New York Times

The United Health Group said yesterday that it was returning decision-making power over patient care to physicians, breaking with a longstanding element of managed care that has infuriated many doctors and frustrated their patients.

United, one of the nation’s biggest managed care companies, said that a patient’s doctor would be able to decide without the insurer’s interference whether to admit health plan members to a hospital or provide other treatment.

That does not mean the company, which is based in Minneapolis, is giving up cost controls. The company will still review decisions after the fact and urge doctors not to exceed certain averages. When persuasion does not work, doctors can be dismissed from the company’s network of approved physicians — thus forcing patients to transfer to other doctors — but the company said that sanction was rarely used.

United, which insures 14.5 million people, including 8.7 million in health maintenance organizations and other managed care units, said the rules were being phased in nationally. United has 1.1 million members in New York, New Jersey and Connecticut.

With the decision, United, which said it approves 9 out of 10 care decisions anyway, will save about $100 million, much of which will be spent elsewhere. It also gets a chance to smooth relations with doctors and patients, attract more customers and perhaps avoid some future legal liability as health plans battle a backlash against managed care in Congress and the states and a series of class-action lawsuits. Those suits generally contend that managed care companies misrepresent that clients are getting the best possible care when in fact, the suits say, the cost of care is the determining factor.

The announcement by United is one of several changes by insurance companies that analysts attribute to the backlash. United, Aetna Inc. and several Blue Cross plans have separately offered their members the right to appeal denials of care to an independent panel outside the company. Such panels would be required in the Congressional measures and are already required in 30 states, including New York.

And several big nonprofit H.M.O.’s, like Kaiser Permanente, based in California, and Harvard Pilgrim in Boston, have long relied on doctors to decide when care is considered medically necessary.

Other managed care companies declined to comment on the United announcement, which was reported yesterday in The Dallas Morning News. Spokeswomen for Oxford Health Plans, Aetna U.S. Healthcare, and Empire Blue Cross said they had not seen United’s official account.

Physicians and consumer advocates hailed United’s move yesterday.

“It’s a response to the consumer and political backlash,” said Ken Jacobsen, a health care expert in New York at the Segal Company, a consulting firm.

Explaining its decision to stop requiring doctors to get prior approval for care, United said it was “no secret that state and federal lawmakers want to put an end to much of this practice.”

But officials of the American Association of Health Plans, a managed care trade group in Washington, disagreed that the changes being made by health plans were prompted by developments like the “patients’ rights” legislation that is awaiting action by a Senate-House conference committee. Provisions include the right to sue health plans for medical malpractice, the right to appeal denials of care to independent review panels and guaranteed access to specialists.

Susan Pisano, a spokeswoman for the trade groups, said the United announcement was “the next stage in the evolution of health care, the edge of a wave of change.”

John Stone, a spokesman for Representative Charles Norwood, Republican of Georgia, who sponsored the House bill, said that managed care companies that turned over medical decision-making to physicians would not be liable to medical malpractice lawsuits under the bill.

Republican leaders in the House and insurance company lobbyists have argued that the right to sue the companies would increase costs for health plan members. But Mr. Norwood said in a statement yesterday that his bill would “very likely result in lower costs.” He said, “the best care in the long run is less expensive than cutting corners.”

“This action is historic,” said Dr. Thomas Reardon, president of the American Medical Association. He said it was “a long overdue victory for American patients and the care they receive.”

Jeffrey Roth, a Manhattan dermatologist, said the change would “help re-establish a sense of trust between the insurers and the doctors” and reduce burdensome paperwork in doctor’s offices that they denounce as “the hassle factor.”

Health care experts and critics of managed care said the prior review system had outlived its usefulness and was actually costing the companies more than they saved. “This is a confession that H.M.O. bureaucrats cost more than they save,” said Jamie Court, a spokesman for the Foundation for Taxpayer and Consumer Rights, an advocacy coalition.

Wall Street investors reacted to the news by driving United Health Group stock up $2.375 yesterday, to $54.9375.

Robert Hoehn, a health care analyst with ING Barings, said that the higher stock price may reflect the belief of traders that the new policy would give United “an advantage over other companies in terms of marketing” and “further insulate them from the risk of litigation.”

Dr. Archelle Georgiou, chief medical officer of the United Healthcare unit of the company, said that it had been spending $100 million a year to respond to requests for approval of care, which were almost always granted.

Some of the money saved will go toward programs for patients, she said, like telling patients what to expect in the hospital and keeping tabs on them so they get appropriate care promptly and can return home.

The company will still track doctors’ decisions after they are made and urge physicians who exceed the average costs on certain types of health care to bring their practices in line. “When we are talking to physicians and not calling to deny a service, they are so much more willing to listen,” Dr. Georgiou said.

“Doctors will still have to be mindful of economic outcomes,” Mr. Jacobsen, the consultant said.

Like other health care companies, United will still negotiate discounts on payments to doctors and hospitals. And it will continue to try to minimize expensive hospital stays by reminding members with chronic ailments like asthma, diabetes and congestive heart failure to take their medication and closely follow their doctors’ orders.

Mr. Hoehn, the analyst, said that managed care had succeeded in bringing health costs down. Fifteen years ago, he said, reviews like those being dropped by United played an important role in holding down costs. “Now quality and access to care are taking precedence,” he said, as prior reviews could no longer show savings.

Dr. Lee Sacks, a family physician in Oak Brook Ill., said he was “encouraged that United is trying to figure out how to work with physicians and patients to provide the best care.” Dr. Sacks, a senior executive of Advocate Health Care, a group of 2,700 doctors, said that previously United had approved the group’s requests for prior approval of care “in 99 out of 100 cases.”

Helen Darling, a senior health care consultant with the Watson Wyatt consulting group, said that “health plans, for the most part, are approving everything.”