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What's in the box? Is UnitedHealthcare delivering on its promises?


Whether it's cereal or health insurance, you're right to wonder whether there's truth in the hype--and to be concerned about what the "improvements" might cost you.


Cover Story
The New "Improved" Managed Care

What's in the box?
Is UnitedHealthcare delivering on its promises?

Jump to:
Choose article section... Carveout specialties await their turn Care coordination hasn't set the world on fire Money speaks louder than looser controls Will the managed care industry follow United's lead?

Whether it's cereal or health insurance, you're right to wonder whether there's truth in the hype—and to be concerned about what the "improvements" might cost you.

By Ken Terry
Managed Care Editor

When UnitedHealthcare announced last fall that it was eliminating prior authorizations for most tests, procedures, and admissions, the event was hailed as a turning point in the evolution of managed care. Ten months later, however, physicians wonder what all the shouting was about.

Some doctors find it's a bit less of a hassle to deal with United. Others haven't noticed any change. And many physicians still fear that at some point, United will deselect those whose costs are significantly higher than their peers'.

"Let's face the facts: United is still in charge," says ophthalmologist Stephen G. Slocum of St. Louis. "Doctors who cost the plan too much money might not find themselves with United all that long."

Todd Baker, director of medical economics and advocacy for the Ohio State Medical Association, notes that United has stepped up its profiling of physicians. "How aggressive the company will be at terminating physician relationships remains to be seen," he says.

United's chief medical officer, Archelle Georgiou, denies that the company embarked on its new program with the aim of dropping less efficient physicians. "One of our key strategies is to give patients a broad choice of physicians," she says. "So it wouldn't make any sense for United to terminate large volumes of providers."

Maybe not, but doctors still mistrust the company, as they mistrust all managed care organizations. "United's announcement was pure PR, as expected," says internist Abigail Hagler of Tucson. "It's no easier to get things done with them than it was before. They are just as dogged as ever in sticking with formulary drugs."

While Georgiou admits that United is still developing a new approach to formulary management, she's puzzled that Hagler and some other physicians across the country haven't noticed any change in United's policy on preauthorization. Georgiou insists that all of the company's HMOs and point-of-service plans adopted the new policy in November 1999, and that its PPOs altered their rules last April.

Medical society leaders contacted by Medical Economics generally feel that United has carried out its commitment, judging by the lack of complaints from their members. But thoracic/vascular surgeon Mathis L. Becker, immediate past president of the Florida Medical Association, says that the majority of doctors at a recent Broward County medical society meeting didn't think anything had changed with United.

One explanation for the lack of enthusiasm among doctors is that many don't think United went far enough. Besides retaining formularies—albeit under a three-tiered system that gives patients more choice in return for higher copayments—United still restricts HMO patients to network specialists and to certain labs and imaging centers. "That significantly impacts quality and access to care," says ob/gyn M. LeRoy Sprang, president of the Illinois State Medical Society.

Some primary care physicians might not have paid attention to United's move because it doesn't affect them as much as it does specialists. FP Michael W. Rutigliano of Paramus, NJ, notes that United never required approval of the few outpatient procedures he does, and that he rarely has elective admissions that would have previously needed precertification. Most of the impact on him and his colleagues, he says, lies in the area of big-ticket tests like MRIs and CT scans.

On the other hand, FP Patricia J. Roy of Muskegon, MI, who says she derives about 30 percent of her volume from an HMO managed by United, is very aware of the company's changes. She says United's new stance on preauthorization, coupled with its recent introduction in her area of a direct-access health plan, has saved her office staff a "significant" amount of time on the phone.

Similarly, says gastroenterologist Robert D. Coli of Warwick, RI, United's abandonment of UR has "significantly reduced the hassle, aggravation, and waste of time in my practice." United is one of Coli's two biggest payers.

In practices where United is a smaller factor, its reduction of utilization controls tends to get lost in the "noise" surrounding managed care. At Midwest Orthopedics, a 29-doctor practice in Chicago, only 11 physicians contract with United, which furnishes less than 5 percent of group revenues. At one site that includes orthopedists in the United network, the clerks who deal with managed care plans say that the only change they've seen in the company's policies is that they're getting more direct-access patients.

"With most United patients, we're still going through the process of verifying the referrals," says secretary Sylvia Estrada. "And even if you don't need a paper referral, you have to make sure the primary care physician okays any diagnostic tests." Even with direct-access patients, she checks with the plan in advance to make sure that tests and procedures are covered.

The only services United wants to be informed about, however, are upper-lid blepharoplasty, breast reduction and reconstruction, and vein stripping, ligation and sclerotherapy—any of which could potentially be a noncovered cosmetic procedure. The plan also requires prior notification of admissions and out-of-network services. None of the doctors interviewed by Medical Economics found this to be a burden.

As for referrals, about 75 percent of United's 6.1 million HMO members belong to direct-access plans that allow patients to self-refer to specialists. But that still means a lot of United patients see doctors in gatekeeper-style HMOs or capitated groups. Most of Midwest Orthopedics' United patients are referred by primary care physicians, for example, because the participating surgeons belong to local IPAs that have risk contracts.

Carveout specialties await their turn

Overall, about 8 percent of United's 14.5 million enrollees receive their care from capitated medical groups, PHOs, or IPAs. In order to extend its new policy to these patients, United has told the risk-taking organizations that they must either drop preauthorization or return delegated HMO functions to United. Among these functions, typically, are provider credentialing, utilization management, and, sometimes, claims processing. About half of the physician groups have decided to play ball, while the others have given up delegated roles but haven't necessarily abandoned capitation, says Georgiou.

Most of the risk-taking organizations in California wouldn't have to change much to comply with United's edict, says Henry E. Golembesky, vice president of CSC Health Care and a consultant with the firm. "The majority of groups here view United's change as very consistent with what the groups have been doing for years," notes the pediatrician, who's based in San Diego.

"Many of them do what I call administrative authorization," he continues. "If you want to refer a patient to a specialist for some procedure, you fill out a form, mainly to make sure the patient is assigned to the group, that it's a covered benefit, and that you're going to a contracted provider. The group's medical director doesn't say, 'This patient should or shouldn't go.' The groups collect the data so they can handle the payments properly. They've delegated to the primary care physician the ability to make referrals within their networks without prior approval."

The big groups found out over the years that they denied a very small percentage of requests, so it wasn't worthwhile to do preauthorization, Golembesky points out. But this isn't necessarily the case with smaller groups and IPAs that have relatively few enrollees and that lack the information systems needed to keep track of what their physicians are doing. "Some of the smaller IPAs that have only 50,000 or 100,000 HMO members worry about one or two very bad cases' hurting their risk pools," says Golembesky. "So they're not ready to let go of the preauthorization process and let patients have free access."

Ophthalmologists and psychiatrists, meanwhile, complain about United carveouts that aren't affected by the company's new hands-off policy. St. Louis ophthalmologist Stephen Slocum, for example, says United's North Carolina-based vision care carveout, OptiCare, pays miserably and continues to be very strict on preauthorizations. John B. Holds, another ophthalmologist in the same city, claims that United has threatened "implicitly" that vision care providers who leave the carveout—which covers Medicare HMO patients—will be dropped by its other health plans.

The American Psychiatric Association, meanwhile, has protested to United about what it regards as "discriminatory utilization review" of behavioral therapists. Exempting behavioral carveouts from the new rules on preauthorization means "our patients and our members are not being treated equitably," says psychiatrist Jeremy A. Lazarus, chair of the APA's government relations committee.

According to Archelle Georgiou, United is on its way to lifting prior-authorization requirements for mental health care. There are no plans, however, to bring vision care carveouts under the new United policy, says a company spokesman.

Care coordination hasn't set the world on fire

The heart of United's new approach, says Georgiou, is care coordination, which essentially replaces prospective utilization review. As United defines it, care coordination includes health education, management of chronic illnesses and complex conditions, admission counseling, "inpatient care advocacy," readmission prevention, and pharmacy management.

The program is aimed partly at high-risk patients who generate the majority of health costs. Besides educating them about self care and medications, it's designed to prevent them from falling through the cracks of the medical delivery system and to ensure they get proper follow-up after discharge from the hospital. Also included are United's disease management programs for asthma, diabetes, cardiovascular disease, and congestive heart failure.

According to Georgiou, a trial of care coordination in six markets improved care without raising costs. Not only were expensive admissions and readmissions prevented, but physician utilization of services remained stable after preauthorization was removed. While United is employing additional case managers to take care of the 5 to 10 percent of members who need complex illness support, it's more than offsetting that expense with the $100 million a year it has saved by eliminating utilization review.

The details of this blueprint raise some questions, however. For instance, is preadmission counseling just a way to prepare patients for a quicker discharge than their doctor might think appropriate? "The admission counseling process is meant to set expectations for a reasonable length of stay," says Georgiou. "If that should differ from what the physician thinks the patient needs, we'd never contradict the physician. It's the physician who makes the final decision about how long the patient needs to stay in the hospital."

That's fine, but do "inpatient care advocates" hound doctors the way that "concurrent stay reviewers" sometimes do? "Concurrent stay review is a process that uses a checklist to decide whether someone's sick enough to be in the hospital," Georgiou replies. "Inpatient care advocacy looks at what the physician wants to have done while the patient is in the hospital and makes sure it gets done today instead of tomorrow.

"In one New England hospital, if the order for a thallium stress test isn't written by 11 am, the test isn't done until the next day. What if that order isn't written until noon on Friday? That patient stays in the hospital until Monday. That's a lose-lose situation. We can help make sure the order gets written earlier, so the patient gets the test today instead of tomorrow. And if the patient gets his diagnosis sooner, he goes home sooner, and the physician gets the test he wanted done."

Gastroenterologist Robert Coli says that United's case managers follow his patients in the hospital and do discharge planning. But he never hears from them. He explains, "If you don't feel good about keeping a patient in the hospital an hour longer than is medically indicated, if you do the right tests and practice good medicine, you never have to deal with any of these nurse reviewers. Because you're doing what they want you to do."

Especially on the West Coast, many capitated groups and IPAs use hospitalists, notes consultant Henry Golembesky. So, while an inpatient case manager might hassle a physician who follows his own patients in the hospital, a doctor who refers his admissions to an inpatient service is unlikely to hear from a case manager, Golembesky says. Instead, the case manager will work closely with the hospitalist to make sure the patient gets all the appropriate services on schedule. In that respect, the groups are already in line with United's approach.

On the outpatient side, United is emphasizing disease management and clinical profiling to make sure that chronic-disease patients get the care they need. New Jersey FP Michael Rutigliano hasn't had many patients in United disease management programs. But he observes that, while some patients benefit from such programs, others avoid them because they don't trust health plans to look out for their welfare.

Contrary to United's assertion that it no longer requires repeated referrals of chronic-disease patients, he says the plan rarely allows specialists to be principal caregivers for patients. "Most of the time, their referrals are good for only 60 days, and you have to keep re-authorizing them," he says.

Todd Baker of the Ohio State Medical Society remains skeptical about United's care coordination program. "We've been hearing this for years," he says. "It's the same argument that the insurance companies made in Ohio for shifting Medicaid into managed care. They said, 'We'll manage care, and therefore we'll reduce the costs by targeting high-risk people.' We've not seen one shred of evidence that that's actually occurred. Maybe as health plans do this more and more, they'll do it better, but I'm not convinced they're equipped or really have the desire to do that."

Money speaks louder than looser controls

It's hard for doctors to support United's care coordination program wholeheartedly while the carrier is slashing their compensation. And across the country, United has the reputation of being among the lowest payers.

In Rhode Island, for instance, Robert Coli considers United his worst payer. For a simple colonoscopy, he says, United pays him $274 to $294; in comparison, Blue Cross & Blue Shield of Rhode Island pays $438 to $490, and Medicare a maximum of $603.

United pays Michael Rutigliano less on a fee-for-service basis, he says, than the FFS equivalent of what he receives in capitation from other plans. United's reimbursement averages 65 to 70 percent of his charges, leaving him a profit margin of just 5 to 10 percent. But at least the plan pays promptly, he observes.

That hasn't been the experience of Midwest Orthopedics in Chicago. According to the group's administrator/CEO, Steve Fisher, United owes the practice at least $600,000 in unpaid claims, and 30 percent of those claims are more than 90 days old. United staffers play the usual game of "dodge the claim," asserting they never got claims that the group had sent to them on numerous occasions, he says.

United contends that the IPAs to which the Midwest Orthopedics physicians belong were supposed to pay those disputed claims. But Fisher notes that United told his group to resubmit its claims directly many times, and that in three years of discussions, United never said until last May that the IPAs owed money to the group.

In North Carolina, whatever goodwill United has generated with its preauthorization policy has been canceled out by its latest fee schedule, which is lower than what Medicare pays. And in Louisville, KY, pediatrician John B. Roth says his practice won't sign up with United, a relatively new entrant into the market, unless it agrees to pay more. "United has the right idea," says Roth. "Dropping precertification is a major money-saver for them, and it eliminates a major hassle for us. But until recently, they were the lowest payer in the state."

Michigan FP Patricia Roy describes another way United has reduced doctors' fees. Last year, she relates, a local HMO called Physicians Health Plan, which is managed by United, introduced direct access in her area without eliminating her 15 percent withhold. Since the return of that withhold is contingent on her controlling referral-related costs, she says, she and her colleagues didn't get their withholds back last year for the first time in several years.

Although United claims it was PHP that made the decision not to return the withholds, there's no doubt that United is trying to curb medical expenses by paying doctors less. Not long after the company dropped preauthorization, oncologist Lee N. Newcomer, then senior vice president of the UnitedHealth Group, parent of UnitedHealthcare, was asked how the plan would control costs without riding herd on utilization. His answer: "Good contracts. We're still looking at what is the right price for the service." While he added that United would also profile physicians' use of services, educating those who over- or underutilized, the company's subsequent record bears out his first point.

Physicians argue that it's difficult for them to provide good care to patients when they get paid so little. But United doesn't see it that way. "There's always going to be a challenge to determine how to provide fair yet competitive reimbursement to physicians," says Archelle Georgiou. "It's an ongoing struggle that we deal with every day. But we certainly value our physicians and want to support them in providing high-quality care."

She suggests one route out of this impasse: "I think we'll see a shift in the future toward differentiating physician reimbursement based on the quality of care each doctor provides. We don't quite have the design of that yet, but paying all physicians the same for the same service is not a model that's sustainable in the future. We want to recognize physicians for providing better care, whether that means better access or higher quality."

It's ironic that physicians are so unenthusiastic about the boldest move by a national managed care company to set them free from utilization review. This is, after all, what they've been demanding ever since managed care emerged.

Perhaps doctors haven't noticed much change because they weren't overruled very often before United made its move. In fact, United said that it approved 99 percent of the preauthorization requests it received; as a whole, managed care organizations okay 97 percent of requests, according to the American Association of Health Plans.

But that doesn't explain why doctors and their office staff still perceive they have to jump through hoops for United. Perhaps the real reason is that it's in the nature of managed care to keep tabs on what doctors are doing and to intervene with their patients. As long as that's the case, and as long as the plans continue to chop away at their incomes, most doctors will dislike managed care.

But that doesn't mean physicians will return to their old ways, even if every plan drops utilization review. Besides United's positive experience in its pilot project, a new study sponsored by the Agency for Healthcare Research and Quality found that allowing HMO patients to have direct access to specialists didn't increase the cost of physician services.

"If everyone can agree that we can't just do what we did before managed care, maybe the United approach can work," says hematologist/oncologist Paul Reich, chief medical officer for the Scheuer Management Group in Newton, MA. But the health plans have to reciprocate. Giving physicians limited clinical autonomy won't make them happy unless the plans also recognize doctors' right to earn a decent living.

Will the managed care industry follow United's lead?

Considering all the favorable publicity that UnitedHealthcare received when it gave up prospective utilization review, you might have expected other plans to follow suit in short order. But nearly a year after United's announcement, the only other plan to give up preauthorization is HealthPartners in Minneapolis (see below).

On one level, the reason appears to be simple: United's elimination of preauthorization hasn't caused employers to flock to it from more-restrictive plans. In January 2000, United's commercial enrollment grew by 6 percent over the previous year—hardly an explosive increase.

United also hasn't proved it can hold down health costs under its new model, notes hematologist/oncologist Paul Reich, chief medical officer of the Scheuer Management Group in Newton, MA. "All the plans considering this are worried that in areas where physicians are unhappy with managed care and may be overutilizing resources, this program would put the plans in financial hot water pretty quickly," he says. "In areas where doctors have embraced managed care to some extent, this program may play out extremely well. But the question is whether financial losses in those other areas would force plans to reconsider the program."

Responding to anti-managed care pressures, however, a number of plans have moved or intend to move in the same direction as United, though in more limited ways. Three years ago, for instance, PacifiCare stopped requiring many primary care doctors to get specialty referrals approved either by its own UR department or by capitated groups. Some Blue plans are also curbing preauthorizations and opening up the referral process. Blue Cross and Blue Shield of North Carolina, for example, now requires precertification only for admissions and procedures it may decide are cosmetic; next year, a spokesman says, it will introduce direct access to specialists.

Aetna US Healthcare and Cigna HealthCare, two of the largest national carriers, typify the shades of difference among current approaches to utilization management. The biggest contrast between them is that Aetna's HMOs and point-of-service plans now require notification only of hospital admissions and referrals, whereas Cigna has clung to precertification of both. Both plans have cut back on other preauthorizations, but neither has gone to direct access, although they both permit specialists to provide principal care to chronically ill patients.

According to pediatrician Harold S. Zarkowsky, Aetna's Midwest medical director, the company now requires preauthorization of fewer than 10 percent of tests and procedures. The bulk of procedures that need approval, he says, are either those that may be cosmetic or transplants, which Aetna wants done at a particular institution. "Most radiologic and laboratory tests require a referral from the primary care physician rather than a precertification by the health plan," he says. Aetna recently dropped preauthorization of PET scans, CT scans, and MRI tests.

To avoid confusion, Zarkowsky says, Aetna tells doctors to call the plan about certain tests and procedures, whether they require preauthorization or just notification. As a result, physician offices don't know whether a planned test or procedure is undergoing medical review until the medical director starts asking questions. That may be one reason why the physicians we interviewed hadn't noticed any change in Aetna's utilization management process.

Like United, Aetna views admission notification as a key to management of hospital care. "We want physicians to notify us about an admission, because that allows us to get involved with case management and discharge planning," says Zarkowsky. It's also important to be prenotified about procedures that might not be covered, he adds: "Otherwise, we get totally retrospective, denying things on the claims end."

Internist W. Allen Schaffer, senior vice president and chief medical officer for Cigna, takes a harder line: "We steadfastly believe that inpatient admissions should be precertified. And that is also the entry into our quality program. We find it much easier and more timely to interrupt poor-quality care at the time of certification, rather than retroactively."

To get a bigger bang for its UR buck, Cigna last year cut its list of CPT codes requiring preauthorization by 44 percent, and halved the number of precertifications it made. But that doesn't mean it's going to give up control of utilization. For instance, while Cigna has knocked some outpatient diagnostic procedures off the preauthorization list, "we're looking more closely at outpatient imaging tests," says Schaffer.

Cigna has adopted some patient-friendly tactics, such as allowing open access to ob/gyns and revising its formulary to include the most popular and effective drugs in each therapeutic category. But Schaffer doesn't foresee the plan's ever emulating United. "We know that if we were to remove referrals and authorization, the quality of care our members receive would be lower and their costs would be higher," he declares.

Following guidelines instead of asking for permission

UnitedHealthcare is no longer the only major health plan to return control over medical decisions to the doctor.

HealthPartners, a regional plan based in Minneapolis, went United one better in June by eliminating not only prior authorization but also prenotification of most tests, procedures, and admissions. Only 50 of 9,500 procedures—things like breast reduction, gastric bypass surgery, and blepharoplasty—still require prior approval.

HealthPartners, which says it was planning this move long before United's announcement last fall, now relies mainly on practice guidelines to contain costs generated by its 750,000 members. "Our belief is that if you get the best doctors together to identify best practices for cystitis, stroke, low back pain, or heart-attack follow-up, and if you distribute those best practices widely and provide education about them, and if the whole process is medically led, you get more-consistent care," explains George Halvorson, president and CEO of HealthPartners. "More-consistent care is both better and more efficient. It's more efficient to do it right."

Sounds ideal, but does it work? Halvorson cites some of the results of physicians' following locally constructed guidelines for more than 40 conditions: "We know that preventing second heart attacks with beta-blockers and lipid-lowering drugs has been a cost saver. We know that patients with congestive heart failure benefited. Guidelines for preterm birth have resulted in better care and, ultimately, cost savings. We're spending more money on diabetes, but the care is getting better and the complications are decreasing."

What's harder to understand is how HealthPartners has induced the 9,000 physicians in its network—including 550 employed doctors who handle nearly half of the covered population—to practice more or less consistently. Halvorson explains, first of all, that the guidelines were created by the Bloomington, MN-based Institute for Clinical Systems Improvement, a widely respected, independent organization that includes physician leaders from HealthPartners' own group, the Park Nicollet Clinic, and the Mayo Clinic. "So the guidelines aren't plan-generated; they're medically developed and led guidelines," he says.

Second, like some West Coast plans, HealthPartners uses its Web site to publicize clinical indicators for each contracting group or integrated delivery system. "We report how each of the care systems is doing in managing the blood sugar for diabetics, and how each system is doing on its follow-up tests," notes Halvorson. "So instead of just getting a plan-wide, HEDIS type of scorecard, where most of our doctors overlap with our competitors' doctors, diabetic patients can get data by individual care site. What we found is that the care sites that had the lowest scores two or three years ago have made huge improvements in their scores."

While HealthPartners has dropped one group for refusing to abide by the guidelines, Halvorson adds, he finds that most participating doctors are willing to follow the peer-created standards, and that most have become more conscious of the need to conserve resources.

Groups that take risk from HealthPartners are allowed to do their own utilization management. But most of them do no prior authorization and permit doctors to refer freely within the group, says Halvorson.

The plan itself hasn't required preauthorization for in-network referrals for some time. And HealthPartners has added a direct-access policy as one of several plan choices.

What influence did United's move have on HealthPartners' decision to drop preauthorizations? "We were right in the middle of our planning, and some people had mixed opinions about whether we were doing the right thing," Halvorson recalls. "The positive reaction that United got with its announcement was very reinforcing."


Ken Terry. What's in the box? Is UnitedHealthcare delivering on its promises?. Medical Economics 2000;17:158.

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