What Is Retro Authorization and How Does It Work?

Retro authorization is the process of obtaining formal approval for an action, service, or expense after it has already occurred. This concept is relevant where pre-approval is typically required, such as in insurance claims or financial transactions. It validates activities that could not undergo the standard authorization process beforehand.

Defining Retro Authorization

Retro authorization, also known as retrospective or post-service authorization, is a process where approval for a service, expenditure, or action is sought and granted after the event has taken place. This contrasts with prior authorization, which mandates securing approval before proceeding. It serves as an exception to the usual requirement for upfront approval. For example, in medical billing, an insurance company reviews and approves medical services after they have been delivered to a patient.

This process is initiated when a claim for reimbursement is denied due to the absence of prior authorization. The entity that provided the service or incurred the expense then submits a request to the approving body, such as an insurance payer or financial department, to validate the necessity and appropriateness of the action. Unlike prospective approvals, retro authorization involves a review of completed services to determine if they meet established criteria for coverage or necessity. This review ensures that services rendered without initial approval can still be considered for financial coverage.

Reasons for Retro Authorization

Emergency situations often make it impossible to obtain prior approval, such as when immediate medical care is paramount to a patient’s well-being. In these instances, services are rendered without delay, and authorization is pursued retrospectively. This ensures that necessary care is not withheld while administrative processes catch up.

Administrative oversights or technical issues can also contribute to the need for retro authorization. A provider might mistakenly believe a service does not require pre-authorization, or a system glitch could prevent real-time verification. Changes in a patient’s insurance coverage after services have been provided can also trigger a retrospective review to confirm coverage under the new policy. Instances of incorrect coding during initial billing may also require retro authorization to assess if correct coding would lead to payment.

The Retro Authorization Process

The process for obtaining retro authorization begins when a service provider or individual submits a request to the approving entity after a service has been rendered. This request includes detailed information about the services provided, along with an explanation of why prior authorization was not obtained. For instance, in a financial context, this might involve submitting an expense report for an urgent purchase without prior approval, detailing the necessity and circumstances.

Upon submission, the approving entity, such as an insurance company or corporate finance department, undertakes a review of the provided documentation. This evaluation assesses the medical necessity of the service, its alignment with policy guidelines, and the validity of reasons for lacking prior authorization. The review may involve scrutinizing records and requesting additional supporting information to make an informed decision. Following this review, the request is either approved or denied, with approval leading to reimbursement or formal acceptance of the action. If denied, the submitting party may appeal the decision, providing further justification or clarification.