What does preauthorization involve in medical billing?

Preauthorization is a crucial process in medical billing that requires obtaining approval from a health insurance company before a patient undergoes a specific treatment or procedure. This process is designed to ensure that the proposed medical service is necessary and covered under the patient's insurance plan before the service is rendered. The goal is to prevent unexpected costs for both the provider and the patient, as well as to manage healthcare expenditures effectively.

Prior approval helps to facilitate a smoother billing process. The insurance company reviews medical necessity based on the information provided by the healthcare provider. If the treatment is deemed appropriate, it is preauthorized, thereby securing the coverage for that procedure.

Other options do not accurately represent the essence of preauthorization; for instance, post-approval for procedures would occur after the service has already been provided, which does not align with the proactive nature of preauthorization. Denial of service requests relates more to situations where claims are rejected rather than the approval process before services take place. Lastly, self-referral refers to patients directly seeking services from specialists without a physician's referral, which is unrelated to preauthorization.