UnitedHealthcare leads charge to drive outpatient care away from hospitals

Starting Nov. 1 in most states, 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.

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 the company’s website in September.

The policy, which a UnitedHealthcare spokeswoman said is now being used for some surgeries but will be expanded next month, applies to fully insured commercial groups and Affordable Care Act exchange members. The bulletin stated that the company is working on a similar policy for self-insured employers who contract for administrative services.

UnitedHealthcare’s socalled “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, including colonoscopies, eye surgeries, biopsies, tumor removals and insertions of a pacemaker or heart catheter, according to a utilization review guideline.

UnitedHealthcare said the policy is meant to curb spending while still providing access to quality healthcare. CEO Dirk McMahon told investment analysts during the company’s third-quarter earnings call last week that the site-ofservice 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 added.

UnitedHealthcare’s efforts align 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.

There’s limited data on quality in ambulatory surgery centers. The CMS required ambulatory surgery centers to report only four measures as part of its quality reporting programs this year.

A 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 and some critics worried that non-hospital settings have less regulatory oversight and may not be as equipped to handle surgery complications as a hospital.

“You may not get that superb quality that you would get in a hospital setting, and God forbid something happens and you’re at that surgery center,” said Stacey

Knowles, director of managed care at St. Peter’s University Hospital, New Brunswick, N.J. “You now have to wait for an ambulance to come pick the patient up and bring them to the closest hospital.”

The policy could also impact hospitals’ income. A 2018 Navigant analysis found that most hospitals included in its study experienced a significant decrease in operating earnings from 2015 to 2017, driven in part by lower demand for surgeries and inpatient admissions.

Knowles cautioned that other insurers may implement similar rules. Plus, she said it’s possible that non-employed doctors who perform surgeries at St. Peter’s may choose to move all of their patients regardless of payer to an ambulatory surgery center instead of splitting time between the two locations.

Hospitals have already been squeezed by health insurer Anthem’s policy of not paying for MRIs and CT scans in hospital outpatient departments.

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 the last few years. In addition to its imaging policy, Anthem also stopped paying for emergency department visits it later decides were not true emergencies. 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 what a hospital does 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.

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.

UnitedHealthcare’s policy includes safeguards. For patients with some serious conditions, such as 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. ●