SHELBY LIVINGSTON October 17, 2019
UnitedHealthcare is ramping up a prior
authorization policy intended to shift outpatient surgeries to lower-cost
settings outside of the hospital, a move that could put a dent in hospital
revenue.
It's the latest volley in a battle over where
care should be delivered. Other health insurers in recent years have begun
refusing to pay for some services, such as MRIs, when they occur in hospitals,
which generally charge higher prices than physician offices or ambulatory
surgery centers. UnitedHealthcare's new policy takes an aggressive stance on planned
surgeries.
"This policy really shifts the burden to
the patient and the physician to prove that a hospital site is warranted, and
what is distressing is that it's adding another level of complexity to an
already complicated system of pre-authorization," said Lyndean Brick,
president and CEO of healthcare consultancy Advis.
Starting Nov. 1 in most states,
UnitedHealthcare, the nation's largest health insurer, will not pay for certain
planned surgeries delivered at outpatient hospital settings unless it
determines the site is medically necessary after a review, according to a bulletin posted on its website in September.
The policy, which a UnitedHealthcare spokeswoman
said is currently being performed for some surgeries but will be expanded next
month, applies to fully insured commercial groups and Affordable Care Act
exchange members. The bulletin stated the company is working on a similar
policy for self-insured employers who contract for administrative services.
UnitedHealthcare's so-called "site-of
service medical necessity review" will take place during the prior
authorization process and apply to more than 1,100 medical codes for a wide
array of planned procedures, from colonoscopies and knee replacements to eye
surgeries, biopsies, removing a tumor and inserting a pacemaker or heart
catheter, according to a company utilization review guideline.
UnitedHealthcare said the policy is meant to
curb healthcare spending while still providing access to quality healthcare.
CEO Dirk McMahon told investment analysts during the company's third quarter
earnings call Tuesday that the site-of-service efforts would save customers
$500 million in 2020.
"There is considerable excess spending on
care delivered in sub-optimal, high-cost settings that can and should be
provided in higher quality, consumer responsive and more cost-effective sites.
In our commercial business alone, we see opportunity to shift well more than
20% of our medical spend to these more effective sites," McMahon said.
UnitedHealth Group's medical costs in 2018
totaled $145.4 billion.
He noted that there is an opportunity to provide
more hip and knee replacements in ambulatory centers, which he said can cost
50% less than in traditional settings with comparable or better safety and
quality. UnitedHealthcare is "rapidly expanding this approach to
additional high-cost services," while also taking a similar approach to
imaging and the administration of specialty drugs, he said.
Paul Keckley, a healthcare consultant, said
UnitedHealthcare's policy is more aggressive than the insurer has had in the
past, but it's not surprising given the movement in the industry to reduce the
use of services that are not medically necessary.
UnitedHealthcare's expanded policy aligns with a
growing number of initiatives by insurers to reduce their costs by encouraging
patients to get care outside of a hospital. The CMS has also attempted to cut
Medicare payments for some hospital services that can also be delivered in
physician offices; a federal judge tossed the rule in September.
But some experts say UnitedHealthcare's new
rules limit patient choice and further burden physicians with onerous rules. The policy also
raises questions about the quality of care delivered in ambulatory surgery centers—where
UnitedHealthcare is pushing patients—for certain procedures.
The policy could have implications for
hospitals' income. A 2018 Navigant analysis found that most for-profit and
not-for-profit hospitals included in its study experienced a significant
decrease in operating earnings between 2015 and 2017, driven in part by lower
demand for surgeries and inpatient admissions.
Brick of Advis warned that financially
struggling community hospitals could be affected by a reduction in surgeries.
"Our community hospitals, or smaller hospitals, depend on this," she
said.
Hospitals have already been squeezed by health
insurer Anthem's policy of not paying for MRIs and CT scans in hospital
outpatient departments, she said.
Molly Smith, vice president of coverage at the
American Hospital Association, said the financial implications of the policy
will vary by hospital, but she noted that the costs associated with additional
administrative burden to prove that certain patients need to be seen in a
hospital will put pressure on the system.
"It's a deliberate strategy to try to
reduce the medical spend," she said of the policy.
There is a race among health insurers to buy up
physician offices, ambulatory surgical centers and other lower cost providers
so they can exert more control over where patients seek care and keep
healthcare dollars in house. UnitedHealth's Optum business employs thousands of
doctors. It recently completed its acquisition of DaVita Medical Group and it
owns Surgical Care Affiliates, a network of more than 210 ambulatory surgical
facilities where 7,500 physicians practice.
Insurers have also implemented strict prior authorization requirements, which physicians
complain have soared in number in the last few years. In addition to its
imaging policy, Anthem also stopped paying for emergency department visits it
later decides were not a true emergency. Those policies sparked immense
backlash and some lawsuits from hospitals.
A UnitedHealthcare spokeswoman defended the
site-of-service reviews, writing in an email that ambulatory surgery centers
may charge almost half the cost a hospital charges for the same procedure,
according to the company's internal data. On average, members may save up to
$3,600 on common outpatient surgical procedures if performed at an ambulatory
surgery center instead of an outpatient hospital facility, she said.
UnitedHealthcare's policy includes safeguards.
For patients with some serious conditions, such as advanced liver disease or
coronary artery disease, surgical procedures in hospital outpatient settings
will be considered medically necessary, according to the insurer's utilization
review guideline. Procedures in hospital outpatient settings will also be
considered necessary if there's no geographically accessible ambulatory
surgical center available.
The policy doesn't apply in Alaska, Kentucky,
Massachusetts, Maryland and Texas.
While those safeguards are helpful, they can be
vague, Smith said.
"Our members often sign contracts with
United, and they look at a very comprehensive set of services that they'll be
providing for a set of patients or enrollees that United is purportedly bringing
to the table, and then, unilaterally, they change the rules and all of a sudden
an in-network provider is essentially not in network anymore for a set of
services," she said.
There is evidence that outpatient hospital
departments set higher prices than ambulatory surgery centers and physician
offices for the same procedure. One study published in the American Journal of Managed Care in March 2016, whose
authors were affiliated with America's Health Insurance Plans, found
colonoscopies and upper gastrointestinal endoscopies cost about 1.7 times more
on average at hospital outpatient departments than at ambulatory surgery
centers in 2013.
A 2019 analysis of commercial insurance claims by the Health
Care Cost Institute found that for 30 services deemed by MedPAC to be safe and
appropriate to provide in freestanding physician offices, the average price for
a given service was always higher when delivered in an outpatient hospital
setting than in an office between 2009 and 2017.
Despite the higher price, the percentage of
services delivered in the hospital outpatient setting grew during the time
period, which could be influenced by hospital consolidation of physician
practices, said John Hargraves, a senior researcher at HCCI. The cost of getting
care in a more expensive setting eventually is carried over to patients in the
form of higher premiums, copayments or deductibles, he said.
Another 2019 study in the Journal of Health Economics showed that switching to
an ambulatory surgical center from a hospital for a colonoscopy doesn't hurt
care outcomes. Still, UnitedHealthcare's site-of-service policy extends beyond
colonoscopies. Some critics worried that non-hospital settings are subject to
less regulatory oversight and may not be as equipped to handle surgery
complications as a hospital.
"Site of service decisions should be based
on the clinical judgment of physicians and the decision of their
patients," Anders Gilberg, senior vice president of government affairs at
the Medical Group Management Association, said in an emailed statement.
"Prior authorization requirements that delay or deny care do not support
the patient experience element of the triple aim no matter how much health
insurers try to spin them as such."
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