Bill has bipartisan support and, if passed, would require physician involvement in any decision of medical necessity
Harmful effects caused by delays in care due to payer preauthorization requirements are receiving renewed attention with the refiling of the Reducing Medically Unnecessary Delays in Care Act of 2025 in the US House of Representatives. The bill intends to “ensure that prior authorization medical decisions under Medicare are determined by physicians” and not by non-medical personnel.
Originally introduced by Representative Mark Green, MD, (R-TN) in 2022 and reintroduced in March 2025, the bill notes that “board-certified physicians in the same specialty are the ones making these important decisions. It would also direct Medicare, Medicare Advantage, and Medicare Part D plans to comply with requirements that restrictions must be based on medical necessity and written clinical criteria, as well as additional transparency obligations,” according to a press release from Green’s office.
Thus, to ensure physician involvement in determinations of medical necessity, the bill includes the following requirement:
“Prior to establishing, or substantially or materially altering, written clinical criteria for purpose of preauthorization review, the Medicare administrative contractor, Medicare Advantage plan, or prescription drug plan, respectively, shall obtain input from actively practicing physicians within the service area where the written clinical criteria are to be employed.”
The bill has bipartisan support. Green partnered with Doctor Caucus co-chair Greg Murphy, MD, (R-NC) and Congressional Democratic Doctors Caucus co-chair Kim Schrier, MD, (D-WA) to draft the bill.
“Americans don’t want bureaucrats sitting in on their doctor’s appointments, and they don’t want them to determine their treatment plans,” said House Representative Mark Green, MD, in a press release. (Photo copyright: Department of Homeland Security.)
‘Life Threatening Barriers’
Many major medical associations also support the bill. They include the:
American Medical Association (AMA),
American Osteopathic Association,
American College of Emergency Physicians, and many more.
“According to the AMA, 23% of physicians report that prior authorization has led to a patient’s hospitalization, while 18% report that it has led to a life-threatening event. In the same 2024 survey, 94% of physicians believed that prior authorization requirements negatively impacted patient care,” Green’s press release states.
“As a physician myself, I’ve seen firsthand how prior authorization has created life threatening barriers to essential and standard care,” said Schrier in the press release. “This commonsense legislation is something everyone should get behind to ensure patients can access the treatment they need when they need it by putting medical decisions back in their physician’s hands.”
Burdensome Regulations
The matter is also personal to Green. In the press release, he described his own experience in the healthcare system. “As a survivor of both colon and thyroid cancer, I know how critical it is to start treatment as soon as possible. Burdensome regulations keeping patients from accessing life-saving treatment, like colonoscopies, is not only inconvenient but life-threatening.”
Back in 2022 when he first introduced the bill, he said, “At their core, these determinations are medical decisions, and they should be made by those with the appropriate medical training and expertise. The doctor-patient relationship is vital to the practice of medicine, but the current practice of prior authorization amounts to placing a bureaucrat in the middle of the doctor’s office. Physicians are forced to jump through hours of unnecessary and arbitrary paperwork simply to prove to third-party administrators that a procedure is medically necessary. We need to remove the red tape and let doctors do what they do best—treating patients and saving lives.”
The resurrection of this bill is timely. At the end of March, Dark Daily reported KFF’s findings that in 2023 health insurers denied 19% of all in-network claims, including many in anatomic pathology and clinical laboratories.
Disclosures, mandated by the Affordable Care Act, provide a limited snapshot of claim denials
Claim denials have created financial headaches for virtually all healthcare providers, including clinical laboratories and anatomic pathology groups. Reliable data about denials is hard to come by, but a recent analysis by KFF (formerly the Kaiser Family Foundation) revealed that insurers selling plans on HealthCare.gov denied 19% of claims for in-network services in 2023, the latest year for which data is available.
This is the highest rate since 2015, when KFF began tracking the data, according to the analysis. Claim denials for out-of-network services were even higher, amounting to 37%.
Patients and doctors “are saying that it’s become an even bigger hassle in recent years than it has been in the past,” said Kaye Pestaina, JD, co-author of the report, in a video report from CNBC. Pestaina is a KFF vice president and director of the organization’s program on patient and consumer protection.
The analysis, released Jan. 27, noted that the Affordable Care Act (ACA) requires insurers to provide data about health plans to state and federal regulators as well as the public. “However, federal implementation of this requirement has so far been limited to qualified health plans (QHP) offered on the federally facilitated Marketplace (HealthCare.gov) and does not include QHPs offered on state-based Marketplaces or group health plans.”
“One thing that we’ve seen [when] surveying consumers across different insurance types is that they simply don’t know that they have an appeal right,” said Kaye Pestaina, JD (above), VP and director of KFF’s program on patient and consumer protection, in a video report from CNBC. “If appeals were used more often, it might operate as a check on carriers. From what we can see now, so few are appealed, so it’s not operating as a check.” Clinical laboratories and anatomic pathology groups don’t often see data about the rate of claims denials by payers made public. (Photo copyright: KFF.)
Scarce Information
The federal marketplace covers 32 states, which means that the data does not include the 18 other states or the District of Columbia, all of which have their own exchanges. Nor does it include employer-sponsored plans, Medicare Advantage plans, or Medicaid Managed Care plans.
“In the big picture, we’re still operating from a scarce amount of information about how carriers review claims,” Pestaina told the Minneapolis Star-Tribune.
Within this limited dataset, KFF found wide variation in denial rates among the parent companies of health plans. The companies with the highest rates were as follows:
Rates also varied by state, from a high of 34% in Alabama to a low of 6% in South Dakota. However, the report noted that these averages sometimes obscured wide variations within each state. For example, in Florida, the statewide average was 16%, but denial rates for individual insurers ranged from 8% to 54%.
In most cases, in-network denial rates did not vary much based on plan levels. Rates were 15% for Platinum plans, compared with 18% for Silver and Gold plans, and 19% for Bronze plans. The rate for catastrophic plans was 27%.
The data offered only limited insights about the reasons for claim denials. The federal Centers for Medicare and Medicaid Services (CMS), which administers the rules, requires plans to report denial reasons, but it allows for an “Other” category that accounts for the largest number of denials:
Other reason not listed – 34%
Administrative reason – 18%
Service excluded – 16%
Enrollee benefit limit reached – 12%
Lack of referral or prior authorization – 9%
Not medically necessary (excluding behavioral health) – 5%
Member not covered – 5%
Not medically necessary (behavioral health only) – 1%
“We hear anecdotal stories about certain treatments that are denied, that arguably should not have been denied,” Pestaina told the Star-Tribune. “How often is that happening? It’s difficult to come to a conclusion with the kind of ‘reason’ information we have here.”
Health Insurers Pushback
In addition to claim denials, CMS requires insurers to report the number of appeals once a claim has been denied.
“As in KFF’s previous analysis of federal claims denial data, we find that consumers rarely appeal denied claims and when they do, insurers usually uphold their original decision,” the report states.
In total, insurers on the federal exchange denied 73 million in-network claims. Among these, less than 1% (376,527) were appealed internally to the insurers, which upheld 56% of the denials.
The report notes that, in some cases, consumers have a right to an external appeal in which a third party reviews the claim. However, in a separate survey, KFF found that only 40% of all consumers, and 34% of Marketplace enrollees, were aware of that right.
Health insurers pushed back on KFF’s analysis. In a statement reported by the Star-Tribune, UnitedHealth Group described the numbers as “grossly misleading” because the dataset represents only 2% of total claims.
“Across UnitedHealthcare, we ultimately pay 98% of all claims received that are for eligible members, when submitted in a timely manner with complete, non-duplicate information,” the company stated. “For the 2% of claims that are not approved, the majority are instances where the services did not meet the benefit criteria established by the plan sponsor, such as the employer, state or Centers for Medicare and Medicaid Services.”
Another report finds nearly half of all healthcare systems planning to opt out of Medicare Advantage plans because of issues caused by prior authorization requirements
Prior-authorization is common and neither healthcare providers (including clinical laboratories) nor Medicare Advantage (MA) health plans are happy with the basic process. Thus, labs—which often must get prior-authorization for molecular diagnostics and genetic tests—may learn from a recent KFF study of denial rates and successful appeals.
“While prior authorization has long been used to contain spending and prevent people from receiving unnecessary or low-value services, it also has been [the] subject of criticism that it may create barriers to receiving necessary care,” KFF, a health policy research organization, stated in a news release.
Nearly all MA plan enrollees have to get prior authorization for high cost services such as inpatient stays, skilled nursing care, and chemotherapy. However, “some lawmakers and others have raised concerns that prior authorization requirements and processes, including the use of artificial intelligence to review requests, impose barriers and delays to receiving necessary care,” KFF reported.
“Insurers argue the process helps to manage unnecessary utilization and lower healthcare costs. But providers say prior authorization is time-consuming and delays care for patients,” Healthcare Dive reported.
“There are a ton of barriers with prior authorizations and referrals. And there’s been a really big delay in care—then we spend a lot of hours and dollars to get paid what our contracts say,” said Katie Kucera (above),Vice President and CFO, Carson Tahoe Health, Carson City, Nev., in a Becker’s Hospital CFO Report which shared the health system’s plan to end participation in UnitedHealthcare commercial and Medicare Advantage plans effective May 2025. Clinical laboratories may want to review how test denials by Medicare Advantage plans, and the time cost of the appeals process, affect the services they provide to their provider clients. (Photo copyright: Carson Tahoe Health.)
Key Findings of KFF Study
To complete its study, KFF analyzed “data submitted by Medicare Advantage insurers to CMS to examine the number of prior authorization requests, denials, and appeals for 2019 through 2022, as well as differences across Medicare Advantage insurers in 2022,” according to a KFF issue brief.
Here are key findings:
Requests for prior authorization jumped 24.3% to 46 million in 2022 from 37 million in 2019.
More than 90%, or 42.7 million requests, were approved in full.
About 7.4%, or 3.4 million, prior authorization requests were fully or partially denied by insurers in 2022, up from 5.8% in 2021, 5.6% in 2020, and 5.7% in 2019.
About 9.9% of denials were appealed in 2022, up from 7.5% in 2019, but less than 10.2% in 2020 and 10.6% in 2021.
More than 80% of appeals resulted in partial or full overturning of denials in the years studied. Still, “negative effects on a person’s health may have resulted from delay,” KFF pointed out.
KFF also found that requests for prior authorization differed among insurers. For example:
Humana experienced the most requests for prior authorization.
Among all MA plans, the share of patients who appealed denied requests was small. The low rate of appeals may reflect Medicare Advantage plan members’ uncertainty that they can question insurers’ decisions, KFF noted.
It’s a big market. Nevertheless, “between onerous authorization requirements and high denial rates, healthcare systems are frustrated with Medicare Advantage,” according to a Healthcare Financial Management Association (HFMA) survey of 135 health system Chief Financial Officers.
According to the CFOs surveyed, 19% of healthcare systems stopped accepting one or more Medicare Advantage plans in 2023, and 61% are planning or considering ending participation in one or more plans within two years.
“Nearly half of health systems are considering dropping Medicare Advantage plans,” Becker’s reported.
Federal lawmakers acted, introducing three bills to help improve timeliness, transparency, and criteria used in prior authorization decision making. Starting in 2023, KFF reported, the federal Centers for Medicare and Medicaid Services (CMS) published final rules on the bills:
Rule One (effective June 5, 2023), “clarifies the criteria that may be used by Medicare Advantage plans in establishing prior authorization policies and the duration for which a prior authorization is valid. Specifically, the rule states that prior authorization may only be used to confirm a diagnosis and/or ensure that the requested service is medically necessary and that private insurers must follow the same criteria used by traditional Medicare. That is, Medicare Advantage prior authorization requirements cannot result in coverage that is more restrictive than traditional Medicare.”
Rule Two (effective April 8, 2024), is “intended to improve the use of electronic prior authorization processes, as well as the timeliness and transparency of decisions, and applies to Medicare Advantage and certain other insurers. Specifically, it shortens the standard time frame for insurers to respond to prior authorization requests from 14 to seven calendar days starting in January 2026 and standardizes the electronic exchange of information by specifying the prior authorization information that must be included in application programming interfaces starting in January 2027.”
Rule Three (effective June 3, 2024), requires “Medicare Advantage plans to evaluate the effect of prior authorization policies on people with certain social risk factors starting with plan year 2025.”
KFF’s report details how prior authorization affects patient care and how healthcare providers struggle to get paid for services rendered by Medicare Advantage plans amid the rise of value-based reimbursements.
Clinical laboratory leaders may want to analyze their test denials and appeals rates as well and, in partnership with finance colleagues, consider whether to continue contracts with Medicare Advantage health plans.
Trifecta of forces at work that will affect the clinical laboratory and pathology industries have been described as a ‘perfect storm’ requiring lab and practice managers to be well informed
Digital pathology, artificial intelligence (AI) in healthcare, and the perfect storm of changing federal regulations, took centerstage at the 29th Executive War College on Diagnostics, Clinical Laboratory, and Pathology Management in New Orleans this week, where more than 1,000 clinical laboratory and pathology leaders convened over three days.
This was the largest number of people ever onsite for what has become the world’s largest event focused exclusively on lab management topics and solutions. Perhaps the highlight of the week was the federal Food and Drug Administration’s (FDA’s) announcement of its final rule on Laboratory Developed Tests (LDTs). Overall, the conference featured more than 120 speakers, many of them national thought leaders on the topic of clinical lab and pathology management. More than 65% of the audience onsite were executive level lab managers.
“The level of interest in the annual Executive War College is testimony to the ongoing need for dynamic, engaging, and highly relevant conference events,” said Robert Michel (above), Editor-in-Chief of Dark Daily and its sister publication The Dark Report, and founder of the Executive War College. “These in-person gatherings present great opportunities for clinical laboratory and pathology managers and leaders to network and speak with people they otherwise might not meet.” (Photo copyright: Dark Intelligence Group.)
Demonstrating Clinical Value
For those who missed the action onsite, the following is a synopsis of the highlights this week.
Lâle White, Executive Chair and CEO of XiFin, spoke about the future of clinical laboratory testing and the factors reshaping the industry. There are multiple dynamics impacting healthcare economics and outcomes—namely rising costs, decreasing reimbursements, and the move to a more consumer-focused healthcare. But it is up to labs, she said, to ensure their services are not simply viewed as a commodity.
“Laboratory diagnostics have the potential to change the economics of healthcare by really gaining efficiencies,” she noted. “And it’s up to labs to demonstrate clinical value by helping physicians manage two key diagnostic decision points—what tests to order, and what to do with the results.”
But even as labs find ways to increase the value offered to clinicians, there are other disruptive factors in play. Consumer-oriented tech companies such as Google, Apple, and Amazon are democratizing access to patient data in unforeseen ways, and Medicare Advantage plans are changing the way claims are processed and paid.
Clinical labs are fundamental components of the public health infrastructure. So, the CDC plans on focusing on delivering high-quality laboratory science, supported by reliable diagnostics and informatics for disease outbreaks and exposures, and engaging with public and private sector partners.
The history of MolDX and Z-Codes were the topics discussed by Gabriel Bien-Willner, MD, PhD, Chief Medical Officer for healthcare claims and transaction processing company Palmetto GBA. Molecular testing is highly complex, and the lack of well-defined billing codes and standardization makes it difficult to know if a given test is reasonable and necessary.
Z-Codes were established to clarify what molecular testing was performed—and why—prompting payers to require both Z-Codes and Current Procedural Terminology (CPT) codes when processing molecular test claims. Medicare’s MolDX program further streamlines the claims process by utilizing expertise in the molecular diagnostics space to help payers develop coverage policies and reimbursement for these tests.
FDA Final Rule on LDT Regulation
Timothy Stenzel, MD, PhD, CEO of Grey Haven Consulting and former director of the FDA’s Office of In Vitro Diagnostics reviewed the latest updates from the FDA’s Final Rule on LDT (laboratory developed test) regulation. Prior to the FDA releasing its final rule, some experts suggested that the new regulations could result in up to 90% of labs discontinuing their LDT programs, impacting innovation, and patient care.
However, the final rule on LDTs is very different from the original proposed rule which created controversy. The final rule actually lowers the regulatory burden to the point that some labs may not have to submit their LDTs at all. The FDA is reviewing dozens of multi-cancer detection assays, some of which have launched clinically as LDTs. The agency is likely to approve those that accurately detect cancers for which there is no formal screening program.
Stenzel explained the FDA’s plan to down-classify most in vitro diagnostic tests, changing them from Class III to Class II, and exempting more than 1,000 assays from FDA review. He also discussed the highlights of the Quality Management System Regulation (QMSR). Launched in January, the QMSR bought FDA requirements in line with ISO 13485, making compliance easier for medical device manufacturers and test developers working internationally.
Looming Perfect Storm of Regulatory Changes
To close out Day 1, Michel took to the stage again with a warning to clinical laboratories about the looming “Perfect Storm” trifecta—the final FDA ruling on LDTs, Z-Code requirements for genetic testing, and updates to CLIA ’92 that could result in patient data being considered a specimen.
Laboratory leaders must think strategically if their labs are to survive the fallout, because the financial stress felt by labs in recent years will only be exacerbated by macroeconomic trends such as:
Staff shortages,
Rising costs,
Decreasing and delayed reimbursements, and
Tightening supply chains.
Lab administrators looking for ways to remain profitable and prosperous should look beyond the transactional Clinical Lab 1.0 fee-for-service model and adopt Clinical Lab 2.0, which embraces HEDIS (Healthcare Effectiveness Data and Information Set) scores and STAR ratings to offer more value to Medicare Advantage and other payers.
Wednesday’s General Session agenda was packed with information about the rise of artificial intelligence, big data, and precision medicine in healthcare. Taking centerstage on the program’s final day was Michael Simpson, President and CEO of Clinisys. Simpson gave a global perspective on healthcare data as the new driver of innovation in diagnostics and patient care.
Palmetto GBA’s Chief Medical Officer will cover how clinical laboratories billing for genetic testing should prepare for Z-Codes at the upcoming Executive War College in New Orleans
After multiple delays, UnitedHealthcare (UHC) commercial plans will soon require clinical laboratories to use Z-Codes when submitting claims for certain molecular diagnostic tests. Several private insurers, including UHC, already require use of Z-Codes in their Medicare Advantage plans, but beginning June 1, UHC will be the first to mandate use of the codes in its commercial plans as well. Molecular, anatomic, and clinical pathologist Gabriel Bien-Willner, MD, PhD, who oversees the coding system and is Chief Medical Officer at Palmetto GBA, expects that other private payers will follow.
“A Z-Code is a random string of characters that’s used, like a barcode, to identify a specific service by a specific lab,” Bien-Willner explained in an interview with Dark Daily. By themselves, he said, the codes don’t have much value. Their utility comes from the DEX Diagnostics Exchange registry, “where the code defines a specific genetic test and everything associated with it: The lab that is performing the test. The test’s intended use. The analytes that are being measured.”
The registry also contains qualitative information, such as, “Is this a good test? Is it reasonable and necessary?” he said.
Molecular, anatomic, and clinical pathologist Gabriel Bien-Willner, MD, PhD (above), Palmetto GBA’s Chief Medical Officer, will speak about Z-Codes and the MolDX program during several sessions at the upcoming Executive War College on Diagnostics, Clinical Laboratory, and Pathology Management taking place in New Orleans on April 30-May 1. Clinical laboratories involved in genetic testing will want to attend these critical sessions. (Photo copyright: Bien-Willner Physicians Association.)
Palmetto GBA Takes Control
Palmetto’s involvement with Z-Codes goes back to 2011, when the company established the MolDX program on behalf of the federal Centers for Medicare and Medicaid Services (CMS). The purpose was to handle processing of Medicare claims involving genetic tests. The coding system was originally developed by McKesson, and Palmetto adopted it as a more granular way to track use of the tests.
In 2017, McKesson merged its information technology business with Change Healthcare Holdings LLC to form Change Healthcare. Palmetto GBA acquired the Z-Codes and DEX registry from Change in 2020. Palmetto GBA had already been using the codes in MolDX and “we felt we needed better control of our own operations,” Bien-Willner explained.
In addition to administering MolDX, Palmetto is one of four regional Medicare contractors who require Z-Codes in claims for genetic tests. Collectively, the contractors handle Medicare claims submissions in 28 states.
Benefits of Z-Codes
Why require use of Z-Codes? Bien-Willner explained that the system addresses several fundamental issues with molecular diagnostic testing.
“Payers interact with labs through claims,” he said. “A claim will often have a CPT code [Current Procedural Technology code] that doesn’t really explain what was done or why.”
In addition, “molecular diagnostic testing is mostly done with laboratory developed tests (LDTs), not FDA-approved tests,” he said. “We don’t see LDTs as a problem, but there’s no standardization of the services. Two services could be described similarly, or with the same CPT codes. But they could have different intended uses with different levels of sophistication and different methodologies, quality, and content. So, how does the payer know what they’re paying for and whether it’s any good?”
When the CPT code is accompanied by a Z-Code, he said, “now we know exactly what test was done, who did it, who’s authorized to do it, what analytes are measured, and whether it meets coverage criteria under policy.”
The process to obtain a code begins when the lab registers for the DEX system, he explained. “Then they submit information about the test. They describe the intended use, the analytes that are being measured, and the methodologies. When they’ve submitted all the necessary information, we give the test a Z-Code.”
The assessment could be as simple as a spreadsheet that asks the lab which cancer types were tested in validation, he said. On the other end of the scale, “we might want to see the entire validation summary documentation,” he said.
Commercial Potential
Bien-Willner joined the Palmetto GBA in 2018 primarily to direct the MolDX program. But he soon saw the potential use of Z-Codes and the DEX registry for commercial plans. “It became instantly obvious that this is a problem for all payers, not just Medicare,” he said.
Over time, he said, “we’ve refined these processes to make them more reproducible, scalable, and efficient. Now commercial plans can license the DEX system, which Z-Codes are a part of, to better automate claims processing or pre-authorizations.”
In 2021, the company began offering the coding system for Medicare Advantage plans, with UHC the first to come aboard. “It was much easier to roll this out for Medicare Advantage, because those programs have to follow the same policies that Medicare does,” he explained.
As for UHC’s commercial plans, the insurer originally planned to require Z-Codes in claims beginning Aug. 1, 2023, then pushed that back to Oct. 1, according to Dark Daily’s sister publication The Dark Report.
Then it was pushed back again to April 1 of this year, and now to June 1.
“The implementation will be in a stepwise fashion,” Bien-Willner advised. “It’s difficult to take an entirely different approach to claims processing. There are something like 10 switches that have to be turned on for everything to work, and it’s going to be one switch at a time.”
For Palmetto GBA, the commercial plans represent “a whole different line of business that I think will have a huge impact in this industry,” he said. “They have the same issues that Medicare has. But for Medicare, we had to create automated solutions up front because it’s more of a pay and chase model,” where the claim is paid and CMS later goes after errors or fraudulent claims.
“Commercial plans in general just thought they could manually solve this issue on a claim-by-claim basis,” he said. “That worked well when there was just a handful of genetic tests. Now there are tens of thousands of tests and it’s impossible to keep up.
They instituted programs to try to control these things, but I don’t believe they work very well.”
Bien-Willner is scheduled to speak about Palmetto GBA’s MolDX program, Z-Codes, and related topics during three sessions at the upcoming 29th annual Executive War College conference. Clinical laboratory and pathology group managers would be wise to attend his presentations. Visit here (or paste this URL into your browser: https://www.executivewarcollege.com/registration) to learn more and to secure your seat in New Orleans.
