In a potentially damaging policy shift for hospitals, United Healthcare (UHC) is ramping up its’ prior authorization requirements for some common surgical procedures frequently performed in a hospital outpatient setting. As detailed in a Modern Healthcare story, the UHC policy dubbed the “site-of-service medical necessity review” will apply to 1,100 procedure codes for fully insured commercial as well as exchange patients. Procedures which will require medical necessity to be performed in a hospital include colonoscopies, knee replacements, and pacemaker insertions. United CEO Dirk McMahon estimates 2020 savings from this initiative to be $500 million. He is quoted as saying that “in our commercial business alone, we see opportunity to shift well more than 20% of our medical spend to these more effective sites”, going on to say that moving joint replacements to ASC’s can reduce cost by 50%.
The article presents the potential pitfalls of the proposed policy, citing safety concern when certain types of procedures are moved out of a hospital setting and that site of service decisions should be determined by clinicians in conjunction with their patients.
EHC NOTE: This expansion of prior authorization by UHC to many common surgical procedures represents a clear danger to US hospitals and hospital-based anesthesia groups. As is well known, most hospitals struggle to break even on patients with government insurance, “making up the difference” with commercial business. Therefore, a major payer weaponizing authorization protocols to drive commercial business from hospitals can squeeze an important contributor to facility profitability – and in some cases viability. The economics of government vs. commercial reimbursement for anesthesia is even more lopsided than it is for hospitals. The proposed rules would disproportionately benefit ASC anesthesia groups at the expense of those providing care in hospitals. A likely underappreciated secondary effect of such a shift is that reduced anesthesia collections will often translate into more anesthesia subsidy, thus delivering a “double whammy” to the hospital.
We understand that UHC is attempting to drive down costs, and that makes sense if looked at in isolation. The problem we see is that when a UHC patient has an emergency in the middle of the night, the ASC isn’t open. It’s the hospital and the anesthesia provider on call who must care for that patient. If the hospital is barely solvent now and is ultimately tipped into insolvency through loss of profitable business, where does that emergency get cared for? Clearly the answer varies from city to city and from urban to more isolated communities. While a major for profit payer such as UHC has an obligation to maximize their profits, they should also recognize that they are an important financial support for the entire spectrum of care and have a role in sustaining the viability of the entirety of care. In the fragmented US healthcare system, there is unfortunately no one entity looking at the big picture. It is not United’s (or any other payer’s) “job” to drive profitable business to hospitals, but if they and other key payers drive highly profitable surgical cases en-masse to other locations, it may have unintended consequences on their insured patients in communities throughout the country.