United's fine mess: A way to alienate physicians

Many physicians are outraged about a policy sanctioning doctors for referrals to out-of-network labs.

Posted May 14, 2007.

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It shouldn't have to take government action by each state for UnitedHealth Group to come to its senses on a policy that rightly has many physicians seething. We're talking about United's threat to issue fines to doctors who do not refer patients to network labs.

But at this point, with the edict on hold only in New Jersey, United still appears happily wedded to this turkey. If United executives keep on this tack, they will further damage an already often-strained relationship with physicians.

Many physicians are outraged that on March 1, United established a policy that fines them a minimum of $50 if they refer patients to out-of-network labs. There's more. Physicians also could face a change in eligibility in United's pay-for-performance and quality-rating programs or a decreased fee schedule. Doctors even risk being terminated from United's network.

Letters we have received from medical practices are blunt in expressing concerns and frustration. One asks: "How and why is the physician, a third party to the patient-insurance contract, the fall guy?" Another wants to know: "How much more can we do to police patients for the insurance companies? ... Would we be able to 'fine' the insurance company because their client didn't meet their financial obligation to us and we were losing money?"

Leaders of organized medicine have spoken out repeatedly against what is believed to be the first time an insurer has looked to punish physicians for sending patients out of network. Connecticut State Medical Society representatives met with their state attorney general to raise the question of whether United's policy was illegal. The American Medical Association and Iowa Medical Society sent letters to United voicing concerns. State medical society officials in Washington, Texas and Florida also are among those who questioned the policy.

It was a government official in New Jersey who got United to back off in that state -- at least for now. Medical Society of New Jersey officials went to their state Dept. of Banking and Insurance to question the policy. And challenge the measure is exactly what New Jersey Commissioner Steven M. Goldman did.

He ordered United to show why it shouldn't be required to abandon its latest policy. The commissioner pointed out that it doesn't appear that the sanctions were in physicians' contracts, nor did the doctors agree to the change. It also doesn't seem that the standards under which United's sanctions may be imposed and the formula to calculate penalties and fee reductions are clearly articulated, the commissioner wrote.

Goldman also said it looks like the sanctions might create a threat that results in cases in which doctors don't make appropriate out-of-network referrals that may be in a patient's best interest and that the policy could affect "members' benefits, quality of care and health care plan choice."

United suspended its policy in the Garden State. It's a start, but barely.

In a letter to United, the AMA pointed out that the insurer would "go a long way in repairing the significant damage it has done in its relationships with physicians by revising the protocol on a national basis."

Instead of dropping the divisive -- and as the New Jersey analysis suggests, legally questionable -- policy, United representatives defend it: The policy isn't intended to punish physicians for patients' choices, and the doctor won't be fined if a patient defies their referrals and selects a non-network lab. The policy is meant to be patient-friendly, saving its members out-of-network fees. United plans to use the fine and other sanctions infrequently and has yet to levy one.

But from the perspective of many doctors, this whole controversy is a study in how a powerful health plan gets its way. And United is clinging awfully tight to a $50 fine, and other sanctions, that it claims to be so reluctant to use.

Also, it is hardly lost on observers that United just entered into a 10-year exclusive laboratory services deal with LabCorp. The Wall Street Journal provided useful insight when it linked the fines to United's interest "to squeeze as much savings as possible out of the LabCorp deal."

Meanwhile, New Jersey is the one place where physicians have won a reprieve. Other states should follow its lead aggressively, or, better yet, United should drop the whole ill-conceived policy.

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