Pre-authorization fees are charges applied by insurance companies to confirm that a patient's treatment is covered before services are provided.
For physical therapists (PTs), incorporating pre-authorization fees can significantly reduce administrative burdens, verify a patient’s ability to pay upfront, and improve cash flow by preventing delayed payments. By implementing this process, PTs can focus more on patient care while enhancing financial stability.
In this article, let’s discuss the process, benefits, and best practices for handling pre-authorization charges effectively, starting with the basics.
What is a Pre-Authorization Charge?
A pre-authorization charge is a temporary hold placed on a patient's credit or debit card by a physical therapist before a medical service is provided. Before treatment starts, it confirms that the patient can pay for co-pays, deductibles, or out-of-pocket expenses. Here is why Pre-authorization is important:-
- Pre-Authorization vs. Immediate Charge: Unlike an immediate charge, a pre-authorization reserves the amount rather than withdrawing it.
- Payment Security with Flexibility: The hold ensures the clinic receives payment while giving the patient flexibility in case of adjustments.
- Adjustments and Final Charges: The hold is either raised or turned into a charge if the ultimate cost varies due to additional treatments or insurance adjustments.
Pre-authorization guarantees that patients can receive care without facing unexpected financial challenges while shielding physical therapists from financial losses.
How Does Pre-Authorization Charges Work?
Before finalizing the charge, pre-authorization uses a structured process to confirm the patient's financial stability. This ensures clinics receive timely payments while allowing flexibility for insurance adjustments or treatment changes. Here's how the process works:

- Authorization Request: Your clinic submits a request to the bank to confirm that funds are available for your services. A bank icon and a checkmark represent this. This step may also involve verifying card details, including the CSC (Card Security Code)—a three- or four-digit number that helps prevent fraud. (Wondering what is CSC on card? It’s the small code on the back or front of your card that verifies you're the rightful cardholder.).
- Temporary Hold: A temporary hold is placed on your account to secure the necessary funds for treatment. A credit card icon with a lock or pause symbol shows it.
- Final Transaction Adjustment: Once your service is complete, any changes—like insurance coverage—adjust the hold. You see this represented by a doctor icon and a credit card.
- Hold Expiry: If the charge isn’t processed on time, the hold is automatically released. This is shown with an expired date and a credit card being unlocked.
Real-Case Scenario:
Sarah, a 45-year-old patient, visits a physical therapy clinic for her treatment. Before her session begins, a pre-authorization hold is placed on her credit card to reserve the amount for the anticipated co-pays.
After the session, the clinic submits the necessary information to her insurance provider, and part of the treatment cost is covered. Once the insurance payout is confirmed, the pre-authorization hold is adjusted, and Sarah's final charge reflects only her portion of the bill. This process ensures that Sarah's payment is secure while giving her flexibility for any insurance adjustments.
Understanding how long these holds last is essential for clinics as it affects cash flow, payment transparency, and overall satisfaction. The length of time a hold remains on a patient's account can vary, affecting both financial planning and the patient’s experience.
Duration of Pre-Authorization Holds
The length of a pre-authorization hold depends on various factors. While providing flexibility for unforeseen treatment changes or insurance adjustments, these factors hold guarantees that money is available for medical services.
Here’s how long they typically last:
- Standard Duration: Before being returned to the patient's account, the majority of pre-authorization holds remain in effect between 5 and 7 days.
- Extended Holds: In order to allow for billing modifications and insurer approvals, holds for specialized treatments or post-surgical therapy may last up to 30 days.
- Factors Affecting Hold Duration: The complexity of the treatment, insurance processing delays, and provider agreements with financial institutions can all affect how long a hold lasts.
Pre-authorization holds are necessary to ensure payments, but extended holds might concern patients. Transparency and patient trust can be increased through proactive and transparent communication regarding the reasons behind holds, duration, and release dates.
Common Use Cases for Pre-Authorization Charges
Pre-authorization charges are used in various healthcare settings to manage patient financial responsibility and ensure service payment. Here are the most common use cases for pre-authorization charges in healthcare:
- Physical Therapy & Rehabilitation Clinics: Pre-authorization guarantees that patients can cover co-pays, out-of-pocket expenses, or treatments not covered by insurance before starting therapy sessions.
- Specialty Medical Practices: Pre-authorization verifies the patient's ability to pay upfront for elective operations and expensive treatments, such as cosmetic surgery or specialized diagnostics.
- Diagnostic & Imaging Centers: Pre-authorization holds the patient's financial obligation to be confirmed before performing tests such as CT or MRI scans, particularly when insurance reimbursement may be pending or partial.
- Outpatient & Primary Care Services: Pre-authorization secures reimbursements for wellness examinations, consultations, and preventative care, especially when insurance claims have not yet been processed.
By understanding how pre-authorization works in these scenarios, you can better manage payments and reduce the risk of payment disputes, streamlining financial operations and improving patient experience.
Benefits of Pre-Authorization for Physical Therapists
Physical Therapists can effectively handle financial transactions and guarantee payment before services by implementing pre-authorization. This proactive approach to securing funds is key to reducing payment-related challenges, improving operational efficiency, and enhancing patient satisfaction.
Here's how pre-authorization benefits physical therapists:
- Prevents Unpaid Bills: Pre-authorization reduces the possibility of unpaid bills or late payments by verifying a patient's financial capacity before treatment, guaranteeing that expenses are covered.
- Reduces Administrative Burden: By streamlining billing procedures, pre-authorization saves time on manual tracking and delinquent charge follow-ups.
- Improves Cash Flow: By ensuring consistent income and reducing financial interruptions, receiving payments in advance helps a clinic's cash flow.
- Enhances Patient Trust: Clear communication about the pre-authorization process helps patients feel more confident and informed, leading to a smoother experience.
Using Spry's automated payment solutions, physical therapy clinics can increase financial stability and minimize administrative work by streamlining pre-authorization management.
Each authorization type offers varying levels of flexibility for both patients and physical therapists and understanding these differences can help you make more informed decisions. Let’s take a closer look at how pre-authorization stacks up against other commonly used authorization methods.
Pre-Authorization vs. Other Authorization Types
Different payment authorization methods give patients and providers different degrees of flexibility. Here is a brief comparison of pre-authorization with other authorization types:
Clinics should be well aware of the differences and adhere to best practices that improve payment security and efficiency to optimize pre-authorization's effectiveness. Let's explore it.
Best Practices for Managing Pre-Authorization Charges
By implementing streamlined practices, physical therapists can reduce payment-related problems and promote transparency and patient trust. Here are some best practices to follow:
- Choose a Reliable Payment Processor: To reduce human mistakes and delays, pick a system that facilitates automated pre-authorization and seamless charge processing.
- Clearly Explain Payment Policies: To prevent misunderstandings later, inform patients about pre-authorization charges and anticipated hold times during scheduling or registration.
- Keep an eye on and modify holds as necessary: Placing excessive holds on patients' cards may cause them to become dissatisfied and may result in arguments.
- Simplify the refund and release procedures: Ensure unused holds are released on time to foster transparency and trust while preserving good patient relations.
Spry's automated pre-authorization solutions help you manage your clinic's patient payments with greater accuracy and less manual effort, ensuring seamless billing. Want to know more about Spry? Click here.
By using these best practices, clinics can increase cash flow and patient satisfaction, decrease billing disputes, and enhance overall clinic operations.
Conclusion
For physical therapy clinics, medical practices, and healthcare professionals, pre-authorization charges are essential because they guarantee safe payments, less administrative work, and better revenue management. Clinics can improve financial stability by comprehending pre-authorization and implementing best practices.
With integrated capabilities including electronic medical records, billing, patient management, digital intake, appointment scheduling, and analytics, Spry, an all-in-one physical therapy management software, provides clinics with a comprehensive solution.
By enabling clinics to manage pre-authorization and other administrative duties effectively, Spry frees practitioners to focus more on patient care.
Would you like to explore how Spry can help optimize your clinic's payment workflows? Get in touch today!
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