UnitedHealthcare ("United"), the nation’s largest health insurer, is using a dual strategy to put downward pressure on provider reimbursement rates: (1) strategic contract terminations, combined with (2) heavy investment in its own physician practice operations to allow it to directly compete in the market and drive down rates.
Although United has engaged in various strategic contract terminations, such as with Houston Methodist in the beginning of 2020, the most visible recent such termination was Mednax. Mednax employs thousands of anesthesiology, neonatology and high-risk OB physicians providing services in all 50 states. The contracts impacted by United’s recent Mednax terminations involve physician services in Arkansas, Georgia, North Carolina and South Carolina, with terminations set to take effect from March 1 to September 1 of this year.
United’s “terminate to negotiate” strategy obviously disrupts patient care. This patient impact is notable in the case of Mednax, for example, because it is impractical for patients to shop for the types of services involved – like neonatology for high-risk births. Similarly, anesthesia is a common specialty that results in surprise billing, even for diligent patients who track down the network status of the facility they are using and their operating physician. But many observing the situation believe that this type of preemptive termination anticipates success in Congressional efforts to pass surprise billing legislation. New drafts of surprise billing laws released this year have received committee attention with bipartisan support. United could be anticipating that, if efforts to pass surprise billing legislation at the federal level are successful, the risks from surprise bills could be shifted from patients onto the providers themselves. This would be particularly true if certain policy proposals with Medicare-based benchmarks carry the day.
A second prong of United’s strategy to drive down physician reimbursement rates appears to involve competing as an independent participant in the market. Some have claimed that this example of plan-provider vertical integration and United’s head-on competition in the provision of primary care have also led to physician contract terminations.
United has invested heavily in the acquisition of physician practices, for example, in the acquisition of 2,200 individual providers within DaVita Medical Group that closed in June 2019. Today, its affiliate Optum touts itself as having nearly 50,000 employed, managed or contracted physicians. In some ways, the healthcare provider community has yet to fully realize the impacts of having an integrated plan and provider organization of this scale competing in their traditional space. But the phenomenon of United terminating physician network contracts in favor of narrow networks featuring its own employed physician groups to the exclusion of others has brought this trend into clearer focus.
As Kaiser Health News reported last month, United terminated hundreds of physicians in its northern and central New Jersey Medicaid physician network in 2019, resulting in litigation.[1] United did so in the same market where, through Optum, it operates the Riverside Medical Group. Evidence came to light that in the same notices patients received informing them of the cancellation of their physician providers, they were directed to seek care at the 20-office Riverside group.
The competitive impacts of United’s stature as a payer and, through Optum, an extremely large provider of physician services are particularly noticeable in the physician network actions United recently has taken. The success of surprise billing initiatives currently before Congress and the degree of pricing burden those laws shift to providers will heavily impact whether these strategic terminations are viewed more as a hit to providers or instead a material impact to the public at large.
[1] See Needy Patients ‘Caught in the Middle’ As Insurance Titan Drops Doctors (Feb. 25, 2020), available at khn.org/news/needy-patients-caught-in-the-middle-as-insurance-titan-drops-doctors/.
