AHA Decries UnitedHealthcare’s Diagnostic, Drug Coverage Policies

February 09, 2021 - The American Hospital Association (AHA) is seeking immediate relief from UnitedHealthcare’s new benefit design program that would restrict in-network diagnostic providers.

The hospital group called on CMS to exercise its oversight authority over Medicare Advantage, Medicaid managed care, Children’s Health Insurance Program and Health Insurance Marketplace health plans to prevent the private payer from implementing the program dubbed the Designated Diagnostic Provider program.

UnitedHealthcare recently introduced the program meant to ensure cost-efficiency and delivery of high-value care by covering outpatient laboratory services provided solely by freestanding or hospital lab providers who meet certain quality and efficiency requirements.

However, AHA is arguing that the program “could eliminate coverage for diagnostic tests at most freestanding and hospital labs while continuing to portray these providers as ‘in-network’ to health plan enrollees.”

“This policy would result in substantial confusion among patients about which providers are covered by their health plan, and, as a result, also likely increase the incidence of surprise medical bills that will not be prevented by recent changes in federal law,” Thomas P. Nickels, AHA’s executive vice president of government relations and public policy, continued in the letter to Acting CMS Administrator Liz Richter.

READ MORE: AHA Slams Big Pharma Over Efforts to Limit 340B Drug Discounts

AHA also raised concerns that the program could result in more surprise medical bills for patients since some laboratories would appear to be within a patient’s network even though they have not earned Designated Diagnostic Provider status according to UnitedHealthcare’s policy.

Patients would be responsible for the costs of care provided by non-Designated Diagnostic Provider laboratories.

Additionally, the group urged Richter to investigate another UnitedHealthcare policy limited specialty pharmacy coverage.

Specifically, AHA decried new coverage policies that no longer permit some providers to acquire and store a variety of drugs needed to treat patients.

“Instead, the health plan demands that these providers accept drugs purchased and handled by the health plan, which in turn relies on the OptumRx chain of owned and affiliated specialty pharmacies. These actions pose significant risks to quality of care as providers have inadequate control in ensuring patient access to high quality drugs as well as the appropriate storage and handling of those drugs,” the group explained in the letter.

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UnitedHealthcare’s parent company UnitedHealth group runs Optum, its health services platform.

CMS should disallow implementation of the Designated Diagnostic Provider program in products it oversees and prohibit the apparent use of “white bagging” and “brown bagging” of prescription drugs by health plans serving Medicare Advantage, Medicaid, Children’s Health Insurance Program, and federally-facilitated Health Insurance Marketplace populations, AHA recommended.

White bagging occurs when a provider cannot procure and manage the handling of a drug used in patient care; instead, a third-party specialty pharmacy dispenses the drug and sends it to the hospital or other providers on a case-by-case basis.

Brown bagging is a similar practice that occurs when third party specialty pharmacies dispense drugs directly to patients who are then responsible for bringing the prescription drugs to the hospital or other healthcare provider for administration.

The latter practice, in particular, raises serious patient safety concerns for hospitals, especially since there is no guarantee patients with handle drugs properly.

READ MORE: Hospital Prescription Drug Spending to Increase 4.57% in 2020

But restricting white bagging is still needed, AHA continued, so the practice is only employed when certain criteria are met, such as instances in which the provider and health plan agree on the clinical best interests of the patients or in which certain providers, like rural hospitals, may prefer to partner on some pharmacy operations.

And when white bagging is permitted, payers should be required to give advance notice to providers to address any gaps in information and to secure appropriate agreements, AHA suggested.

In response to the letter, a UnitedHealthcare spokesperson Tracey Lempner told RevCycleIntelligence that the Designated Diagnostic Provider program is aimed at delivering high-quality, low-cost care for its commercially insured members.

“Some hospitals may charge as much as 500 percent more on average for lab services, depending on where they are performed,” Lempner said in an emailed statement. “Designated Diagnostic Provider benefit designs will cover outpatient lab services provided by qualified free-standing and outpatient hospital laboratories who meet quality and efficiency criteria. The new benefit designs provide our members with access to quality, efficient care while helping to protect them from higher lab costs.”

Additionally, UnitedHealthcare has planned robust member and provider education to inform stakeholders of the program and it will continue to review applications for Designated Diagnostic Provider status until the program launches this summer.

Members who neglect to see a designated provider will also be able to appeal charges incurred by going to a non-designated diagnostic provider. Members will receive a one-time exception.

In a separate statement, UnitedHealthcare also commented on its specialty pharmacy coverage policy.

“As of October 1, 2020, outpatient hospitals in UnitedHealthcare’s commercial network are subject to an expanded requirement that requires additional specialty drugs to be sourced from indicated specialty pharmacies, unless otherwise authorized by UnitedHealthcare,” the statement emailed to RevCycleIntelligence reads.

“Our data shows that, for some outpatient hospitals, the reimbursement rate on some specialty drugs may be over 400 percent of the reimbursement rate established by the Centers for Medicare & Medicaid Services (CMS) for the same drug. By requiring outpatient hospitals to source these drugs through an indicated specialty pharmacy, we are driving unnecessary costs out of the health care system to help make care more affordable.”

Cost savings could be north of tens of thousands of dollars, the spokesperson added. For example, average savings under the specialty pharmacy coverage policy would be $47,000 for just one infusion of Ocrevus, a multiple sclerosis drug, if sourced through a specialty pharmacy.

CMS has not published a public response to AHA’s letter.