UnitedHealth's contract dispute with physician staffing company Team Health could have broader implications across the industry, according to Moody's.
A similar dispute with Envision last year resulted in Envision agreeing to an undisclosed decline in reimbursement, Moody's said.
WHY THIS MATTERS
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Congress is proposing to curb surprise medical bills by paying out-of-network providers a median or market rate based on in-network rates for providers in the same geographic area.
By canceling higher-rate in-network contracts, UnitedHealth would effectively lower median reimbursement rates in certain geographies – a strategy other payers could follow, Moody's said.
Disagreements between insurers and staffing companies could also disrupt hospitals, if staffed physicians are no longer in-network. This could result in more surprise bills as patients may unknowingly see a doctor who is not in-network, leading to reputational and social risk for hospitals.
Also, if staffing companies receive lower reimbursements from insurers, they would likely seek to increase subsidies they receive from hospitals.
THE LARGER TREND
In making its assessment, Moody's looked to last year's conflict between UnitedHealth and staffing company Envision Healthcare.
That contract was settled in December 2018, but it came at a steep price for Envision, which agreed to an undisclosed cut in reimbursement. This contributed to a roughly 22% earnings decline in Envision's physician staffing segment in the first half of this year, Moody's said.
The cancellation of Team Health's contract would become effective between October 15 and July 1, 2020 and affect contracts in 18 states.
If Team Health agreed to a comparable rate cut, Moody's estimates that revenue would decline by 1%-2% while earnings would decline by 11-18%.
Team Health said in an earnings report that earlier this year that UnitedHealth reduced reimbursements to certain out-of-network claims by approximately 50%. Team Health is suing UnitedHealth in eight states, according to Moody's.
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