The Operational Drag of Prior Authorizations and the Moral Hazard Impact on Patients

Prior authorization (PA) was conceived as a utilization management tool—an administrative safeguard that would ensure appropriate care and limit unnecessary spending. Over time, however, it has evolved into a pervasive operational burden that delays treatment, strains clinical infrastructure, and creates a moral hazard that shifts risk and harm onto patients.¹ These consequences are especially acute in complex, time-sensitive specialties such as oncology, cardiology, and rheumatology.

From an operational standpoint, PA functions as a hidden tax on health care delivery. Physician practices and hospitals devote substantial staff time to navigating payer portals, submitting documentation, and responding to requests for additional clinical justification. Tracking approvals may take days or weeks. The administrative burden is not trivial. The American Medical Association (AMA) reports that physicians and staff spend an average of 16 hours per week per physician on PA activities, with practices often employing full-time staff dedicated solely to utilization management tasks.²

For community-based practices operating on thin margins, these inefficiencies directly affect sustainability. Clinical workflows are disrupted, infusion and imaging schedules are delayed, and staff burnout increases. Importantly, PA decisions are frequently rendered by nontreating reviewers who lack longitudinal knowledge of the patient, undermining clinical judgment at the point of care.

Even when care is ultimately approved, delays have cascading operational effects. They cause appointment backlogs, increase no-show and cancellation rates, and lead to underutilized clinical capacity. In oncology, where many treatments are already aligned with FDA labeling and National Comprehensive Cancer Network guidelines, requiring PA for standard-of-care regimens adds friction without improving quality.³

Cost Shifting Without Cost Control
Payers often justify PA as a mechanism to control health care costs. However, evidence that it meaningfully reduces total system spending is limited. Instead, PA frequently shifts costs downstream—into administrative overhead, delayed treatment, and avoidable acute care utilization.^4,5

The HHS Office of Inspector General has found that PA requirements result in delayed or denied medically necessary care, even within Medicare Advantage plans, sometimes leading to adverse patient outcomes.⁶ Delayed care can result in disease progression, complications, emergency department visits, and hospitalizations—costly outcomes that offset any short-term savings from utilization controls.^4,5,7

These downstream costs disproportionately affect independent and community practices, which lack the scale to absorb administrative inefficiencies. Over time, this dynamic accelerates consolidation by favoring large health systems with centralized authorization teams—reducing competition, limiting patient choice, and potentially increasing long-term health care costs.⁸

The Moral Hazard for Patients
Beyond operational inefficiency lies a deeper concern: the moral hazard imposed on patients. In economic terms, moral hazard occurs when one party is insulated from risk while another bears the consequences. PA exemplifies this imbalance with striking clarity.

Payers impose administrative barriers that carry little direct risk for themselves—denials and delays do not harm the insurer. But patients absorb the full weight of those decisions:

Clinical risk: Delayed treatment can lead to disease progression or loss of therapeutic windows.
Financial risk: Delays may trigger new deductibles, repeat diagnostics, or additional visits.
Emotional risk: Waiting for approval introduces anxiety and uncertainty.
Behavioral risk: Some patients abandon treatment after repeated denials or delays.

The AMA reports that more than 90% of physicians say that PA delays access to necessary care and that 1 in 4 report that such delays have led to a serious adverse event for a patient.¹ These harms are not theoretical—they are the predictable result of a system in which the entity making the decision does not bear the consequences of that decision.

This is the essence of the moral hazard: Payers face no direct penalty for creating barriers while patients and clinicians shoulder the clinical, financial, and emotional fallout.

Erosion of Trust and Clinical Decision-Making
PA also undermines the physician-patient relationship. When patients are told that a recommended treatment is delayed or denied by an insurer, it erodes patient trust—not only in the payer, but sometimes in the clinician delivering the message. Shared decision-making is compromised when treatment options are constrained by opaque, nonclinical criteria.

Over time, clinicians may adapt by selecting treatments they believe are more likely to be approved rather than those they consider optimal. This distortion of clinical decision-making represents a system-level moral hazard: Payer policies influence care choices without bearing accountability for downstream outcomes.

A Path Forward

Recent regulatory efforts acknowledge the growing burden of PA. In January 2024, CMS issued the Interoperability and Prior Authorization Final Rule, which introduced several important reforms.⁹ Key elements of the rule include the following⁹:

Shortened response timelines: Urgent requests must be processed within 72 hours and standard requests within 7 days.
Mandatory electronic PA: Plans must adopt standardized electronic processes to reduce manual workflows.
Public reporting requirements: Payers must publish approval rates, denial rates, and average processing times.
Improved data exchange: Payers must share PA decisions and clinical data through standardized application programming interfaces.

These steps improve process efficiency and transparency, but they do not address the fundamental overuse of PA for routine, guideline-concordant care. Without limits on when PA can be applied, administrative friction will persist even in a more digitized system.

Meaningful reform should exempt high-performing providers, streamline approvals for evidence-based treatments, and establish accountability when delays cause harm. Most importantly, patient impact—not just projected savings—must be a central metric in evaluating utilization management policies.

Conclusion
PA has drifted far from its original intent. What was framed as a tool for stewardship has become a source of operational drag, delayed care, and moral hazard for patients. Until utilization management policies align with clinical evidence, provider expertise, and patient-centered outcomes, PA will continue to impose costs—both human and financial—on the health care system it was meant to protect.

Author Information
Kathy Oubre, MS, is the CEO of Pontchartrain Cancer Center in Louisiana. She is a board member of the Community Oncology Alliance, co-chairs the Drug Policy and Regulatory Affairs committee, and serves on their Government Affairs committee. Oubre also serves on the Strategic Advisory Committee and Leadership Council for Flatiron Health and is on the Executive Board for Athena Oncology. She co-chairs the Association of Value-Based Cancer Care and the NCODA Oncology Institute. She is the Associate Editor of Evidence-Based Oncology.

References
1. Henry TA. Prior authorization: Don’t fall for these myths. American Medical Association. April 17, 2025. Accessed March 24, 2026. https://www.ama-assn.org/practice-management/prior-authorization/don-t-fall-these-myths-prior-authorization
2. AMA Prior Authorization Physician Survey, 2023. American Medical Association. 2024. Accessed March 4, 2026. https://www.ama-assn.org/system/files/prior-authorization-survey.pdf
3. Henry TA. Prior authorization delays care and increases health care costs. August 9, 2024. Accessed March 25, 2026. https://www.ama-assn.org/practice-management/prior-authorization/prior-authorization-delays-care-and-increases-health-care
4. Anderson KE, Darden M, Jain A. Improving prior authorization in Medicare Advantage. JAMA. 2022;328(15):1497-1498. doi:10.1001/jama.2022.17732
5. Howell S, Yin PT, Robinson JC. Quantifying the economic burden of drug utilization management on payers, manufacturers, physicians, and patients. Health Aff (Millwood). 2021;40(8):1206-1214. doi:10.1377/hlthaff.2021.00036
6. Some Medicare Advantage Organization Denials of Prior Authorization Requests Raise Concerns About Beneficiary Access to Medically Necessary Care. HHS Office of Inspector General; 2022. Report No. OEI‑09‑18‑00260. Accessed March 19, 2026. https://www.oversight.gov/sites/default/files/documents/reports/2022-11/OEI-09-18-00260.pdf
7. Assessing the economic consequences of prior authorization. Portiva. Accessed March 25, 2026. https://portiva.com/assessing-the-economic-consequences-of-prior-authorization/
8. American Hospital Association. Statement to the House Ways and Means Subcommittee Physician Practice Consolidation. May 23, 2024. Accessed March 25, 2026. https://www.aha.org/2024-05-22-aha-statement-house-ways-and-means-subcommittee-physician-practice-consolidation
9. CMS Interoperability and Prior Authorization Final Rule CMS-0057-F. CMS. January 17, 2024. Accessed March 4, 2026. https://www.cms.gov/newsroom/fact-sheets/cms-interoperability-prior-authorization-final-rule-cms-0057-f