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Highlights of this episode include:

• Current challenges impacting prior authorization workflows today
• What impact data quality has on prior authorization
• How the CMS Interoperability and Prior Authorization Final Rule will impact how teams exchange and structure data
• How data quality impacts a hospital’s bottom line

Kelly Wisness: Hi, this is Kelly Wisness. Welcome back to the award-winning Hospital Finance Podcast.  We’re pleased to welcome Shobha Phansalkar, PhD, FAMIA. Shobha is the Vice President of Client Solutions and Innovation for Wolters Kluwer Health Language, where she leverages her extensive expertise in medical informatics to drive impactful solutions that address challenges in semantic interoperability and enhance healthcare data quality. Shobha has been in the healthcare information technology field in industry and academia for more than 20 years. She is an internationally recognized thought leader in the field of clinical decision support and a fellow of the American Medical Informatics Association. In addition to her roles in the industry, she has published more than 50 peer-reviewed articles and book chapters on CDS and led research for the Agency for Healthcare Research and Quality, the U.S. Department of Veterans Affairs, and the Office of the National Coordinator for HIT. She also serves on the editorial board of BMC Informatics and Decision Making. Welcome, and thank you so much for joining us, Shobha.

Shobha Phansalkar: Thanks, Kelly. Pleasure to be here.

Kelly: Great. Well, let’s go ahead and jump in. So, Shobha, please tell us about yourself and your background.

Shobha: For sure. First, thank you for the opportunity, Kelly. Appreciate that. Thank you for that introduction as well. A bit more context on who I am and Health Language, which is a part of Wolters Kluwer Health. So, I’m a clinical informaticist and a pharmacist by background. Over 20 years in the healthcare IT space. I lead Client Solutions and Innovation at Health Language and our customers span the healthcare ecosystem, where we serve payers, providers, life sciences with the ability to improve data quality. And that really is the foundation of the value proposition that we provide our customers with, where we serve as a single source of truth for industry standards, your reference terminologies, but also help them improve the quality of their data by standardizing and normalizing it.

In addition, we serve as the providers of knowledge assets, code groups, value sets that help them power their business rules, as well as their clinical decision support processes.

Kelly: Wonderful. Thank you for sharing that with us. So, Shobha, what are the current challenges impacting prior authorization workflows today?

Shobha: Oh, huge ramifications. And a key time for us to be talking about this. As you know, prior authorization has been front and center in the news this year. It’s unfortunate from many perspectives. But I think because your audience is hospital finance focused, it might make sense for me to share some staggering numbers associated with prior authorization. So just to give you a sense of the magnitude of the problem, right? $11 billion, that’s billion with a B, is spent by providers in prior authorization transactions, purely from an administrative perspective. And if you think about it, that’s time taken away from clinical care. Now, 37% of these transactions are manual, and the cost per transaction is at an average of about $11.

If we were to make that transaction electronic, it actually halves the amount spent, which is at about $5.70. Now, the kicker here is that irrespective of whether it’s a manual or an electronic transaction, a large part of the burden of that cost is taken up by providers. About 70% of that cost is taken up by providers and about 30% by payers. That’s a huge burden on providers. And granted the numbers are large, but the impact that that has in terms of provider burden, a recent survey by the American Medical Association actually showed that 88% of providers felt that PA requirements posed a high or extremely high burden on them. And if you take that thread and think about what that means to patient care, 30% of them said they didn’t even think that the PA requirements were evidence-based. And another third thought that they might actually abandon the care of their patient because of the administrative overhead associated with prior authorization.

So, the reason I’m mentioning this, Kelly, is there is the financial or the cost aspect for it. But there’s also a huge burden that it poses on denied, delayed care for patients, as well as huge burden on providers resulting in provider burnout.

Kelly: Wow. Yeah, those are some significant challenges, Shobha. Thanks for sharing those with us. So, what impact does data quality have on prior authorization and ensuring patients receive coverage for appropriate care?

Shobha: Yeah, great question. I mean, there’s so much that we see in the news about the frustration that members and patients have when they have to deal with prior authorization denials or just the burden of going through the process of requesting prior authorization. But if you think about it, a study shows 30% of these requests get denied. 40% of those are actually related to poor data quality. And that’s where the opportunity is. I mean, I think with all of the huge numbers that we have come to recognize, I think it’s important to recognize where can we make a difference. I think the difference is in making these electronic, in standardizing the data that’s being shared between payers and providers, as well as making sure that the data is of high quality so that patients are able to get their requests approved or receive a reason for what the next step is quickly.

That’s going to fundamentally be made possible by having good data quality that’s exchanged between these systems and making sure that there’s interoperability within that data exchange. What that means, Kelly, is that fundamentally when two systems are talking to each other, they need to use the same language. And a lot of the regulations that are coming through are actually focusing on that. They’re making sure that not only are we exchanging the data in standardized FHIR APIs, but we’re making sure that we call out the terminologies that will populate these FHIR APIs. And that standardization rings right home to what we do at Health Language because we are making sure that we can take that data, we can serve it up as good quality data, not just from validating the terminologies that are used for this data exchange, but also making sure that we are supporting our payer customers in being able to represent that data as high quality data that can then reduce the amount of time for prior authorization requests.

Kelly: Wow. I mean, thank you so much for sharing that. That’s quite the significant impact. So how will the CMS Interoperability and Prior Authorization Final Rule impact how teams exchange and structure data?

Shobha: Yeah. No. Like I said earlier in this conversation, I think our conversation is so timely, right? A lot of good information as well as conversation has happened to support this prior authorization rule. The CMS Final Rule, which is 0057-F, basically mandates the use of FHIR-based APIs and produces transparency around prior authorization. And that’s fundamental, right? Because not only are you imposing deadlines for implementing the FHIR APIs, but you’re also calling for the decision timeframes to be expedited. You’re calling for transparency requirements so that both providers and patients are aware as to whether their request was denied for a certain reason and how they can ameliorate that. So, all of this, I think we’re in a very good place in terms of serving the needs of the problem, which is making sure that we are standardizing the exchange of information, but also accountability so that providers as well as payers can have expedited decision-making for this process.

Kelly: Most definitely. Thank you for sharing that. And how does data quality impact a hospital’s bottom line, especially around prior authorization?

Shobha: Yeah. That’s– it all comes down to making sure that we are making sound financial decisions. I mean, given the market and given that where we are economically as different parts of the healthcare system strive for better bottom lines, I mean, I think data quality directly impacts financial performance. So let me give you an example of that. Recently, we collaborated with MCG Health, a big player in the space of utilization management. And what we were able to show is by creating knowledge assets, which we call value sets in order to power their utilization management engine, they were able to bring down the average amount of time that a utilization management nurse spent in reviewing a request from 20 minutes to 3 minutes. Just think about that. That’s staggering, right?

Just by making sure that we are exchanging data in a standardized way, they were able to bring back the right information about that patient from the EHR, extract it, summarize it, present it back to the utilization management nurse, and that three minutes is 85% faster than the national average. So, think about everything we talked about in terms of the financial burden. That itself was reduced. A $42 million savings annually that MCG Health now has because it’s able to power their rules for decision-making better. And so I tie that back to your question, which is if we can standardize the way we are exchanging information between payers and providers, just like MCG Health example, we would be able to get better data between these entities, whether it’s the provider sending the prior authorization request and knowing at the point of care, “What are the documents or what is the information that I need to provide in order to make sure that I have a successful request submitted to the payer?” And also for the payer to then know, “What’s the documentation that I need in order to make sure that I’m providing the right decision back to the provider?”

So, all of this rings or resonates very closely to what we do at Health Language, and we are very excited for the Prior Authorization Final Rule because it aligns very much with what we consider as the data quality journey for our customers. There’s sort of that threefold impact. You’re making sure that the terminologies that are powering these fire APIs are containing valid codes. You’re making sure that the data quality that’s exchanged between the provider and the payer is good quality data. And then last but not the least is making sure that the rules or the benefits that the payers are sending back to their providers are represented as standard value sets that can then be used to make streamlined decisions on what that prior authorization request should be.

Kelly: Yeah. I mean, data quality is so very important, and I think you kind of proved it with what you just said. Well, thank you so much, Shobha, for sharing your insights with us on where data quality can make or break prior authorization accuracy. We appreciate all your insights.

And if a listener wants to learn more or contact you to discuss this topic further, how best can they do that?

Shobha: Oh, thank you for asking that, Kelly. We are always excited at Health Language to talk to people about what we do. Our website carries a wealth of information, our value proposition, and our offerings to the market. In addition, when you go on the website, you can see that there’s the option to speak to an expert. That’s another way that we can have a conversation. Would love to learn about where we can help.

Kelly: Great, thank you for providing that. And thank you all for joining us for this episode of The Hospital Finance Podcast. Until next time…

[music] This concludes today’s episode of The Hospital Finance Podcast. For show notes and additional resources to help you protect and enhance revenue at your hospital, visit besler.holdings/podcasts. The Hospital Finance Podcast is a production of Besler Holdings.

Given the significant impact quick fixes in data quality infrastructure can have on an organization’s prior authorization infrastructure, Shobha and her team of informatics experts are happy to meet with any of our listeners to review your current data supply chain and evaluate quick wins to accelerate your path to compliance with the prior authorization rule. Schedule a meeting with her. 

Additional Resource: https://www.wolterskluwer.com/en/expert-insights/bridging-the-data-divide-between-payers-and-providers?utm_campaign=core-thought-leadership&utm_medium=referral&utm_source=beslers

If you have a topic that you’d like us to discuss on The Hospital Finance Podcast or if you’d like to be a guest, drop us a line at update@besler.com.

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Highlights of this episode include:

• Acumens on the outpatient updates for calendar year 2026
• Changes CMS has made to outpatient payment in the 2026 OPPS final rule
• 340B program updates
• The inpatient-only list

Kelly Wisness: Hi, this is Kelly Wisness. Welcome back to the award-winning Hospital Finance Podcast.  We’re pleased to welcome back Bob McDowell, BESLER’s Senior Reimbursement Consultant. In this episode, Bob will provide us with a glimpse into BESLER’s next free Webinar, CY 2026 OPPS Final Rule Summary, that we’re hosting live on Wednesday, January 14^th, at 1 PM eastern time. Welcome back and thanks for joining us, Bob.

Bob McDowell: Well, thank you, Kelly. It’s a pleasure to be with you today.

Kelly: It’s a pleasure to have you on. Well, let’s go ahead and jump in. So, in the final rules, CMS updates the payment rates for covered services. Can you give us some acumens on the outpatient updates for calendar year 2026?

Bob: Absolutely. For calendar year 2026, outpatient payment rates for hospitals that meet the quality reporting requirements will increase 2.6%. This increase is based on the market basket increase of 3.3% and reduced by a 0.7% or 7/10 of a percent productivity adjustment. Once the budget neutrality factors are applied, we see the conversion factor increase from $89.17 for calendar year 2025 to $91.42 for calendar year 2026 for facilities that are not affected by the 340B remedy offset. For hospitals affected by the 340B remedy offset, they will see an increase to $90. 97. These conversion factor updates result in a net increases of 2.519% and 2.017% respectively. CMS estimates that the calendar year 2026 OPPS total payments to providers to be $101 billion, an increase of approximately $8 billion compared to estimated calendar year 2025 OPPS payments. CMS is continuing the policy for hospitals that do not meet the outpatient quality reporting requirements to experience a 2% reduction in payments using a reporting factor of 0.9805 applied to OPPS payments and copayments. CMS has extended the 7.1% adjustment for rural sole community hospitals and essential access community hospitals for calendar year 2026.

Kelly: Thank you for those updates, Bob. So, the wage index has received a lot of attention in recent years. Can you elaborate on any changes CMS has made to outpatient payment in the 2026 OPPS final rule?

Bob: Sure. If you remember back in the federal fiscal year 2025 inpatient final rule presentation that we did, CMS had finalized the inclusion of the 25th percentile rule, otherwise known as a low wage index hospital policy. A couple of days after that presentation, CMS came out with an interim final rule with comment period, removing the low wage index hospital policy from the federal fiscal year 2025 inpatient prospective payment system regulations in response to ongoing litigation. Now, in the calendar year 2025 OPPS final rule, CMS had once again finalized the inclusion of the low wage index policy to be applied to OPPS payments. CMS recognized that that would mean that some hospital facilities would have a different wage index for calculating their outpatient claims than they had for calculating their inpatient claims. So, in the calendar year 2026 OPPS final rule, CMS has implemented the realignment by eliminating the low wage index policy from the OPPS payments. CMS is using the same methodology they did in the federal fiscal year 2026 IPPS final rule, utilizing the 5% cap and wage index reduction from the prior year for those hospitals affected by this policy change.

Kelly: Thank you, Bob. That’s very interesting. Another major program for hospitals is the 340B program. Can you tell us about the changes in the coming year triggered by the program?

Bob: Sure. There are two major changes to reimbursement relating to the 340B program starting in calendar year 2026. The first is the 340B remedy recruitment fix, which is related to the conversion factor that we just mentioned. It’s for the conversion factor increase for calendar years 2018 through 2022. CMS had previously, in the proposed rule, stated a 2% decrease in the calendar year 2026 conversion factor in order to accelerate the recoupment of the $7.8 billion in additional payments to hospital facilities. In the calendar year 2026 final rule, CMS did not finalize the 2% reduction, but decided to stay with the original 0.5% or half percent decrease in the calendar year 2026 conversion factor as originally stated in the remedy document published on November 8th, 2023. CMS also reserved the right to increase this reduction in future years. Now, the second change to the 340B program for calendar year 2026 was published on August 7th, 2025, by HHS and HRSA and involves a shift in funds for providers by moving to a backend rebate-style pilot program instead of an upfront discount program for 10 drugs that are listed on the CMS Medicare drug price negotiation selected drug list.

For these 10 pharmaceuticals, providers will have to pay full WAC or wholesale acquisition costs pricing when purchasing these drugs. Once the product is sold and the provider applies for the rebate, the drug costs will be reduced to the lower cost of the 340B ceiling price or the Medicare maximum fare price. If the model is fully implemented at a 340B program, it could mean millions of dollars being postponed to 340B providers. The rationale for this program is the adage from the manufacturers about duplicate discounts and diversion that is happening in the program.

Kelly: Well, thank you for sharing that with us. I know the 340B program, there’s always something going on with that. There’s some discussion on changes to the way hospital outpatient departments are being paid in calendar year 2026. Do you have any details on those changes?

Bob: Well, I believe you’re referring to what is called the method to control unnecessary increases in volume of outpatient services furnished and accepted off-campus provider-based departments, which we have shortened to simply site-neutral payments. CMS has stated in the final rule that there was evidence that increased volume and intensity of certain covered outpatient department services, which was likely driven by financial incentives to furnish services in hospitals in order to receive higher reimbursement than making site of service decisions based on medical necessity. For calendar year 2026, CMS decided to pay accepted hospital outpatient departments as if they were non-accepted or freestanding clinics at the Medicare physician fee schedule reimbursement rates instead of the OPPS rates for anti-HCPCS codes assigned to drug administration services, AAPCs. CMS published the specific APCs affected in table 121 of the final rule. And something else to watch here is that there is discussion in the final rule of applying this provision to on-campus hospital outpatient department.

Kelly: Okay. But isn’t CMS doing away with the inpatient-only list? How is that going to affect the outpatient volumes and inpatient services?

Bob: Well, that’s a good point. In the calendar year 2026 OPPS final rule, CMS finalized the elimination of the inpatient-only list over the next three years. This means that more procedures will be done in an outpatient setting, increasing volumes. It will be interesting to watch and see how payments made to hospitals, outpatient departments, and ambulatory surgical centers evolve over time, and whether site neutrality will eventually be implemented in some form to ASCs. And I want to shift gears there for a second, but there’s another aspect with the elimination of the inpatient-only list. And that is the indefinite exemption of site of service claim denials due to the two-midnight rule. As procedures migrate to the outpatient setting, CMS is relying on the physician’s determination as to whether a procedure removed from the inpatient-only list should be done in an inpatient or outpatient setting. If done in an inpatient setting, auditors are not to use the two-midnight rule as a determination for denial of payment at this time. Once CMS determines the procedure to be an outpatient procedure, they will communicate the reinstatement of the rule towards that procedure.

Kelly: So, kind of switching gears a bit here. So, in some of your previous webinars, you discussed up-and-coming activities that could be changing and items we need to keep an eye on. So can you share any areas our audience may need or want to watch?

Bob: First, I would say we should keep an eye on the 340B remedy reduction amount. CMS has given us warning they could increase the reduction of the conversion factor in later years. Next, I would watch for additional site-neutral payment policies. As they have progressed to the excluded provider-based sites for drug administrative services, CMS may choose to apply that policy to other services or to on-campus clinic sites. And lastly, we visit this every year, and that’s pay-go sequestration. The additional Medicare 4% statutory pay-as-you-go sequestration was scheduled to go into effect in January of 2026. Congress has, over the years, continued to keep this program from going into effect, either by wiping the scorecard clean or by using other devices to avoid triggering the sequester. In the continuing resolution that passed in November of 2025, the current administration followed the same practice as the prior administration and wiped the scorecard clean of the $3.4 trillion of deficit spending over the next 10 years. And so it will not go into effect in January of 2026. The reason we need to continue to watch this is twofold. First, it is potentially a drastic cut to Medicare spending as long as the provision remains in the regulations. And second, that Congress could at some point implement it to control over spending.

Kelly: That makes sense. Well, thanks so much for sharing that with us. And thanks for joining us, Bob, today, and for giving us this sneak peek into BESLER’s upcoming webinar, 2026 OPPS Final Rule Summary, that you’re presenting live on Wednesday, January 14^th, at 1 PM eastern time. And as a bonus, you can earn CPE. Thanks again, Bob.

Bob: Thank you, Kelly. Have a great day.

Kelly: Thank you. And thank you all for joining us for this episode of The Hospital Finance Podcast. Until next time…

If you have a topic that you’d like us to discuss on The Hospital Finance Podcast or if you’d like to be a guest, drop us a line at update@besler.com.

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