Finalized regulations look to phase out the manual aspect of prior authorization

Medicare’s FY26 final rule for hospital inpatient payments includes the latest federal effort to streamline and improve prior authorization.

The rule has a subset of regulations titled “Health Data, Technology and Interoperability: Electronic Prescribing, Real-Time Prescription Benefit and Electronic Prior Authorization,” issued by HHS’s Assistant Secretary for Technology Policy and Office of the National Coordinator for Health Information Technology. As companion regulations to a January 2024 final rule from CMS, the provisions are intended to operationalize and advance the concept of real-time prior authorization.

The new regulations aim to standardize electronic prior authorization by incorporating HL7 Fast Healthcare Interoperability Resources (FHIR) applications. Providers will be able to electronically obtain information on a health plan’s coverage requirements and input the necessary information in a workflow. They can submit the request and be kept apprised of its status directly through their electronic health record. Clinicians also will be able to access a patient’s prescription benefit information at the point of care.

Leaders with ASTP/ONC wrote that the new regulations, in tandem with the prior CMS rule, support HHS Secretary Robert F. Kennedy Jr.’s stated goal of processing all prior authorizations in real time during care episodes.

Tackling a problem

Although key provisions in the new rule have been in the works since the Biden administration, they illustrate the Trump administration’s ongoing push to take friction out of healthcare transactions.

In June, the administration hosted leading insurers, which voluntarily pledged to alleviate prior authorization processes where possible across payer segments. By the start of 2026, the insurers plan to implement reforms such as reducing the scope of claims subject to prior authorization, ensuring better continuity of care when patients change plans, and improving communication and transparency on determinations.

By the following year, standardized electronic prior authorization using FHIR-based application programming interfaces will be in place, according to the pledge, as will real-time responses for an estimated 80% of electronic prior authorization requests.

Although the prospect of such improvements is welcome news for providers, Jeff Wurzburg, a partner with Norton Rose Fulbright who specializes in healthcare reimbursement and policy issues, said it remains to be seen how much impact a voluntary initiative can have.

“If you look at the pledges, they’re relatively vague,” Wurzburg said. “Time will certainly tell with implementation how those changes are made, how extensive they are, whether it truly does relieve the burden on providers and ultimately clear the pathway to care for beneficiaries.”

Recent earnings reports by insurers have pointed to increased utilization as a drag on their businesses. In that climate, the companies are unlikely to remove all or most of their guardrails.

“It is hard to imagine that these [prior authorization] changes would lead to a reduction in utilization management tools,” Wurzburg said. “[You] squeeze one end of a balloon and another area pops up.”

The opposite direction

Right around the same time that the White House hosted the insurers, CMS announced an initiative that could create additional burden.

The Wasteful and Inappropriate Service Reduction (WISeR) Model, a pilot of the Center for Medicare & Medicaid Innovation (CMMI), will deploy AI and machine-leaning technology as a tool to review services that are vulnerable to fraud, waste and abuse in traditional Medicare. The goal is to root out clinically unsupported care using technology sponsored by private vendors.

Beginning next Jan. 1 for selected items and services, providers in Arizona, New Jersey, Ohio, Oklahoma, Texas and Washington can choose to submit a request for care authorization directly to a participating company or to their Medicare administrative contractor (MAC), which will route the request to the company. If the provider bypasses prior authorization, the claim would be subject to prepayment medical review.

In the event the item or service is denied via algorithm, the determination would need to be reviewed by a clinician. Providers can resubmit a denied request as many times as they choose. Roughly 15 items and services will be newly subject to prior authorization in year one.

“It’s an interesting example of the CMS administrator’s promise to utilize AI and technology,” Wurzburg said. “At the same time, this is the first instance I can think of where a model may actually inhibit or slow a beneficiary’s access to medically necessary care.”

As part of the WISeR Model announcement, CMS referenced leveraging “the innovative, technology-enhanced approaches that exist in MA [Medicare Advantage] and the private payer space, potentially exceeding and improving [traditional] Medicare’s existing capacity and effectiveness at prior authorization.”

“You have this rare convergence of practices where traditional Medicare seems to be inching its way toward Medicare Advantage practices,” Wurzburg said.

Big-picture developments loom

Wurzburg said prior authorization could go the route of surprise billing, wherein insurers’ unwillingness or inability to tackle reform in a meaningful way spurred legislation at the state and ultimately the federal level.

State-level activity in addressing prior authorization has picked up in 2025. Indiana passed a law that requires insurers to respond within 48 hours for standard prior-authorization requests and 24 for urgent requests, while implementing peer-to-peer review for denials. Iowa passed similar legislation, as did Nebraska, where the enacted bill also restricts AI-based denials. On July 15, Alaska joined the list of states that have passed a prior authorization bill.

As with surprise billing, federal legislative action on prior authorization may be needed to fill in the gaps and perhaps bring uniformity to a patchwork of rules and regulations across states and payer segments. The most prominent such bill that has been drafted in Congress would cover MA and Medicare Part D but not the commercial space or Medicaid.

“I think failure [by insurers] to make a real change will ultimately lead Congress to act,” Wurzburg said.