Prior authorization isn’t shrinking. Its savings are

Health plans are entering a new phase in prior authorization. On March 31, Medicare Advantage, Medicaid managed care, and marketplace plans published their prior authorization metrics for the first time under the CMS Interoperability and Prior Authorization Final Rule (CMS-0057-F). Just months later, the HHS Office of Inspector General revealed a staggering statistic: When skilled nursing facilities (SNF) admission denials were appealed, Medicare Advantage plans overturned 95% of them.

The message for health plans is clear: While prior authorization is not going away, its underlying economics are fundamentally shifting.

Denials have historically played a vital role in managing utilization, but those savings relied heavily on administrative friction, evidenced by the fact that only 18% of SNF denials are ever appealed. When the appeals process becomes faster, easier, and less expensive, far more decisions are contestable. The real challenge for health plans isn’t simply deciding how to automate prior authorization but using this regulatory moment to build a far more durable cost-management strategy.

The cost opportunity is shifting

When electronic prior authorization requirements go live on Jan. 1, 2027, the entire request-and-decision cycle will transition to standardized APIs. Beyond increasing speed, automating these transactions changes who can afford to fight.

Providers are deploying AI tools that assemble clinical records and build the case for approval, while health plans deploy parallel AI tools to evaluate those same records against clinical criteria.When the Peterson Health Technology Institute convened leaders from both sides earlier this year, the conclusion was uncomfortable. Optimizing opposing sides of an adversarial process simply makes it more activity-intensive, not more efficient.

Historically, a denial usually stood because the financial cost of appealing outweighed the eventual recovery for the facility. Automation completely rewrites that math. When submission, review, and appeal cost significantly less, every deniable decision gets challenged and at a 95% overturn rate, the savings that plans originally booked turn into paid claims, an exposure most current cost trends fail to account for. Simply automating an exchange without changing the underlying dynamic makes the process faster without making it collaborative or more cost-effective.

This dynamic raises a fundamental question: How much value was the friction actually generating? When Archelle Georgiou, M.D., UnitedHealthcare’s former chief medical officer, developed a “Friction Index” comparing authorization burden across 155 Medicare Advantage contracts, she found no correlation with medical loss ratios. The heaviest authorization programs simply aren’t spending meaningfully less on actual care.

The lever nobody has fully pulled

To build sustainable cost containment, plans must compare two distinct operational levers:

The denial lever. This approach is inherently narrow, touching only approximately 12% of post-acute requests that plans actually deny. Its savings cap out against a Medicare base rate of roughly $434 a day, while its hidden costs compound rapidly through appeal rework, members sitting in hospital beds for an average of six extra days, and readmissions averaging $15,000 that carry a triple weight in Star Ratings alongside brand erosion.

The care management lever. This approach impacts every single stay and every day within it. In post-acute care, days are the fundamental unit of cost. Plans that reduce length of stay will unlock significantly more value than gatekeeping ever produced.

Pulling the care management lever requires looking inside a stay that has historically been a black box. Typically, an authorization goes in, and a discharge summary comes out weeks later; ONC data shows that hospitals rarely exchange records electronically with post-acute partners, and health plans see even less.

The 2027 mandate establishes the initial bridge for authorization, but real transformation requires extending that connectivity. By streaming real-time clinical data directly from the facility’s electronic record into plan workflows, plan and facility teams can co-author a single discharge plan starting from day one. This isn’t staffing expansion; it’s a realignment of data movement.

Better care through collaboration

Shared visibility changes care management from a reactive exercise into a proactive concurrent workflow. Discharge readiness stops being a calendar negotiation and becomes a joint clinical decision powered by shared, real-time patient data. When plan nurses and facility teams identify potential discharge barriers on day four instead of day 14, they can line up equipment, transportation, and follow-up care before the member needs them. Members transition home safely as soon as they are ready because administrative friction is resolved in real time.

This evolution also addresses workforce constraints. As electronic authorization automates routine utilization management, clinician capacity is freed up to focus on active stay management. Concurrent review naturally becomes concurrent care management, leveraging the same clinical staff for a far more collaborative purpose.

The downstream impact extends directly to quality-linked revenue. Preventing avoidable readmissions protects high-value Star measures, while members who experience seamless care coordination express greater satisfaction on CAHPS surveys, a metric CMS plans to weight even more heavily by 2029.

When UnitedHealthcare eliminated most prior authorization in 1999, it redirected the savings into care coordination and readmissions fell. While the industry eventually drifted back because real-time visibility didn’t exist at scale, technology has finally caught up. Establishing real-time communication channels gives both sides a shared view of the stay, eliminating redundant back-and-forth while laying the foundation for seamless 2027 mandate compliance.

The practical starting point is making it easier for plans and providers to communicate in real time and work from the same view of the stay, so both sides can act earlier, align around the member’s needs, and reduce the back-and-forth that poor visibility creates. The same foundation can support electronic authorization, helping organizations meet the mandate while reducing burden for facilities and plans alike.

The relationship is the strategy

While the 2027 mandate automates administrative transactions, it cannot automate clinical partnerships. Plans that treat the deadline strictly as a compliance exercise will find themselves in a faster, AI-driven arms race with providers. Plans that proactively shift their clinical talent from adjudicating static requests to guiding recoveries are pulling the true lever of long-term cost control.

In post-acute care, optimal patient outcomes and sound plan economics finally point in the same direction: managing a stay jointly until a member is stable, not a day longer, and not a day shorter.

Whitney Eubanks, M.S., is vice president of product management, integrated care, at PointClickCare.