In a recent note, I reported the story of how UnitedHealth was penalized for the action of Ingenix, its subsidiary, that developed the reference databases used to establish usual, customary, and reasonable (UCR) rates. UCRs are used by health insurance companies to bill consumers who venture "out of network" for their healthcare (see: UnitedHealth Settles Suit with New York Attorney General Cuomo). UnitedHealth has been forced to divest itself of Ingenix and pay a fine for its alleged misdeeds. Dave Williams, who blogs over at Health Business Blog, has raised some interesting questions about this Ingenix story (see: Is the Ingenix settlement usual, customary and reasonable?). Below is an excerpt from his note:
UCR [usual, customary, and reasonable charges] is a squishy concept and insurers have leeway to establish their own levels. If an insurance company sets a low UCR that transfers costs to the patient. It effectively takes money out of the pocket of providers, too, since they have a hard time collecting from patients. This is the basis for the recent dispute between United Healthcare’s Ingenix and the New York Attorney General. The AG accused Ingenix of publishing artificially low UCRs that were then used by many health plans to hurt providers and patients. Ingenix’s parent, UnitedHealth Group will have to pay $50 million and get out of the UCR database business. Much of the news coverage on this topic has taken the angle that patients and physicians are getting ripped off by the insurers. I don’t see it that way. A big problem is that a lot of the “usual and customary” charges are not “reasonable.” There is huge variation in pricing for no logical reason. As one cost containment company executive explained to me recently, a chest x-ray can vary between $120 and $600 within a single metro area....Unfortunately with health care it’s very hard to find out ahead of time what a given provider is charging, and often the patient has little real choice of where to go.
Dave's points are very reasonable. It's true that when charges are set too low and consumers balk at paying the difference, it pushes the collection burden onto the providers (i.e., the hospitals or clinics). He is also correct in stating that there is a huge variation in pricing for the same procedure by different providers. Such variation in a community makes the establishment of the usual-and-customary charges a complex matter. In a previous post (see: Why the Prices Charged by Hospital for Inpatient Care Are Irrelevant), I described why the charges by hospitals for inpatient care are totally out of touch with reality. The UCR story is merely another manifestation of the absurdity of billing practices in our healthcare system.
However, none of these facts apparently provided a sufficient alibi for UnitedHealth/Ingenix in their discussions with the attorney general of of the state of New York. I doubt whether the settlement by the company would have occurred unless there was good evidence that the UCRs were being set inappropriately low even in the face of the wide range of charges for a given medical procedure. In other words, if the company had been able to make a reasonable case for the UCRs that Ingenix established, they would have done so. Let's push for more transparency and more competition in the pricing of healthcare services.
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