How prior authorization works
The provider's office submits clinical documentation, such as diagnosis codes and treatment notes, to the payer, which reviews the request against its coverage policy. Some requests are approved within minutes through an electronic portal, while others go to a clinical reviewer and take several days. Each payer sets its own list of services requiring authorization, and the list changes often.
Staff track the authorization number, approved units or visit count, and expiration date, because billing a claim without a valid authorization on file is one of the most common causes of denial. When a treatment plan changes, such as adding extra physical therapy visits, a new or extended authorization request usually has to be submitted before the additional services are billed.
Example
A physical therapy clinic wants to bill for 12 sessions following a patient's knee surgery. The insurer's policy requires authorization above 6 sessions, so the clinic submits the surgeon's notes and a treatment plan two weeks before the seventh visit. The payer approves 8 additional sessions, effective for 60 days. The clinic logs the authorization number in the patient's chart and bills each session against the approved count.
Prior authorization in QuickBooks Online vs Xero
Not software-specific: prior authorization requests are typically submitted and tracked through the payer's provider portal, a clearinghouse, or the practice management system's authorization module, not through QuickBooks Online or Xero. Once services are billed, the resulting claim and payment still flow into the accounting system as normal accounts receivable, which is where our bookkeeping team picks up the reconciliation.
Common mistakes
- Delivering a service before confirming prior authorization is actually approved, which risks a denial even when the treatment was medically necessary and appropriately documented.
- Not tracking the approved unit or visit count against what is actually billed, which can exceed the authorization and trigger a denial for the excess sessions.
- Letting an authorization expire before a treatment plan is complete, which stops billing for continued care until a new or extended authorization is approved.
Why it matters
Without a valid prior authorization on file, a payer can deny a claim regardless of medical necessity, which turns delivered care into unrecoverable revenue for the provider. For a healthcare provider managing patient scheduling and cash flow together, tracking authorization numbers, unit counts and expiration dates prevents a preventable denial from disrupting both patient care continuity and expected payment.
Related terms
How LedgerBPO handles prior authorization
Our billing-call team submits and follows up on prior authorization requests with payers on your behalf, tracking approval numbers, unit counts and expiration dates in your system. We flag authorizations nearing expiry before a scheduled service, so claims are not billed against a lapsed approval and denied for a reason that was preventable.