Hospital advocates urge CMS to scrap new prior authorization model

Hospital advocates have urged CMS to scrap a new prior authorization (PA) model set to launch at the beginning of 2026.

The Wasteful and Inappropriate Service Reduction (WISeR) model will test an AI-driven PA process in fee-for-service Medicare for 15 procedures and services in six states over three years.

Although limited PA exists in traditional Medicare, the new approach will test the use of technology to quickly identify items and services “shown to have little to no clinical benefit and that are particularly vulnerable to fraud, waste, and abuse,” according to a CMS press release.

Hospital advocates and congressional Democrats have come out swinging against the pilot, which comes through the Center for Medicare and Medicaid Innovation (CMMI).

“We want to reduce fraud, waste and abuse, but I question whether or not there’s any sort of oversight of these tech companies that will be utilizing this AI technology to deny claims,” said Maggie Martin, chief legal officer for the Oklahoma Hospital Association. “I question whether there could potentially be abuse of the system in order to potentially pad their pockets.”

The concern over the incentives for the technology companies conducting the PA stemmed from the program allowing them to retain a “percentage of the savings associated with their reviews,” as described in a CMS FAQ.

“WISeR’s proposal to base contractor payment on the volume of care denied adds another troubling dimension,” Charles Kahn, president and CEO of the Federation of American Hospitals (FAH), wrote to CMS. “This structure could create a financial incentive to deny legitimate claims, prioritizing cost savings over patient care.”

The FAQ, which was released after the model was announced and amid initial concerns of the technology contractors’ compensation structure, underscored that “any recommendations that coverage should not be provisionally affirmed will be made by an appropriately licensed human clinician, not a machine.” It also underscored that providers and vendors of items and services denied through the PA could appeal denials through the standard appeal process and outlined accountability measures for the technology companies.

The financial incentives for the contractors echoed past issues with Medicare recovery audit contractors (RACs), said Kahn. RACs’ early rules allowed them to receive a portion of the Medicare savings recouped from providers, which resulted in them being “overly aggressive,” he said. Incentive payments for RACs were later altered to limit such incentives.

Similar restraints are needed for the PA contractors, he said.

Echoes of MA

Hospitals worried that introducing technology-enabled PA into fee-for-service (FFS) Medicare may reproduce extensive payment delays they have experienced from Medicare Advantage (MA) payers extensive use of PA.

“Many rural hospitals and clinics already struggle under the weight of MA prior authorization requirements, which frequently delay care, require significant staff time and resources, and result in confusion for beneficiaries,” Alan Morgan, CEO of the National Rural Health Association, wrote to CMS. “Extending similar processes into Medicare FFS risks doubling the administrative burden for rural facilities that are already operating with limited resources.”

A 2018 report from the HHS Office of Inspector General (OIG) examined MA PA practices from 2014 to 2016 and found plans often overturned 75% of their own initial denials. A separate 2022 OIG report found 13% of denied PAs met Medicare coverage rules and 18% of payment denials were for services that should have been paid.

FAH noted that appealing MA plan denials is “administratively burdensome and costly, requiring teams of clinical, utilization management and financial staff to spend hours on each case.

Targeted concerns

The model would exempt inpatient and emergency care settings from the PA process. However, among the 15 services targeted by the model, Martin said some would have a bigger impact on her 128 member hospitals, including:

• Epidural steroid injections for pain management
• Skin and tissue substitutes
• Cervical fusion

For instance, epidural steroid injections for pain management have been a critical tool to counter the national opioid epidemic because they are an alternative to opioids.

“If we’re going to have increased denials of that, there’s going to be less usage of that option and I question whether that’s going to lead to an increase in opioid prescriptions,” she said.

Medicare PA experience

The new pilot is a notable departure from existing CMS payment integrity approaches.

In 2020, CMS established a nationwide PA process and requirements for certain hospital outpatient department (OPD) services, including blepharoplasty, botulinum toxin injections and rhinoplasty. The program was expanded in 2021 to include implanted spinal neurostimulators and cervical fusion with disc removal.

In FY24, the program resulted in review of 275,390 targeted hospital claims and denial of 37,866 of those.

A fundamental difference in that earlier PA approach was that it was operated by existing Medicare contractors and did not provide them a share of denied claims.

“Historically, the process has been slow and poorly implemented, which meant it wasn’t effective at stopping fraud, waste and abuse,” Abe Sutton, director of CMMI, wrote in a LinkedIn post, about previous CMS initiatives. “That has led to direct patient harm from unnecessary utilization.”

Another difference is that the earlier program was implemented through notice and comment rulemaking, while the new CMMI pilot — like most CMMI pilots — does not have formal process to receive comments.

 Hospital advocates have urged CMS to go back to the drawing board and seek public input.