-cost diagnostic tests, like Magnetic Resonance Imaging (MRI), Computed Tomography (CT) scans, and Positron Emission Tomography (PET) scans.
• Specialized therapies, such as extensive courses of physical therapy, occupational therapy, or chemotherapy treatments.
• Durable medical equipment, encompassing items like wheelchairs, oxygen concentrators, and continuous positive airway pressure (CPAP) machines.

The specific services requiring precertification can vary significantly based on the patient’s individual insurance plan and its contractual agreements with providers.

The Precertification Process

The precertification process begins when a healthcare provider’s office identifies that a planned medical service requires prior approval from the patient’s insurance carrier. Administrative staff then gathers all necessary patient information and clinical documentation to support the medical necessity of the proposed service. This documentation includes diagnosis codes (ICD-10), procedure codes (CPT), and detailed physician notes that justify why the service is appropriate for the patient’s condition.

Once all supporting information is compiled, the provider’s office submits the precertification request to the insurance company. This submission can occur through various channels, including secure online portals, fax, or a direct phone call to the insurer’s authorization department. The insurance company then reviews the submitted request, assessing it against its established medical necessity criteria and clinical guidelines.

Following the review, the insurance company issues a decision, which can be an approval or a denial. If approved, the insurer provides an authorization number and specifies the validity period for the approval. This authorization number serves as proof that the service has been pre-approved. The decision is communicated back to the healthcare provider’s office, and the patient is also informed of the outcome.

Consequences of Lacking Precertification

Failing to obtain precertification when it is required can lead to significant financial repercussions for the patient. If a service is rendered without the necessary pre-approval, the insurance company may refuse to pay for the medical care, classifying the service as not medically necessary or not covered without prior authorization. This often results in the patient becoming fully responsible for the entire cost of the service, which can amount to thousands of dollars depending on the procedure. Even if the claim is partially paid, the patient’s out-of-pocket expense will likely be substantially higher than if precertification had been secured.

For healthcare providers, a lack of precertification can lead to claim denials and an increased administrative burden. The provider’s billing department must then spend time appealing the denial or attempting to collect the full amount directly from the patient. This can strain the patient-provider relationship and create significant collection challenges. Therefore, it is important for patients to confirm with their provider and insurance company that all necessary precertifications have been obtained before receiving medical services.