Doctors Assail
UnitedHealth's
Threat of Fines

By VANESSA FUHRMANS

Wall Street Journal
April 10, 2007; Page B1

A new UnitedHealth Group Inc. policy that threatens to fine doctors for referring patients to out-of-network laboratories for tests is mushrooming into a bitter dispute between the health-insurance giant and many of the 520,000 physicians in its networks nationwide.

Most health plans are designed so their members pay more when they go to an out-of-network doctor or take a nonpreferred medication. But the financial sanctions -- which UnitedHealth has yet to impose -- mark the first time a physician could be fined by a health insurer if he or she directs a patient to seek out-of-network care or testing, the American Medical Association says.

The threats stem from a 10-year deal that UnitedHealth struck late last year with Laboratory Corp. of America Holdings to become its national in-network laboratory. With 28.5 million health-plan members and growing, UnitedHealth has been using its heft more and more in recent years to negotiate cut-rate fees with doctors, drug makers and other suppliers. In the same vein, it signed on Lab Corp. after its longtime lab partner, Quest Diagnostics Inc., said it couldn't accept new terms that UnitedHealth wanted and dropped out of contract negotiations.

To squeeze as much savings as possible out of the Lab Corp. deal, UnitedHealth sent a not-so-friendly reminder to doctors to play along. If doctors consistently failed to refer patients to Lab Corp. or other local in-network lab facilities as of March 1, UnitedHealth said it reserved the right to fine them $50, cut their fees or oust them from the network.

The strategy threatens to backfire. A backlash brewing among physicians and regulators is creating a public-relations mess as the company continues to struggle to recover from a stock-options backdating scandal. It also comes on top of a series of rancorous contract negotiations with doctors and hospitals in California, Colorado and other parts of the country. "This is beyond punitive; it's abusive," says Ted Mazer, an ear, nose and throat doctor in San Diego. "And it makes you wonder, what's next?"

The AMA and a number of state medical societies have demanded that UnitedHealth rescind the policy. In New Jersey, the health insurer temporarily suspended the threat of sanctions after the state Department of Banking and Insurance said it had concerns about their legality. Connecticut's attorney general, Richard Blumenthal, says he may ask UnitedHealth to rescind the policy there as well. "We haven't made a formal demand, but my hope is the company will do the right thing and stop this policy," he says.

UnitedHealth defends the threats as a last-resort measure to protect its health-plan members from paying high out-of-network prices for lab work. In some cases, it says, patients are being billed more than seven times more for tests by an out-of-network Quest lab than what they would pay in-network. The insurer also wants to direct tests to Lab Corp. to streamline analysis of lab data and for such efforts as tracking whether patients are meeting blood pressure or cholesterol targets.

The insurer says it has no plans to fine doctors in cases where patients decide on their own to go to an out-of-network lab. "But we have a responsibility to members to act on their behalf" if a doctor is repeatedly sending patients to out-of-network labs, says Tyler Mason, a UnitedHealth spokesman. He adds that though the insurer expects to apply the sanctions only "sparingly" and after talking with the doctor, "we need to have that recourse."

Many doctors complain that the threat has disrupted patient care -- especially in markets where Quest labs dominate, such as New York. Some lab companies' blood and tissue tests, for example, differ in the methodology used to determine reference ranges for what's considered a normal result. That includes Lab Corp. and Quest's tests to track the level of T-helper lymphocytes -- cells that produce antibodies and indicate immune-system strength -- in patients infected with HIV, the virus that causes AIDS.

Jeff Gumprecht, a Manhattan infectious-disease specialist accustomed to sending UnitedHealth patients to Quest, says he began referring many of them to Lab Corp. for blood work after getting letters from the insurer. Because of different methodologies used by the two companies, their results differed, in this case making Lab Corp.'s counts look lower than those reported by Quest.

Although it turned out that nothing was amiss, Dr. Gumprecht had to repeat many of the tests to ensure that something else wasn't at play. "How is that saving anyone money?" he asks. "Meanwhile, I have to explain to an anxious patient why the results are suddenly different." He now sends a lot of patients to Lab Corp. but still refers some to Quest.

Quest says it has appealed the way UnitedHealth has processed claims on behalf of some patients, arguing the insurer is requiring them to pay too great a share of the cost for using Quest labs. In some instances, Quest has put off billing patients until the cases have been resolved.

Meanwhile, some doctors and their medical societies contend that the UnitedHealth sanctions, beyond affecting patient care, would violate the health plans that UnitedHealth administers. While HMO-style plans can restrict members from going to physicians or labs outside their networks, UnitedHealth's policy extends to the Preferred Provider Organizations, or PPO plans, that most insured people have. These allow members the choice to go out of network as long as they pay a bigger share of the cost. But UnitedHealth's Mr. Mason says the insurers' contracts with doctors have always required that they follow its referral protocols.

Not all doctors are upset. The American Academy of Family Physicians wrote a letter of concern to UnitedHealth in February. But it told members that the health insurer had eased its worries after clarifying that it would not punish doctors for patient's decisions and only apply the sanctions in rare cases where a doctor repeatedly defied the policy. "This doesn't look as bad as it originally did," says Bruce Bagley, the academy's medical director for quality and improvement. Dr. Bagley also serves on a physician-advisory committee for UnitedHealth.

Still, many allergists say Quest is the only national commercial lab, in addition to some smaller, regional labs, that provides what's widely considered the gold-standard blood test to detect food and other allergies. "Now, either a patient doesn't get the best test, or I could get fined," says Ivor Emanuel, a San Francisco allergist who adds he'll still refer patients to the Quest test if he believes it's in their best interest.

Lab Corp. says it provides a similar allergy blood test and one of the broadest ranges of allergen tests available.

Write to Vanessa Fuhrmans at vanessa.fuhrmans@wsj.com