Another Domino Starting to Fall- The Narrowing of Physician Networks

In previous posts, I’ve discussed the inevitable squeeze that high cost/ low quality physicians will feel from payers as the system becomes more discriminating about paying more “reasonable” rates and only for performance.

There now seems to be evidence that we are seeing the largest health insurers get tough by trimming their networks of the physician value outliers, in some cases doing this en-masse with entire physician groups barred from participating in several Medicare Advantage programs.

This week, the Boston Globe ran a prominent piece on United Healthcare’s recent decision to cut 700 Massachusetts physicians from participating in the UHC Medicare Advantage program.

National insurance giant UnitedHealthcare plans to cut up to 700 Massachusetts doctors from its physician network for seniors enrolled in its private Medicare plan as a way to control costs, according to company officials…. For elderly patients enrolled in the plan, the cuts mean they will have to find a new doctor or eventually switch to a new health plan that covers their current doctor.

The move, effective Sept. 1, follows similar cuts made by the insurer to its Medicare Advantage provider networks in 11 other states, including in Rhode Island and Connecticut, where the reductions drew outrage from patients, doctors, and lawmakers earlier this year. (Boston Globe 6/7/14)
These cuts in physician participation follow large-scale cuts in other states and show that UHC does’t seem to have a lot of fear about disrupting access to specialist in wide geographies.  In Ohio UHC was bold in cutting physicians:
The cancelations include most of the orthopedic surgeons in Dayton, the only hand specialty practice serving the Cincinnati area, a large gastroenterology practice with 2,500 patients that also provides most of the inpatient care at five Cincinnati area hospitals, and the largest practice of retina specialists serving 600 UnitedHealthcare members, many with macular degeneration, in central and southern Ohio. (Kaiser Health News)

In explaining the cuts, UHC indicates that cost and quality were factors leading to the move.  What’s unclear is whether UHC is referencing the rate demands of participating physicians, or their utilization of services.

“Network restructuring is the new normal. It’s not just UnitedHealthcare, but that’s the way health plans will be operating in the future,” said Dr. Sam Ho, UnitedHealthcare’s chief medical officer, in an interview. “Healthcare is going through so many significant changes that it’s no longer a matter of doctors providing services and health plans paying claims, but a focus on the quality and cost effectiveness…” (Boston Globe 6/7/14)

Kaiser Health News quotes another UHC spokesperson reflecting on cuts in other states:

UnitedHealthcare spokeswoman Jessica Pappas said in a written response to questions, “While these changes can be difficult for patients and their doctors, they are necessary to meet rising quality standards, slow the increase in health costs and sustain our plans in an era of Medicare Advantage funding cuts.”

Most commentators agree that the cuts ultimately seem to be the consequence of the the Affordable Care Act which has made Medicare Advantage programs more accountable for cost and quality.  Under the new legislation, quality becomes a driver for reimbursement to the Advantage programs, while rates are expected to fall.   The Kaiser Family Foundation notes:

The ACA of 2010 revised the methodology for paying plans and reduced the benchmarks. For 2011, benchmarks were frozen at 2010 levels.  Reductions in benchmarks will be phased-in over 2 to 6 years between 2012 and 2016.  By 2017, when the new benchmarks are fully phased-in, the benchmarks will range from 95% of traditional Medicare costs in the top quartile of counties with relatively high per capita Medicare costs (e.g., Miami-Dade), to 115% of traditional Medicare costs in the bottom quartile of counties with relatively low Medicare costs (e.g., Boise).

The ACA specified that plans with higher quality ratings would receive bonus payments added to their benchmarks, beginning in 2012.  The ACA also reduced rebates for all plans, but allowed plans with higher quality ratings to keep a larger share of the rebate than plans with lower quality ratings.  A CMS demonstration was implemented in 2012 that superseded bonuses specified by the ACA, raised the size of the bonus payments, and increased the number of plans that would receive bonus payments, providing an additional $8 billion in bonuses between 2012 and 2014.

So, here we have a funny issue.  What we are seeing, I think, is the federal government pushing the private insurance companies to take “risk” and not simply serve as conduits for Medicare FFS payments.  The insurance companies have responded by becoming more aggressing in lowering their price points by limiting their networks to only value (cost/quality) providers.

xxxx-fact-sheet-medicare-advantage-exhibit-3I wonder how the government plans to control costs in the traditional Medicare FFS program.  By selecting the highest value providers to participate in Medicare Advantage, low value physicians will be clustered in traditional FFS.  In other words, UHC is creating a two-tiered setup where high value physicians are invited to participate in potentially lucrative programs while others are left exposed in traditional FFS with few incentive opportunities.

What happens next is anyone’s guess: perhaps indiscriminate across the board rate cuts for the traditional FFS program to trend the rates commonly seen in FFS Medicaid?

It seems clear, though, that there is great opportunity for insurers and providers to generate value in well-managed Advantage programs.  I certainly see the benefit of having seniors receive well-managed care through a captivated Advantage program that focusses on prevention, addresses drug costs and the like.  HMO plans constitute over 60% of the Advantage program as seen in this slide from the Kaiser Family Foundation.

But these is no mistaking the fact that what we are witnessing is an insurance company making careful decisions about who to partner with in order to maintain a profit.  The same calculus will, no doubt, play out among physician groups taking risk from insurance companies.

One final note: The massive amount of hyperventilation that has accompanied UHCs decision to winnow its physician network has been notable.  Howls of outrage are coming from both politicians and from physician medical societies.  The Boston Globe quotes a senator:

“This phenomenon is nationwide and needs to be addressed,” Senator Richard Blumenthal, a Connecticut Democrat, said in an interview. “I’m reviewing possible legislation that would prevent this kind of draconian discharge of providers from networks serving Medicare Advantage patients.”

I’m not going to say much about the advisability of creating laws which would restrict the market’s ability to differentiate providers on the basis of cost and quality.  Certainly consumers will be inconvenienced by UHCs changes to their networks, and they have been reaching out to their political representatives.

But, ultimately, patients aren’t served unless there is some degree of provider accountability.  The political opposition supports my assumption that having provider groups police their own value generation through provider risk contracting is a more politically tolerable approach to value as opposed to having insurance companies serve as the policemen.

There will be a lot of hard questions for physicians ahead, particularly those with a value problem:

“We’re really opposed to (UHC’s) actions because it’s going to limit access to care,” said Dr. Richard Pieters, president of the Massachusetts Medical Society. “We think the decisions on how they are eliminating physicians may well be arbitrary and not based on quality. It’s very unsettling. Potentially, this is just another domino starting to fall.”

I’d be pretty comfortable that UHC’s actions aren’t going to limit any access to care in the aggregate, and that what we are seeing is simply a question of musical chairs where the total number of caregivers doesn’t change in the least, but that patients and providers get new dance cards.  And, I’m also pretty sure that UHC doesn’t make any arbitrary decisions about restricting networks and inconveniencing its membership. Their actions are based on rigorous analysis.

But, Dr. Pieters (who, in addition to his role at the medical society also serves as a respected radiation oncologist at the University of Massachusetts) and I can agree on a few things:  This is unsettling, and is probably supposed to be.  And, yes, the dominoes are falling with a thud.

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