In one state, United suspends new lab protocol

New Jersey physicians will not face possible penalties if patients use out-of-network lab services while regulators review the program.

By Bob Cook — Posted March 26, 2007

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UnitedHealth Group's new laboratory services protocols, which threaten sanctions on physicians whose patients are referred to out-of-network facilities, has run into a roadblock.

United has complied with a request by New Jersey's state insurance regulator, the Dept. of Banking and Insurance, to suspend its new protocols in that state, United spokesman Tyler Mason said. In a statement, the department said it wanted to review United's program because it was "not satisfied with the legality of these protocols." The regulator did not say when its review would be completed.

The protocols, rolled out nationwide as of March 1, attempt to curb physician referrals to out-of-network labs. They state that doctors could be assessed a fine of $50 -- "the amount by which non-par laboratory claims exceed the cost of par laboratory claims, on average," according to United -- for each out-of-network referral. Physicians also could face a change in eligibility for quality-based pay and pay-for-performance programs, a decreased fee schedule or termination from the United network.

The protocols followed United's signing a 10-year exclusive deal with Laboratory Corp. of America to be the plan's exclusive national lab network. It is not unheard-of for large insurers to have exclusive deals with labs, but physicians say they haven't heard of a plan that tried to enforce that deal through doctor sanctions.

United has tried to assure physicians that it would assess any penalties infrequently, and not without talking with physicians first. "It will be applied rarely and with complete respect," Mason said.

But the Medical Society of New Jersey in late February went to the Dept. of Banking and Insurance to ask whether it was legal for United to threaten sanctions outside the realm of a contract. "Penalties of that type and severity needed to be communicated in a contract amendment," said Lawrence Downs, the society's director of public health and acting general counsel. "They were certainly material changes to an agreement. Physicians would have to have the opportunity to review this and re-evaluate the value of that contract."

Downs said the society wondered that if United would enforce their sanctions only rarely, then "why do you need a change in protocol?"

AMA Board of Trustees member J. James Rohack, MD, a cardiologist in Temple, Texas, said the Association supports United's decision to suspend its protocol in New Jersey. But it also called for the company to suspend the lab protocol nationwide.

"United Healthcare has again damaged its relationship with physicians by introducing a protocol that imposes heavy-handed sanctions for referring to out-of-network laboratories," Dr. Rohack said. "Physicians across the country have been angered by the inclusion of unnecessary and punitive penalties in United's protocol.

"The AMA believes United could help mend its significantly damaged relationship with the nation's physicians if it acts now and voluntarily removes the sanctions from its national protocol," Dr. Rohack said.

Various medical societies have protested United's move because it is a rare case in which a doctor could be penalized for a patient using out-of-network services. Normally, a patient pays a higher out-of-pocket fee, with the referring physician seeing no change in compensation.

Mason said the protocols were enacted because of member complaints upon seeing a higher bill, that doctors sent them to out-of-network facilities. He said United physicians have access to in-network labs, even if there is not a nearby LabCorp location.

The American Academy of Family Physicians, which on Feb. 13 sent a letter to United expressing its concerns about the lab protocols, says that after a meeting with the company it is assured that the protocols will not result in much extra hassle for physicians. In-office and physician-owned labs are excepted from the policy. Also, patients generally always go to whatever lab the physician sends them, so the doctor likely will not be caught unaware that patients are going to out-of-network labs, said AAFP board Chair Larry Fields, MD.

But that doesn't mean AAFP supports United's proposed sanctioning system.

"This is a stupid idea," said Dr. Fields, of Flatwoods, Ky. "It's not as much hassle, but it's no less irritating."

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