DSH Alert 1

Managed Care Prior Authorization Denials

Medicaid Disproportionate Share Hospital (DSH)

January 2019

Managed Care Prior Authorization Denials

On July 17, 2023, the Office of the Inspector General (OIG) released a report titled, “High Rates of Prior Authorization Denials by Some Health Plans and Limited State Oversight Raise Concerns about Access to Care in Medicaid Managed Care”: https://oig.hhs.gov/oei/reports/OEI-09-19-00350.pdf. The report highlights that overall Medicaid managed care organizations (MCOs) denied one out of every eight (12.5 percent) prior authorization requests in 2019. Medicare Advantage health plans denied only 5.7 percent in 2019. Among the 115 MCOs in the OIG review, 12 had prior authorization denials greater than 25 percent. The report compares the oversight of prior authorization denials between Medicaid and Medicare Advantage MCOs, as well as the process for appeals.

The OIG recommended the Centers for Medicare & Medicaid Services (CMS) implement the following specific to Medicaid MCO prior authorizations:

“(1) Require States to review the appropriateness of a sample of MCO prior authorization denials regularly.

(2) Require States to collect data on MCO prior authorization decisions.

(3) Issue guidance to States on the use of MCO prior authorization data for oversight.

(4) Require States to implement automatic external medical reviews of upheld MCO prior authorization denials.

(5) Work with States on actions to identify and address MCOs that may be issuing inappropriate prior authorization denials.”

Additionally, on October 3, 2023, the United States Senate Committee on Finance sent a series of letters to MCOs across the country as part of an investigation into the OIG report. Senate Finance Committee Chair Ron Wyden and House Energy and Commerce Committee Ranking Member Frank Pallone, Jr. wrote, “While plans may use prior authorization as a means to manage care, this report raises serious questions about whether plans are improperly using prior authorization to deny care. This alarming trend cuts across a range of parent companies and makes clear that this is a system-wide problem in need of attention.”

Many of the OIG recommendations are outlined in the CMS Medicare Manuals. Myers and Stauffer is uniquely positioned to assist state Medicaid agencies in addressing the OIG’s findings. We have worked extensively with CMS over the past 10 years, both to develop and apply the protocols outlined in the Medicare Manuals, including: analysis and evaluation of denials of requests for prior authorizations and appeals; clinical appropriateness of the denials; and timeliness of processing of requests for prior authorizations and appeals within the Medicare Advantage program. Given our partnership with CMS alongside our ability to design compliance programs that address issues similar to those described by the Inspector General, we thought it was important to share our experience as the state Medicaid agency considers next steps, if any, in response to OIG’s findings.

While external quality review organizations (EQROs) may review some of the areas listed below to determine compliance with the MCOs’ contractually mandated policies and procedures, the reviews do not typically assess their effectiveness, nor do they provide a root-cause analysis to help identify the issues contributing to their non-compliance. Furthermore, as the OIG reported, states may not be currently collecting the appropriate amount of data necessary to monitor prior authorization denials. 

Following are high-risk areas for which Myers and Stauffer can provide audit and consulting procedures, including:

  • Required reporting of prior authorizations – Our team will incorporate prior authorization decisions reporting into the managed care contract language or amendment language. We also track and dashboard reports submitted by managed care entities.
  • Inappropriate denials of services or drug requests (pre-service prior authorization requests, services on appeal) – We identify and correct inherent access-to-care or access-to-medication issues that may be caused by an inappropriate clinical decision.
  • Untimely processing of requests for pre-service prior authorizations of services/drugs or requests for appeals – We also Identify and correct inherent access-to-care issues that may be caused by the untimely processing of requests for prior authorizations of services/drugs or requests for appeals. 
  • Inappropriate denials of payments for covered services and drugs – Our team identify and correct questionable determinations related to denials of provider payments and member reimbursement requests.
  • Unidentified or unprocessed pre-service prior authorization requests and requests for appeals, requests for drugs or complaints/grievances – We identify and correct instances of unrecognized or unprocessed pre-service prior authorization requests and appeals, requests for drugs or complaints/grievances. These issues often relate to significant access-to-care concerns.

We are available to provide a more in-depth review of the areas above to assist the state Medicaid agency with oversight insight into Medicaid MCO prior authorization denials and appeals. We are happy to schedule a time to discuss how our experience could benefit your state’s Medicaid managed care programs.

For More Information

If you have questions, please reach out to your Myers and Stauffer contact or one of the members of our leadership team.

Mike Johnson, CPA, CFE (Member)

PH: 404.524.0775


Judy Hatfield, CPA, (Member)

PH: 816.945.5319


Keith Sorensen, CPA, CFE (Member)

PH: 919.829.7429