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UnitedHealthcare, Insurers Put Heat on Doctors to Cut Costs

March 9, 2020, 9:36 AM

Health insurers, led by UnitedHealthcare, are pressuring high-priced medical specialists to slash the rates they charge or be dropped from their networks of providers. Their targets include large staffing companies that provide sensitive services such as neonatalogy and high-risk obstetrics.

UnitedHealthcare, the nation’s largest health insurer, recently announced it will terminate contracts with anesthesiology and neonatal practices in four states owned by Mednax Inc., a public company based in Fort Lauderdale, Fla., that provides nationwide staffing to hospitals. UnitedHealthcare, owned by UnitedHealth Group Inc., said it wants to renegotiate the contracts because Mednax physicians are being paid more than double the median rate of in-network physicians providing similar services in the states.

The gambit by UnitedHealthcare and other insurers, including Aetna and Cigna, to lower the rates charged by specialists is aimed at reducing costs for employers as well as out-of-pocket costs for consumers. But it could leave many patients susceptible to high, surprise medical bills for out-of-network services, if their doctors are dropped from their networks.

The insurers’ move comes as Congress is considering legislation that would prevent providers from sending patients surprise bills, which occur when patients are treated at in-network hospitals by out-of-network medical providers.

Insurers have been pushing back against high-cost specialists for the past several years as investment and private equity companies have purchased practices and raised their rates substantially.

S&P Global said in a recent report that the U.S. health insurance industry “has experienced significant consolidation over the past five years.” The health insurance industry has pointed to significant consolidation among hospitals, and among hospitals and physicians, in recent years as a factor in driving up rates.

Anesthesiologists Feel the Pain

Anesthesiologists, who are one of the types of medical providers most likely to send high bills for out-of-network services, are among the specialists feeling the brunt of insurer demands most acutely.

A survey of 76 anesthesiologist practice groups in 33 states, released Feb. 27 by the American Society of Anesthesiologists, found that 42% had contracts terminated in the previous six months, and 43% of the respondents experienced payment rate cuts from insurers of as much as 60%.

UnitedHealthcare was the insurer most associated with the contract changes, but Aetna, Cigna, and unspecified Blue Cross Blue Shield plans also were cited in the survey.

The contract terminations could leave patients without providers in their insurance networks, Mary Dale Peterson, an anesthesiologist in Corpus Christi, Texas, who is president of the association, said in an interview.

“We also heard from people that said, gosh, I’ve been in network with this carrier for 30 years, and we’ve never had this kind of a payment dispute or disruption before,” Peterson said.

In some cases, contracts with insurers had been recently negotiated, she said. “If those rates were reasonable then, why aren’t they reasonable now?” she asked.

Aetna said in a statement that it works to provide a comprehensive network of high-quality providers while helping control costs by negotiating affordable rates on behalf of its employer customers.

It said it rarely terminates provider contracts within six months of being renegotiated. “Significant issues would need to be present with the provider practice to consider that type of change,” the insurer said.

Cigna said in a statement that it contracts with hospitals and physician practices for “affordable, predictable rates.”

‘Unilateral, Without Warning’

Roger Medel, CEO of Mednax, said in a Feb. 20 earnings call that UnitedHealthcare’s contract terminations were “unilateral, without warning and unprecedented.”

“We have been told that the only avenue for negotiation would be to accept a 50% reduction in the rates our practices are paid for their services. This is neither an approach nor an outcome, of course, that we will accept,” Medel said according to a transcript.

The contract cancellations affect 11 practice groups in four southern states.

Two Mednax anesthesiology groups in North Carolina were dropped from UnitedHealthcare’s network March 1, and nine more groups, including neonatal, pediatric, and obstetric groups, are scheduled to be terminated between April 23 and Dec. 15 if they are unable to reach an agreement on rates, UnitedHealthcare said in an emailed statement.

UnitedHealthcare denied it abruptly terminated the Mednax contracts. Negotiations began in mid-2019 when Mednax approached UnitedHealthcare “to request additional rate increases on top of its already egregiously high costs,” the insurer said.

“If Mednax physicians were reimbursed at the median rate of other in-network physicians providing similar services in Georgia, North Carolina, South Carolina and Arkansas, it would result in a combined $40.6 million reduction in overall health care costs,” the insurer said.

“Despite the increased noise in the market, the volume of negotiations we are engaged in has not changed from previous years,” UnitedHealthcare said. The “noise” reflects efforts of a small number of physicians, many of whom are backed by private equity, to pressure UnitedHealthcare into allowing them to charge “egregiously high rates,” the insurer said.

‘Sensitive’ Services

The Mednax terminations were unexpected because the company’s business is concentrated in neonatal and maternal fetal medicine, Sarah Kahn, an analyst for S&P Global who covers medical provider companies, said in an interview.

In addition to being “sensitive” services, “we always saw those services as extremely highly specialized, and therefore somewhat protected from reimbursement cuts,” she said.

The contracts under threat make up 2% of the Mednax’s revenue, Kahn said. But all of the company’s contracts with UnitedHealthcare account for $350 million to $400 million, or 10% to 12%, of Mednax’s annual revenue.

UnitedHealthcare has terminated other high-cost contracts in recent years, Kahn said.

The insurer succeeded in renegotiating rates with Envision Healthcare Corp. in 2019 after it threatened hospitals that it would drop the emergency room services staffing company from its network, she said.

UnitedHealthcare also announced it’s terminating its in-network contracts in 18 states with Team Health Holdings Inc., another emergency medical staffing company, between October 2019 and July 2020, Kahn said. That represents about two-thirds of the contracts Team Health had with UnitedHealthcare, she said.

Meanwhile, U.S. Anesthesia Partners Holdings Inc., a national anesthesiologist staffing company also based in Fort Lauderdale, disclosed recently that UnitedHealthcare canceled its in-network contracts in Washington state, and it said it expects UnitedHealthcare to push it out of network in Texas in late April, according to a recent S&P Global report. Kahn was the report’s primary author.

While UnitedHealthcare has been the most aggressive insurer in terminating high-cost contracts and renegotiating rates, “We’re keeping our eyes open about other insurers that become more aggressive,” David Peknay, S&P Global’s director of corporate health care, said in an interview.

To contact the reporter on this story: Sara Hansard in Washington at shansard@bloomberglaw.com

To contact the editors responsible for this story: Fawn Johnson at fjohnson@bloomberglaw.com; Brent Bierman at bbierman@bloomberglaw.com

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