CMS Finalizes Prior Authorization Rule: What Payers Need to Know

The New Prior Authorization Mandate

The Centers for Medicare & Medicaid Services has finalized a rule that will require Medicare Advantage plans to implement electronic prior authorization processes by 2027. The rule is designed to reduce administrative burden on providers and speed up authorization decisions for patients.

Under the new requirements, payers must respond to prior authorization requests within 72 hours for urgent cases and 7 calendar days for standard requests. They must also provide specific reasons for any denials, giving providers a clearer path to appeal.

Impact on Payer Operations

For insurance companies, the rule represents a significant operational shift. Many payers still rely on fax-based or portal-based prior authorization workflows that will need to be modernized to comply with the electronic data exchange requirements.

The rule mandates the use of FHIR-based APIs for prior authorization transactions, aligning with the broader push toward healthcare interoperability. Payers that have already invested in FHIR infrastructure will have a head start, while others face a compressed timeline to build or acquire the necessary capabilities.

Compliance Timeline

Payers have until January 2027 to achieve full compliance. Industry observers note that while the timeline is aggressive, the rule includes provisions for phased implementation that could ease the transition for smaller plans.