Moving Out of the Hospital: Should Anesthesia Be Worried?

Summary
United Healthcare has announced a new policy intended to direct a long list of procedures to qualified surgical centers. This may be a positive development for anesthesia practices, even though it may reduce hospital volume.

The cost of healthcare is slowly overshadowing other considerations in American medicine. Physicians tend to focus their management strategies on ways to enhance practice incomes. As this happens, and as the overall utilization and cost of healthcare continue to rise, payers are always refining their policies to control the cost of healthcare by managing utilization. To date, this objective has resulted in three distinct categories. Providers are most aware of payer efforts to limit contract rates and the tendency to fixate on contract negotiations. The reality is this is just one factor in the equation. From a payer perspective, utilization has become the primary concern. An increase in utilization of a specific service, such as anesthesia for endoscopy, has a multiplier effect and can dramatically impact the overall cost of healthcare.

Anesthesia providers need to understand that issues such as pre-authorization and place of service are far more significant to the economics of healthcare than contract rates. A recent UnitedHealthcare (UHC) policy update highlights the significance of utilization to their business strategy. Ironically, this policy change may actually be a positive development for anesthesia.

The Cost Differential

Anesthesia providers tend to view a case in terms of what they get paid for it, but a payer looks at it as an episode of care. A procedure performed in a hospital costs significantly more than one performed in an ambulatory surgery center (ASC). Most anesthesia practices have long since recognized the significance and value of migrating many types of surgeries from inpatient venues to ambulatory venues. Conventional wisdom suggests that outpatient cases involve patients of lower acuity and a more favorable payer mix. Most view the hospital with its higher Medicare and Medicaid population as somewhat of a loss leader. It is the outpatient venues that provide the necessary financial balance. Payers tend to share this perspective but for different reasons.

The Policy Shift

The new UHC policy proposes to revive the mechanism of pre-authorization to steer a list of medical procedures to non-hospital settings. The payer's so-called "site-of-service medical necessity review" will take place during the prior authorization process and apply to more than 1,100 medical codes for a wide array of planned procedures, from colonoscopies and knee replacements to eye surgeries, biopsies, removing a tumor and inserting a pacemaker or heart catheter, according to a company utilization review guideline.

A UHC executive noted that there is an opportunity to provide more hip and knee replacements in ambulatory centers, which he asserted can cost 50 percent less than in traditional settings with comparable or better safety and quality. UnitedHealthcare is "rapidly expanding this approach to additional high-cost services," while also taking a similar approach to imaging and the administration of specialty drugs.

The Leading Edge

It is very common in healthcare for one company or insurance plan to take the lead in such policy changes. If the impact proves to be positive for patient care and payer profitability, we can expect other plans to follow suit. The good news is that this is a change that should be viewed as generally consistent with the prevailing anesthesia management strategy, which is to follow the revenue in the targeting of new venues and growth opportunities.

There is one ongoing downside of this migration of cases from traditional hospital venues to ambulatory facilities, which must be acknowledged. The erosion of payer mix within the hospital can have a significant impact on the practice's bottom line and underscores the need for subsidy support.

The ultimate objective of the UHC policy is to ensure that patients receive the best quality of care at the lowest cost. This is just one more example of the changing medical landscape that anesthesia practices have to adapt to. This creates a distinct window of opportunity for anesthesia practices, which have a variety of resources and strategies to enhance the overall quality of the patient's surgical experience. Anesthesia practices should be tracking the types of procedures that are migrating from inpatient to outpatient venues so that they can be proactive in promoting this inevitable evolution. For assistance in identifying the types of cases the UHC policy will involve and the overall migration pattern of cases away from the hospital setting, feel free to contact your ABC account executive.