American Hospital Affiliation turns up the warmth on business insurers in scathing report


Commercial health plans use practices that delay patient care and raise administrative costs, a recent report by the American Hospital Association charged.

The report listed several practices that it says burdens providers and harms patient care. This includes prior authorization, the process that determines if a payer will cover a service; fail-first policies, in which patients try and fail certain treatments before insurers authorize more costly treatments; white bagging, which prohibits providers from using their own medication inventory; and several others.

“Some commercial health insurers have implemented policies that add billions of dollars in added unnecessary administrative costs to the healthcare system while compromising patient care,” AHA states. “Commercial health plan abuses must be addressed to protect patients’ health and ensure that medical professionals, not the insurance industry, are making the key decisions in patient care.”

Some of these practices are needed to reduce expenses for patients, countered Kristine Grow, senior vice president of communications at America’s Health Insurance Plans. But the two topics in the report Grow particularly pushed back against were prior authorization and white bagging, also known as specialty pharmacies.

Both organizations are advocacy groups, one for hospitals and one for health insurers. 

Prior authorization

The AHA claims that health plans’ use of prior authorization often creates dangerous delays in care, leads to clinician burnout and drives up administrative costs.

The report cites a 2021 American Medical Association survey of more than 1,000 physicians, which found 88% of physicians describe the burden associated with prior authorization as high or extremely high, and physicians spend about two days per week completing prior authorizations.

The survey discovered 93% of physicians reported care delays associated with prior authorizations, and 82% said the process led to patients abandoning treatment.

“With the added administrative burden comes unnecessary patient frustration and suffering,” AHA claimed in the report. “Patients are left in a position of uncertainty as to their prospective care plan, facing unnecessary delays in care while their physician navigates the complex prior authorization process.”

Grow said prior authorization exists to reduce costs for patients and consumers while also preventing waste in money. She cited a 2019 JAMA study that found the estimated cost of waste in the U.S. healthcare system ranges from $760 billion to $935 billion, representing about 25% of total healthcare spending. Potential savings from interventions, such as prior authorizations, range from $191 billion to $286 billion, the report said.

In some cases, it can promote patient safety, she claimed. For example, it may determine if a medication that is prescribed contradicts another medication prescribed by a different physician, she said.

“We need to focus on how do we prevent waste?” Grow said. “How do we ensure that patients are getting the evidence-based care that is most effective and proven to be most effective? How do we ensure that the care they’re getting is safe?”

That doesn’t mean the process doesn’t need improvements, Grow added. Providers and insurers need to work together to make prior authorization more efficient, she said, and one way to do that is through electronic processes. 

A 2020 initiative by AHIP called Fast Prior Authorization Technology Highway found 71% of providers who used electronic prior authorization for most or all of their patients reported that patients received care faster than without electronic. The median time between submitting a request and receiving a decision from the health plan was more than three times faster with electronic prior authorization than not, going from 18.7 hours to 5.7.

White bagging

The AHA report claims insurers’ use of white bagging, or specialty pharmacies, compromises safety and delays care. The practice requires in-network facilities and providers to obtain and administer specialty drugs from an insurer-affiliated specialty pharmacy.

“The practice effectively bans a provider from using their own medication inventory to supply drugs used to treat patients in their facility and prohibits them from having oversight of the procurement, storage and handling processes, which have important implications for safety and efficacy,” AHA stated.

The practice usually applies to infused or injected medications that need a clinician to administer in a hospital or clinic, and requires a third-party pharmacy to ship the drug.

“White bagging compromises patient safety and adds significant complexity to the healthcare system and tremendous administrative burden to providers who are trying to manage these policies on behalf of their patients,” the report claimed.

There are several safety issues that come with white bagging, AHA said, including delaying care when medications are not delivered on time and preventing providers from validating that specialty medications were managed appropriately when being delivered. These medications often have temperature and handling requirements.

Sometimes, due to these complications, providers will go ahead and use their own drug supply. When this happens, the insurer usually denies the claim and the provider receives no payment, AHA said.

Grow countered that when drugs are administered in a clinical setting, patients are typically not only paying the cost of the clinician to administer the drug, they’re also paying the hospital’s markup of the drug. Markup refers to what the hospital is selling the drug for versus the amount the item costs the hospital.

She cited a recent AHIP study that analyzed the cost of 10 drugs, which found costs per single treatment for drugs administered in hospitals were on average $7,000 more than those purchased through specialty pharmacies. Drugs administered in physician offices were on average $1,400 higher.

“It is a proven solution that has been shown to lower healthcare costs,” Grow claimed. “It is a way to get these medications safely delivered. These specialty pharmacies have to meet extra safety requirements for specialty drugs that are imposed by the FDA drug manufacturers, as well as by state and federal legal and regulatory requirements.”

While the pandemic forced collaboration between many organizations that had hitherto not had any alignment in goals, this report is evidence of the longstanding rift between providers and payers.

Photo: claudenakagawa, Getty Images



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