As health systems around the nation buy up office-based physician practices and redub them outpatient facilities, Pennsylvania's largest insurer may be starting a competing trend with a new payment policy for one of the most profitable specialities.
Starting in April, Highmark is going to "restore more rational payments" for cancer care in western Pennsylvania by "eliminating markups" on a number of oncology services, including infusion chemotherapy, citing "a dramatic increase" in costs from formerly independent physician practices now billing chemotherapy services with included hospital outpatient fees.
The insurer said the change is limited to western Pennsylvania markets, presumably mostly to University of Pittsburgh Medical Center providers, because provider reimbursements in the rest of the state have largely been free of the office-practice-as-outpatient billing phenomenon.
Highmark president and CEO William Winkenwerder, MD, said the change could save the insurer and members as much as $200 million per year without substantially impacting access or quality.
"Because of this practice" -- office-based oncologists billing as hospital outpatient departments -- "many cancer patients in western Pennsylvania pay much more for their infusion chemotherapy treatments than they should, without any care improvements," Winkenwerder said in a media release.
While saving Highmark a fair amount, the insurer maintains that members will also see reduced out-of-pocket expenses.
A Highmark-insured cancer patient could save as much as $3,500 for a single treatment, "depending on the drugs being used and how the costs are applied to the member's insurance deductible," said the insurer's chief medical officer, Donald Fischer, MD, who helped develop the company's performance-based incentive program.
The new policy is among the first salvos from an insurer in what may become a war between payers and health systems over outpatient facilities fees in oncology reimbursements. Nationally, the office-practice-as-outpatient trend has been increasing as health systems acquire more group practices in a number of specialities but particularly in oncology.
The trend has impacted Medicare as well as commercial payers. According to the Medicare Payment Advisory Commission, which is due to make recommendations this year on its previous suggestions of paying "similar amounts for similar services" regardless of location, Medicare was paying 80 percent more in 2011 for a 15-minute office visit in outpatient facilities than in freestanding physician offices.
Between 2009 and 2011, Medicare was billed at least 25 percent more for outpatient chemotherapy services administered in hospital outpatient facilities than in community-based oncology practices, according to a claims analysis by the Moran Company.
Highmark's new policy will apply to office-based oncologists in its own health system, Allegheny Health Network, but it appears aimed mostly at UPMC, which is balking at the idea.
"It would be an egregious contract violation for Highmark to attempt to unilaterally change fee schedules specifically in place for nearly 20 years and recently affirmed in the 2012 Mediated Agreement," said chief communications officer Paul Wood in a statement, referring to a deal brokered by the governor that extends UPMC in-network status for Highmark members until 2015.
"UPMC's contracts with Highmark, Medicare regulations and Pennsylvania Department of Health regulations all contemplate and establish requirements for hospital-based outpatient services," Wood added. "UPMC is fully compliant with these requirements, which Highmark executives have publicly acknowledged."
The move further strains the relationship between the two organizations, whose mediated in-network agreement is set to expire at the end of the year, and will if UPMC gets its way.
UPMC's much-lauded oncology network has 39 locations across western Pennsylvania, including the flagship Hillman Cancer Center and 16 locations offering medical oncology services.
Highmark, meanwhile, is trying to build Allegheny Health Network's oncology reputation with a new partnership with Johns Hopkins Medicine aimed at offering another option to western Pennsylvanians for comprehensive cancer care, including access to Johns Hopkins' clinical trials and consulting on rare maladies and novel therapies.