Administrative prior authorization requirements increasingly used to steer patients to lower-cost settings

• According to a recent MGMA survey, 83% of respondents said prior authorization was the No. 1 reason for increase in regulatory burden in the past 12 months.
• However, it looks like the issue is going to get worse before it gets better. UnitedHealthcare has announced that it will expand site-of-service prior authorization requirements nationwide effective Nov. 1 for its ACA marketplace and fully insured products.
• The impact on hospital finances could be significant as UnitedHealthcare’s site-of-service prior authorization requirements will apply to approximately 1,100 CPT codes for scheduled services.

Healthcare Dive is reporting: Medical practices continue to be frustrated with red tape and reporting requirements, with 86% saying regulatory burden has increased in the past 12 months, according to a Medical Group Management Association survey released the week of Oct. 14.

“Prior authorization was the main culprit — 83% of respondents said that issue was either “very” or “extremely” burdensome,” according to Healthcare Dive.

“Almost all practices surveyed said reduced regulatory burden would allow them to reallocate resources toward patient care and 80% said it would let them invest in new technology,” said the article.

Takeaway

As I mentioned in my Oct. 15 blog,  prior authorizations should be low-hanging fruit for administrative simplification. And there are many ways it could be reduced. However, it looks like the issue is going to get worse before it gets better.

UnitedHealthcare announced that it will expand site-of-service prior authorization requirements nationwide effective Nov. 1 for its ACA marketplace and fully insured products. Not surprisingly, the policy is intended to move procedures from hospital-based settings to freestanding settings.

What’s at stake for hospitals?

The impact on hospital finances could be significant as it will apply to approximately 1,100 Current Procedural Terminology codes for scheduled services ranging from colonoscopies to knee replacements.

During its third-quarter earnings call, UnitedHealthcare’s CEO told analysts the policy would save $500 million in 2020. He further projected that in UnitedHealthcare’s commercial business they can reduce the cost of care by 20% by shifting more procedures to the freestanding setting. Not only will UnitedHealthcare benefit from this on the health plan side, but its Optum unit owns 210 ambulatory surgery centers (ASCs) from its acquisition of Surgical Care Affiliates, so I would imagine they’ll boost overall margins by steering patients to their ASCs in what amounts to a transfer of funds from the “right pocket to the left pocket.”

From UnitedHealthcare’s perspective, this policy is intended to address excess healthcare spending related to “pricing failures” that were identified in a recent JAMA Network study updating projections of health system waste. This signals an expanding front in health plans’ efforts to control cost by essentially making providers who are contracted to be in-network, out-of-network.

Assuming this move by UnitedHealthcare survives any legal challenges, hospitals will need to figure out how to deliver these services profitably at a lower rate of payment or risk ceding this volume to freestanding practices and ASCs.