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Authorization Number and Action Considerations

During claims processing, the Authorization System looks at all the authorizations with the same action code and sorts them in order, based on the authorization number (A/N) you assigned. The smallest A/N in the set without a rejection code attached “wins;” it will take priority over any other authorization with the same action code and a larger A/N.

This means A/Ns assigned to authorizations permitting an outcome need to be smaller than A/Ns assigned to authorizations restricting an outcome. 

To illustrate this concept, authorizations used in examples will be in two categories and two A/N ranges. Both are shown in this table: 

🛈 Dashes are included in authorization numbers (A/Ns) to aid in readability. Do not include dashes when entering A/Ns into the Authorization System interface.

Here, we have a closed formulary that will be used in examples going forward:

Key: A/N = Authorization Number, N = No, ONFORM = On Formulary, Y = Yes

Looking at the table, you’ll see that there are two approval authorizations for drugs permitted on the formulary, A/N 70000-998 and 70000-999. There is also one denial authorization that keeps claims for unapproved drugs from processing, A/N 80000-999. All three authorizations have the same action code assigned (ONFORM).

In the graphic below, the approval and denial authorizations in the closed formulary are labeled.

When a claim is processed, the system will go through authorizations with the same action code from smallest to largest A/N looking for a match between claim details and selections. In this case, the selections are GPI codes.

If the GPI in the claim matches the GPI on one of the approval authorizations, the claim will process. If the GPI in the claim does not match the GPI on one of the approval authorizations, the rejection message tied to A/N 80000-999 will be returned to the pharmacy.

Since the approval authorizations have smaller A/Ns, they will be checked first. This allows them to override the denial authorization. If the denial authorization in the set were checked first, the system would return a rejection message to the pharmacy before it even had a chance to check for an approval.

Setting a Cost Limit

Cost limitations, or cost caps, are often specified on a drug formulary. In these situations, a rejection needs to be returned to the pharmacy when the limit is exceeded. Let’s add a denial authorization to our closed formulary to meet this need. 

We will add a denial authorization at the Global level with:

• a large A/N in the denial authorization range, but smaller than the existing denial authorization on the formulary;
• an action that best describes the authorization behavior;
• the maximum allowed cost specified in the Cost ‘Over’ selector field; and 
• an NCPDP rejection code to stop the system from processing claims that exceed the allowed limit.

A table with our closed formulary is in the table below. The denial authorization is highlighted in yellow.

Key: A/N = Authorization Number, N = No, ONFORM = On Formulary, Y = Yes

A/N 80000-998 specifies that medications costing less than $1,000 will be processed. The assigned action code and value reflect the intended behavior of the authorization and are related to the selection specified (i.e., Cost Over: 1000). A ‘78-Cost Exceeds Maximum’ rejection message will be returned to the pharmacy if the $1,000 limit is exceeded.

Authorizations with the same action code can override each other. If the ONFORM action were used on the cost limit authorization, its number would have to be smaller than any existing approval authorizations for it to work as intended. If not, a claim with an approved GPI will be processed by the matching approval authorization with the ONFORM action, bypassing the cost limit.

Day Supply Limit

Setting a day supply limit is a common way to prevent waste and potential misuse. Since this is a restriction, a denial authorization will be used to manage the day supply limit requirement. 

To work the way we need, the denial authorization will have:

• a large A/N in the denial authorization range, but smaller than existing denial authorizations on the formulary;
• an action that best describes the authorization behavior;
• the maximum allowed day supply in the Day Supply ‘Over’ selector field; and 
• an NCPDP rejection code to stop the system from processing claims that exceed the allowed limit.

Key: A/N = Authorization Number, DAYSUP = Day Supply,  N = No, ONFORM = On Formulary, Y = Yes

Authorization 80000-997 specifies that claims with a 34-day supply or less will be processed. The assigned action code and value reflect the intended behavior of the authorization and are related to the selection specified (i.e., Day Supply Over: 34). A ‘19-Missing/Invalid Day Supply’ rejection message will be returned to the pharmacy if the limit is exceeded.

Why didn’t we set new restrictions in the existing authorization? 

We did not set new restrictions in the existing authorization (A/N 80000-999) to maintain clarity and reduce the potential for unintended approvals or rejections.

When it comes to creating authorizations, less is more! Don’t overload a single authorization with too many variables. This can cause a claim to either process when it should be rejected, or reject when it should be processed.

 

The Authorization System only sends back one rejection message.  If the drug cost is causing a rejection and the DUR rejection message assigned to A/N 80000-999 were returned, it wouldn’t be clear why the rejection was happening. The rejection codes tied to A/Ns 80000-997 and 80000-998 are more specific and informative.

 

Conclusion

Defining restrictions and allowances is a crucial part of plan design. To make sure your plan works smoothly, you need to know how authorizations interact in the system. Don’t fall into the trap of setting too many restrictions in one authorization – this could result in unintended outcomes. Instead, set limits in separate authorizations and think about how their authorization numbers and actions will interact. 

This article covered two examples of common formulary restrictions and their elements. But that’s just the tip of the iceberg! The Authorization System is capable of handling all sorts of plan design needs, and we’re here to help you harness its full potential. 

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Our team is here to help!

For plan-specific or urgent needs, contact your account manager directly.

For general Authorization System questions, contact EHO360 Operations at ops@ehorx.com