MCOs must move system toward net gain

February 15, 2009
Tracey Walker
Tracey Walker

She is senior editor of Managed Healthcare Executive.

After New York State Attorney General Cuomo's industry-wide investigation of allegations that insurers saddle consumers with too much out-of-pocket costs, UnitedHealth says it will develop a new, independent database. Consultants say this is emblematic of a more persistent problem: the relationship among payers, patients, and providers.

The January settlement between New York Attorney General Andrew Cuomo and United Health Group over reimbursement amounts for out-of-network providers is emblematic of a more persistent problem: the relationship among payers, patients, and providers is largely zero-sum.According to Steve Spear, author, senior lecturer, Massachusetts Institute of Technology and senior fellow, Institute for Healthcare Improvement, “More profit, care, or payment to one means sacrifice on the part of the other two. However, this ignores the reality that the situation should not be zero-sum. It is demonstrably possible to provide better care, to more people, at less cost, and with less stress, strain, and effort.”

When more sophisticated approaches to managing the delivery of care are used, the results have been positive, he says. As Spear describes, there are numerous examples in healthcare of organizations generating far more value with far less effort than their rivals.

“MCOs have a critical role in moving us from a zero-sum to a net-gain situation,” Spear continues. “The basic problem is that we pay for healthcare based on time, effort, and resources consumed not on the quality of results generated. This is actually a scheme for rewarding the most inefficient while penalizing the most effective.”

Thomas L. Strickland, executive vice president and chief legal officer of UnitedHealth Group said in a statement after the settlement that UnitedHealth “is committed to increasing the amount of useful information available in the healthcare marketplace so that people can make informed decisions.”

UnitedHealth Group Inc. has agreed to pay $50 million to fund a nonprofit entity to develop a new, independent database product to determine reimbursement amounts for out-of-network providers.The new database product will ultimately replace the Prevailing Health Charges System (PHCS) and Medical Data Research (MDR) products owned by UnitedHealth Group’s subsidiary, Ingenix Inc. When the new database product is ready for commercial use, Ingenix will close the PHCS and MDR database products. Until that time, Ingenix will continue to update and serve database customers.

According to the Office of the Attorney General press release, Cuomo’s investigation concerned allegations that the Ingenix database intentionally skewed usual and customary rates downward through faulty data collection, poor pooling procedures and the lack of audits. The investigation found the rate of underpayment by insurers ranged from 10% to 28% for various medical services across the state. It found that having a health insurer determine the usual and customary rates creates an incentive for the insurer to manipulate the rate downward, according to the release.

The creation of a new database, independently maintained by a nonprofit organization, is designed to remove this conflict of interest. The nonprofit entity will also develop a Web site designed to educate consumers more directly about market prices.

At press time, the American Medical Assn. and several state medical associations joined with individual physicians in filing separate class-action lawsuits against Aetna and CIGNA, claiming the companies used rigged data to dramatically underpay physicians.

In a statement, CIGNA said it used Ingenix data to determine reasonable amounts to pay for the small percentage of claims submitted for services provided by non-contracted healthcare professionals. CIGNA said it disclosed to doctors and consumers its use of the third-party Ingenix database as the basis of its out-of-network rate calculation.

“The use of the reasonable and customary methodology is a valuable method for our customers to manage costs and reduce upward pressure on the premium rates paid by individuals while maintaining access to a broad array of doctors,” says Chris Curran, CIGNA spokesman.CIGNA said its payments to out-of-network doctors are robust and fair, and greater transparency in regards to physician pricing will prove that point. According to CIGNA, more than 95% of office visits are made to in-network physicians today, and CIGNA believes that increased transparency around physician pricing will further support efforts to drive lower cost, high-quality care.

Aetna's Chief Medical Officer, Lonny Reisman, MD, calls the lawsuits filed by the AMA and state medical associations “disappointing.”“We hope to continue our collaborative dialogue with the medical community, and this will not help advance what we believe is our mutual desire to transform healthcare and provide people with access to affordable, high-quality healthcare,” Dr. Reisman says. “During the past few years Aetna has been actively engaged with the medical community on a range of issues, from initiatives that will improve the ability of physicians to do business with us, to major public health efforts such as racial and ethnic disparities in healthcare and genetic testing. We have simplified business transactions with physicians, increased transparency of policies and processes, and worked with the medical community on evidence-based guidelines in medicine.”