Big HMO relents on managed care principle

Phil Galewitz

Monday, Nov. 8, 1999 | 9:04 a.m.

NEW YORK - In a monumental shift for the health maintenance organization industry, UnitedHealth Group says it will give doctors the final say on what care is medically necessary.

UnitedHealth, the nation's second-largest health insurer, has decided to eliminate a type of red tape that has particularly vexed many patients, an official at the HMO confirmed today.

An official announcement on the new policy is expected on Tuesday, said the source, who spoke on condition of anonymity.

The ability of HMO managers to overrule doctors' decisions about what procedures and services are medically necessary- and thus covered by insurance- has been a basic tenet of managed care. It also has been a policy that HMO officials insist was responsible for bringing down the steep health cost increases of the late 1980s and early 1990s.

But doctors and patients have argued in statehouses and in Congress that the policy put patient care in conflict with HMO profits.

UnitedHealth, which covers 14.5 million people, paid more money to scrutinize and deny questionable treatments than the practice saved, Dr. Archelle Georgiou, the Minneapolis-based company's chief medical officer, told The Dallas Morning News. Georgiou said UnitedHealth approved 99 percent of requests, so the process was unnecessary.

"Within UnitedHealth care, we were spending $100 million a year nationally to say yes," she told the newspaper, which reported the decision today. "Yet, it was the root cause of many of the negative perceptions of managed care."

Some experts, terming the company's planned move a historic one in managed care, expect other insurers to do likewise because of industry pressure.

"It's just extraordinary. Here they are saying that there are other ways to save money without rationing care," Robert Blendon, a Harvard University professor of health policy, told the newspaper. "It removes a fundamental tenet of how these plans have been operating in order to be cost-effective."

In the mid-1990s, managed care became the nation's primary health insurance system because costs were escalating. But patients and physicians have grown resentful of HMOs in recent years.

Insurers are now placing more trust in their physicians by reducing the number of procedures requiring pre-approval, according to the American Association of Health Plans. The industry trade group has surveyed the top 25 managed care companies to assess how they handle treatments doctors recommend.

"We've known all along that these sorts of administrative hurdles are costly, not only in lives and quality of life, but it's also costly to administer," said Lisa McGiffert, a Consumers Union senior policy analyst in Austin, Texas.

Under the new system, the newspaper said, physicians will still be required to notify the insurer if a patient enters the hospital, requires home health care or needs expensive medical equipment, and United HealthCare may ask for more

information or suggest less-costly treatments.

But unlike the previous system, Ms. Georgiou said, the final decision on medical necessity will rest with the treating physician.

If the service is not covered under the insurance contract - for example, cosmetic surgery - it still will not be paid for.

Doctors who lag behind their peers on quality or cost measures could be removed from United Healthcare's network, she said, but the first step would be to offer them help to improve.