November 20, 2019

A major health plan is implementing a new policy that essentially requires large numbers of procedure types to be performed in settings other than the hospital.  On November 1, 2019, UnitedHealthcare (UHC)—the nation’s largest health insurer—implemented a pre-authorization process for hundreds of medical procedures that will involve screening for “site of service” necessity.  If one of these procedures is scheduled to be performed in the inpatient or outpatient hospital, rather than in an ambulatory surgery center (ASC) or similar freestanding facility, prior authorization for the procedure may be denied.

According to UHC’s utilization review guidelines, the payer’s “site-of-service medical necessity review” will be carried out during the pre-authorization process and will apply to more than 1,100 CPT codes.  These codes reflect a wide range of procedures, such as colonoscopies, knee replacements, eye surgeries, biopsies, tumor excisions, pacemaker insertions and heart catheters.  The ultimate aim of these reviews is to direct more procedures away from the hospital setting.

Cost Containment for Payers

The CEO of UHC, Dirk McMahon, explains that the change is in keeping with their company’s mission to contain costs while providing what they believe to be equal or superior care.  He has asserted that these site-of-service mandates will save beneficiaries $500 million in 2020.  In addition, UHC stands to save over 20 percent in insurance payouts by removing these procedures from the hospital setting where costs are typically higher than in an ASC, independent lab or imaging center.

As examples of the kind of savings McMahon envisions, he noted the opportunity to provide more hip and knee replacements in surgery centers.  His contention is that these procedures could be provided at half the cost when compared with “traditional settings,” with no diminution in patient safety or outcomes.

UnitedHealthcare is not the only insurance giant to go down this road.  Anthem, which operates “Blue” affiliates in 14 states, rolled out a policy beginning in March of last year which essentially denied MRIs and CT scans in the hospital setting.  The Anthem policy was expected to be implemented in 13 of these states, New Hampshire being the lone exception.  Accordingly, most Anthem patients must now receive these radiology services at a freestanding imaging center.  Significantly, the Anthem policy change marked the “beginning of the next wave of tension” between payers and hospitals, according to one industry analyst.  That wave continues roll on with the aggressive policy shift just implemented by UHC.

Income Implications for Hospitals

It’s clear that these recent moves by national insurers to remove significant numbers of patient cases from hospital outpatient departments will have a real and growing impact on hospitals’ bottom line.  According to researchers at Navigant, most of the hospitals that were included in their 2018 analysis of health system financial performance experienced a significant decline in earnings between 2015 and 2017.  This negative trend was driven, in part, by lower demand for outpatient surgeries and inpatient admissions.

Many acknowledge that our community hospitals, some of which are already struggling, will face even greater financial pressures as a result of this new strategy on the part of payers to move services to other types of health facilities.  In addition, there could be higher administrative costs for hospitals whose staffs must now go to greater efforts to establish a medical necessity rationale for bringing a patient to the hospital setting.

This is only the beginning of what may be on the horizon for hospitals throughout the country.  As other national and smaller payers get on board with this new approach, hospital executives will be left scrambling to reconfigure their business model.  The wave is on its way and hospitals will have to prepare for its impact.

Patient Protections and a Few Exceptions

While going after cost-savings on behalf of the payer and patient is all well and good, there is still the question of quality of care.  According to CEO McMahon, the care off-campus is expected to be just as good for the patient, if not better, than in the traditional hospital setting.  While there is little in the way of Medicare-type quality measures to provide adequate benchmarking on patient outcomes in the ASC setting, one recent study indicates there is no decrease in patient care or safety in the ASC as compared with the hospital outpatient department—at least as it pertains to one type of procedure.

In May of this year, the Journal of Health Economics provided a study, demonstrating that there were no negative effects in care or outcomes for colonoscopies performed in the ASC setting as compared to the hospital setting.  Of course, this study only focused on this single procedure type, whereas the UHC policy will involve potentially hundreds.  So, at this point, there may not be sufficient data available to gauge patient safety and satisfaction factors between the two types of settings relative to each type of procedure identified in the UHC policy.  In addition, some are concerned that non-hospital settings are not subject to the same level of regulatory oversight as hospitals, and may not be as capable of addressing surgical complications.

In an attempt to mitigate such concerns, UHC’s site of service policy allows for outpatient hospital surgery relative to these procedures under 22 specific exceptions.  Many of these involve certain co-morbidities, such as advanced liver disease, coronary artery disease, and sleep apnea, as well as other factors, such as age (18 years or younger) and pregnancy.  If any of these exceptions are met, surgery in the hospital outpatient setting will be considered medically necessary.  Furthermore, procedures in the hospital outpatient setting will be approved based on three other factors:

• There is no geographically accessible ambulatory surgical center that has the necessary equipment for the procedure; or
• There is no geographically accessible ambulatory surgical center available at which the individual’s physician has privileges; or
• An ASC’s specific guideline regarding the individual’s weight or health conditions that prevents the use of an ASC.

According to one source, this UHC site of service policy, which became effective November 1, will NOT be applicable in the following states: Alaska, Kentucky, Massachusetts, Maryland and Texas.  We recommend readers in those states confirm the policy’s applicability status with your UHC representative.  If we can assist you in evaluating how this and similar policies will impact your revenue or practice, please feel to reach out to us at info@miramedgs.com.