CMS Prior Authorization Rule: What ASCs Need to Know

Last week, the Centers for Medicare and Medicaid Services (CMS) announced the CMS Interoperability and Prior Authorization Final Rule (CMS-0057-F), marking a significant development in the effort to streamline the prior authorization process.   

Here’s what ASCs need to know about the CMS Prior Authorization Final Rule and the timeline for payers to comply.

Payers Affected by CMS Prior Authorization Rule

The CMS Prior Authorization Rule will affect Medicare Advantage, Medicaid, Children’s Health Insurance Program (CHIP), Medicaid managed care, CHIP managed care, plus issuers of qualified health plans on federally-facilitated exchanges.  

However, fee-for-service Medicare and Medicare supplemental insurance policies are not affected. The rule does not affect prior authorization decisions for drugs, and it does not apply to commercial insurance programs. 

Since many carriers that provide Medicare Advantage, Medicaid, and exchange policies also provide commercial coverage, healthcare industry experts are hopeful that payers will extend the new prior authorization rules to all policies.

Purpose of CMS Prior Authorization Rule

The Prior Authorization Rule is expected to reduce the health care system’s administrative burden and improve health outcomes for patients by improving the electronic exchange of healthcare data and streamlining the electronic prior authorization process between providers and payers.  

Beginning on January 1, 2026, impacted payers must send prior authorization decisions within 72 hours for expedited (urgent) requests and 7 calendar days for standard (non-urgent) requests.

Under the rule, additional measures will take effect on January 1, 2027. As of 2027, payers will be required to implement a Health Level 7 Fast Healthcare Interoperability Resources Prior Authorization application programming interface (API). Payers will also be required to expand on existing patient access to API, implement provider access, and allow patient data to be transferred from one payer’s API to another with the patient’s permission.   

CMS notes that these prior authorization updates will cut the decision timelines in half for some payers, and these changes are expected to generate approximately $15 billion in savings over the next decade. 

CMS Prior Authorization Rule’s Transparency Requirement

Starting in 2026, Payers are obligated to provide patients and providers with a specific reason for denying a prior authorization request. This requirement is intended to promote better communication and transparency between payers, providers, and patients and improve the physician’s ability to resubmit the prior authorization request if necessary.  However, the rule does not specify how fast carriers need respond to prior authorization appeals.

In addition, CMS is requiring impacted payers to publicly report certain prior authorization metrics annually by posting them on their website. The initial set of metrics is to be reported by March 31, 2026.

Electronic Prior Authorization for Clinicians and Hospitals

The CMS Prior Authorization Rule introduces a new electronic prior authorization measure to the Health Information Exchange (HIE). The update is specific to participants in the Merit-based Incentive Payment System (MIPS) and the Medicare Promoting Interoperability Program under CMS’s traditional fee-for-service Medicare program.  

For eligible clinicians and hospitals, the electronic prior authorization update adds an additional step to the prior authorization workflow.  

Beginning in 2027, the electronic prior authorization will be an attestation measure that MIPS eligible clinicians and hospitals will report by indicating a yes/no response.  
 
According to the CMS fact sheet:

• MIPS eligible clinicians must attest “yes” to requesting a prior authorization electronically via a Prior Authorization API using data from certified electronic health record technology (CEHRT) for at least one medical item or service (excluding drugs) ordered during the CY 2027 performance period or (if applicable) report an exclusion.  
   
• Eligible hospitals and CAHs must attest “yes” to requesting a prior authorization request electronically via a Prior Authorization API using data from CEHRT for at least one hospital discharge and medical item or service (excluding drugs) ordered during the 2027 EHR reporting period or (if applicable) report an exclusion. 

A detailed summary of all prior authorization updates can be found in the CMS press release.

Responses from the Healthcare Industry

Healthcare advocacy groups were quick to respond with positive feedback about the CMS Prior Authorization Rule. The American Hospital Association (AHA) commended CMS for finalizing the Prior Authorization Rule and addressing delays in patient treatment and clinician burnout. The American Medical Association (AMA) also expressed support, emphasizing the need to modernize the prior authorization process.

CMS Prior Authorization Rule: Final Takeaways

In summary, the CMS Prior Authorization Rule is a much-needed step in the right direction to streamline the time-consuming and costly prior authorization process.  

However, there is still much more that can be done to improve prior authorization bottlenecks and reduce the number of claim denials that are due to prior authorization issues.  

As payers update their processes, ASCs can increase efficiency and turnaround times with tech-forward front-end processes.  In fact, ASCs significantly reduce the likelihood of payer denials with a scheduling and check-in process that includes automation and a streamlined workflow for insurance verification and eligibility, prior authorization approvals, accurate payment estimates, and digital payment options. 

Find out how a multi-specialty ASC reduced prior authorization turnarounds and increased cash flow in our case study How to Solve Front End Challenges: Improve Accuracy, Revenue, and Patient Satisfaction.