What does preauthorization mean in healthcare?

Preauthorization is a process in healthcare where a healthcare provider must obtain approval from a patient’s insurance company before performing a specific procedure or prescribing medication. This process is crucial because it ensures that the services being requested are considered medically necessary and will be covered by the patient's insurance plan. The insurance company reviews the patient's clinical information, including their diagnosis and treatment plan, to decide whether to grant this approval.

This process helps manage costs and ensures that both providers and patients are aware of insurance coverage limitations, helping to prevent unexpected medical bills after services are rendered. Given this context, the definition of preauthorization directly aligns with the approval of coverage and necessity of services before they are received, which is a significant aspect of health insurance management.