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Showing posts with label UnitedHealth. Show all posts
Showing posts with label UnitedHealth. Show all posts

Wednesday, October 20, 2010

In Treating Cancer, Insurer Tries New Way to Pay Docs

The Wall Street Journal



In the latest experiment aimed at curbing health-care costs, UnitedHealth Group Inc. is altering the way cancer specialists are paid.

The program, which the insurer plans to announce Wednesday, attempts to address potential overuse of expensive cancer drugs by eliminating any incentive for doctors to choose a drug based on profit. As a result, oncologists will be reimbursed at cost for whatever drugs they prescribe and receive a separate payment covering their services.

Typically, doctors are paid by insurance companies for seeing patients and performing procedures or administering drugs and tests. Critics have said this "fee-for-service approach" gives doctors an incentive to provide more—but not necessarily better—care, which can drive up drug usage and other costs.

To start addressing the problem, the new federal health law calls for Medicare pilot programs that pay doctors based on the quality rather than the quantity of their services.

Private efforts are also cropping up in the wake of the law. Cigna Corp., for example, is testing a payment scheme that shares savings with doctors if costs come in under targets.

UnitedHealth says cancer care poses a particularly thorny problem. Spending on cancer treatment is rising at 15% to 18% a year, a rate that is almost double that of health-care costs generally, the insurer says, citing industry-wide trends. And it says that cancer drugs account for 35% to 40% of its spending on cancer treatment.

Many cancer drugs are infused by doctors in their offices, and historically doctors have purchased the drugs and billed insurers for their cost, plus a profit margin of around 15%, says Lee Newcomer, UnitedHealth's vice president of oncology. "They've become drug dealers."

UnitedHealth estimates that drugs account for 65% of an oncologist's income. In particular, the insurer says, there is concern that toward the end of a cancer patient's life, doctors continue giving drugs as a way to keep being paid for the patient's care. The evidence is anecdotal, Dr. Newcomer notes, but a goal of the pilot program is to reduce any overuse in metastatic cancer patients while still paying doctors to care for patients.

UnitedHealth's new payment program, being tested at five clinics, requires doctors to decide in advance what treatments they would like to use for three types of cancer: breast, colon and lung.

The drugs can include anything from standard chemotherapy with generic drugs to costlier branded treatments, such as Herceptin or Avastin. The insurer will pay the doctors for each drug they actually end up using, but without the traditional markup, and data on the doctors' choices will be shared among the clinics to identify what works best.

To make the doctors whole, the insurer will give them a set fee that includes the profit they would have made from the drugs they selected, plus costs for managing patient care. If doctors use drugs outside of their original treatment plan, the plan will cover the drug but won't adjust the separate payment.

For example, UnitedHealth tallied up one clinic's drug profits for treating a patient with a type of breast cancer that responds to Herceptin. The practice would have made $15,344 in profits for one year of Indianapolis cancer treatment involving Herceptin plus two other drugs.

To devise the new bundled payment, UnitedHealth added to that number a case-management fee and a hospital-care fee, for a payment of $15,575 to manage the patient's care regardless of the drugs the doctors chose.

The acquisition costs for the drugs—about $70,000 to $80,000—
were covered separately.

Eric Winer, the chief scientific adviser to Susan G. Komen for the Cure, a research and educational organization, says he applauds efforts to pay doctors for the time they spend caring for patients instead of for administering drugs as long as those efforts don't create incentives to limit drug use. "The [UnitedHealth] program is banking on the assumption that if we uncouple paying for drugs with paying for care that doctors will do what they do best, which is doctor. It remains to be proven if that will really be the case."

Changing how payments are determined can be controversial. In the 1990s, a model called "capitation" became popular. It set fixed payments for a group of patients in the hope that providers would be able to manage care more efficiently within a set budget. But the approach fell out of favor as patients incurred higher costs than the payment covered. It was also criticized for providing an incentive for doctors to cut back on care so they could save money and pocket the difference.

The UnitedHealth program could run up against similar criticism. "We want patients to get the right treatment for them, and we are worried that [UnitedHealth's approach] could incentivize physicians to undertreat," says Kent Lieginger, senior vice president of managed care at Roche Holding AG's Genetech, a biotech company that makes cancer medicines.

UnitedHealth's Dr. Newcomer responds that the insurer won't penalize doctors for deviating from the initial treatment regimen and will pay all drug costs regardless of which medicines are used.

Doctors in the program say the new system could work, but some of them question how easily it can be scaled up nationally or can be extended to other cancers. "It's something quite novel," says Marcus Neubauer, a medical oncologist at Kansas City Cancer Center who is participating in the pilot.

Doctors who aren't in the program question whether UnitedHealth's payments would cover all of the costs of running a practice. Therese Mulvey, physician-in-chief at Southcoast Center for Cancer Care in New Bedford, Mass., says that technology, imaging and supportive services all stretch clinics and that those costs often aren't covered even by the historically fat drug margins.

"Payments need to be driven by the full cost of care," she says, "not just by the profit margins of the drugs."

Tuesday, October 28, 2008

UnitedHealth Posts 29% Drop in Net

UnitedHealth Group Inc. reported an expected 29% drop in third-quarter profit but said a weak economy would hurt health-plan enrollments next year.

Third-quarter net income fell to $920 million, or 75 cents a share, from $1.28 billion, or 95 cents a share, a year earlier. The earnings included three cents a share in charges.

Revenue for the quarter ended Sept. 30 climbed 7.9% to $20.16 billion.

Investors reassured that UnitedHealth's exposure to issuers of failed mortgage investments and capital market turmoil appears minimal bid up the stock as much as 9% intraday on the news. In 4 p.m. composite trading on the New York Stock Exchange, shares of the Minnetonka, Minn.-based health-insurance giant were up 4%, or 96 cents, or 4%, to $22.63

UnitedHealth and other managed-care stocks have been battered more than most in recent weeks amid worries that their investment portfolios are vulnerable to the global credit crisis.

The company Thursday described its balance sheet as "strong," with nearly 30% of its $20 billion portfolio is in cash or cash equivalents and the rest in what it said were diversified, high-quality investments. The company said it incurred a loss equal to two cents a share on investments during the quarter and that it reduced its debt by $337 million in the period.

But UnitedHealth's chief executive, Stephen Hemsley, provided a cautious outlook for the company in 2009, citing the "economic and political climate." He added that higher job losses would likely mean steeper declines in health-plan membership next year and that enrollment in the first quarter would be down "significantly" from year's end.

UnitedHealth is the largest health insurer by revenue and the first in its category to report results each quarter. This year it has twice lowered profit expectations amid problems keeping premiums ahead of medical costs and declines in health-plan enrollments.

UnitedHealth forecasts 2009 earnings of between $2.90 and $3.15 a share, excluding investment income, on revenue of between $84 billion and $86 billion.
UnitedHealth would like to remind everyone that a great way to increase ones general health is to wear Foot Orthotics.

Friday, May 2, 2008

Group Health Insurance Update: UnitedHealth Slashes Forecast


Revision Reignites Fears About Industry Outlook; Net Lower Than Expected


UnitedHealth Group Inc. reported disappointing earnings and became the latest managed-care titan to slash its profit forecast, reigniting concern about the industry's outlook amid the rising cost of health care and insurance in a rocky economy.

Shares of UnitedHealth, the country's second-largest insurer by number of health plan members, fell during the day Tuesday to $33.48, their lowest point in nearly four years, and ended at $34.15, down 9.7%. The company cited accelerating medical costs and a sharp decline in commercial health-plan members as reasons for its poor first-quarter performance. Though its executives had braced the market for a possible cut in the company's profit outlook, the 10% reduction in expected 2008 earnings a share caught Wall Street by surprise.

UnitedHealth now expects earnings this year of between $3.55 and $3.60 a share, 40 cents lower than the range it forecast earlier this year. "These financial results are not acceptable for a company with our capabilities and potential," said UnitedHealth's chief executive, Stephen Hemsley, who attributed the disappointing results to "our own performance" and the economy.

Some of UnitedHealth's wounds are self-inflicted. The company has been struggling to overcome customer-service problems brought on in part by troubles integrating its 2005 purchase of PacifiCare Health Systems. It has lost some disgruntled customers in the process.

But its thornier problems appear to be more widespread. Economic woes are forcing more employers to cut back benefits or switch to plans that yield less profit, while layoffs are helping to shrink the market of jobs offering health benefits. Also, Mr. Hemsley said, more employed people decline coverage, especially with small companies.

That presses health insurers to compete for customers on price, just as UnitedHealth and some rivals report unexpected upticks in medical costs. The combined effect raises the risk costs will outrun premiums and endanger the record profit margins Wall Street has come to expect from insurers. WellPoint Inc., the largest U.S. insurer by number of health-plan members, which reports earnings Wednesday, set off a fire sale of the sector's stocks last month with a profit warning.

Excluding recent acquisitions, UnitedHealth in the quarter lost 30,000 members from fee-based employer health plans and 530,000 from plans for which it charges premiums to take on the risk of insuring. It blamed a bad flu season for a higher-than-expected 81.5% medical-loss ratio -- the share of premiums it spends on medical costs.

By: Vanessa Fuhrmans & Dinah Wisenberg Brin
Wall Street Journal; April 23, 2008