Open referral – in its various guises – is now an established part of the private medical insurance landscape. Tony Levene assesses how it has changed the relationship between insurers and the medical profession – and what impact that is having for brokers and clients
Private medical insurance (PMI) providers are ratcheting up moves to control claims costs, hoping to rein in their biggest expenses – consultants and hospitals. But those representing some doctors are unhappy, seeing imposed financial limits and contracts as fetters on their freedom to practice in the best interests of patients.
The issue, which puts insurers and parts of the medical profession head-to-head, has been highlighted by AXA PPP healthcare’s decision to roll out its Fee-Approved Specialist concept further over the next twelve months. It is writing to some 17,000 consultants offering them the chance to sign up to a contract, which AXA PPP says, is beneficial to both insurer and practitioner.
Fee-Approved Specialist status is a formal legal agreement where doctors have a schedule of payments to which they adhere. In broad terms, it is similar to Bupa’s “fee-assured” contract. Both are designed to control costs and reassure customers that they can claim without fear of shortfalls, a worry that can dampen sales.
The AXA PPP approach
The AXA PPP scheme is already in ‘beta’ mode where it has proved successful in 99% of negotiations. Now that AXA PPP knows it works for all parties concerned – insurer, consultant and patient – it is to extend the offer to most other consultants.
But that call has been opposed by the Federation of Independent Practitioner Organisations (FIPO). It has expressed “serious concerns” over the AXA PPP proposal which, it says, will cut fees by a fifth. However, PMI intermediaries are, in the main, supportive of the AXA PPP contract.
AXA PPP offers consultants incentives to sign up. The first is a fees-schedule more generous than its standard listing, which will continue to be paid to “fees-limited” consultants – AXA PPP jargon for those doctors outside its contract who will either have to adhere to standard prices for procedures or charge shortfalls.
The second come-on is that consultants who opt for Fee-Approved Specialist status can also receive preferred access to patient referrals from the insurer’s Fast Track Appointments scheme where the insurer takes the lead on directing policyholders to a suitable specialist, with the guarantee there will be no additional costs to carry.
“Even though shortfalls only occur in around 3% of claims, the fear of shortfalls is a substantial disincentive,” says AXA PPP commercial director Fergus Craig. “At the very least, we believe we have a duty to tell policy holders of potential shortfalls. If a GP recommends oncologist A who has a history of high charges, we tell patients that there could be shortfalls and of A’s average. It is clear from the Competitions and Market Authority and regulators that we should do this. Clients then have the choice of either continuing with A or asking us for a fee-approved specialist. They expect insurers to offer security when something bad happens.”
In common with competitors, AXA PPP sees an increasing number of open referral letters from GPs – addressed, for example, to ‘Dear Oncologist’ rather than ‘Dear Doctor A’. Providers believe a growing number of patients put more trust in insurers to find the best consultant than in their GPs, whose knowledge of the fee-charging market may be limited.
Bupa’s fee-assured scheme, which now covers around 15,000 out of some 20,000 consultants, caused some controversy when introduced. But it is now largely accepted.
“Our customers expect difficult conversations regarding fees are left to us,” says Alex Perry, Bupa’s director of health and benefits management. “This is not comparing televisions at John Lewis. Patients are, by definition, ill, which makes them vulnerable, on top of which very few, even well, would argue or haggle with doctors.”
Bupa has a published list of maximum fee-assured prices – unsurprisingly most doctors charge the maximum.
“Our contract limits their ability to charge – although we believe these levels are generous – but consultants receive additional benefits such as reduced administration, and no patient unhappiness,” Perry says.
FIPO has taken an anti-contract stance. And it has expressed worries that AXA PPP is attempting to strong-arm doctors into signing up with the carrot of higher than standard fees plus referrals and the stick of what it claims will be a 20% overall reduction in reimbursed charges for fee-limited specialists when the insurer produces its new schedule in October 2015.
FIPO’s deputy chairman Richard Packard said: “According to AXA PPP, the fee-approved group is being offered potentially better access to patients through a so-called ‘fast-track’ referral system. However, if the majority of consultants sign up to this contract, this will cease to be of any added benefit, as the pool of private patients is finite. Fee-limited consultants will still be able to charge at their normal rates, but reimbursement from AXA PPP will be limited, meaning patients will have to make up the shortfall.”
FIPO said its initial analysis of over 40 most common procedures indicated a benefit cutback of around 20%. It has advised consultants to ‘be wary of engaging with insurers and losing their contract with the patient, for what may be short-term, if any, gain.’
“There is a lack of logic here,” says Craig. “Doctors can’t have the higher fees we guarantee unless we, in return, have a contract with them that assures their charging.”
The Private Patients Forum, which has been critical of insurer caps on charges as, it believes, this limits patient choice and damages the doctor-patient relationship, is unhappy with fee-approved and fee-assured contracts.
PPF spokesperson Don Grocott says: “What concerns us is that ‘Open Referral’, ‘Fast Track’ and other programmes are presented as entirely good news for patients, which they are not. ‘Fee-Approved Specialists’ may be the best doctors for the condition to be treated. Equally, they may not. That insurance companies decide on which consultant treats a patient – a decision in part at least made by whether the consultant agrees to the fees set by the insurer – takes away patient choice. Choice is the principal differentiator between private and public healthcare.
“PPF is also concerned that ‘Fee Limited Specialists’ will be reimbursed at lower rates than ‘Fee-Approved Specialists’.
“That would mean that a patient going to a consultant not on the ‘Approved’ list will be reimbursed at a lower rate. That is unfair to the patient whose premium is the same whether they use ‘Approved’ or ‘Limited’ consultants.”
If insurers published the rates of reimbursement they offer and leave the decision of whether to pay more to the patient, there would be greater choice and a better market, Grocott adds.
Challenger insurer APRIL UK has a different take on controlling costs. Instead of contracting consultants, it has a deal with Spire hospitals.
“There is a clear need for all cover providers to reduce expenses. Whether in medical or marine, no insurer can afford to treat claims with a blank cheque,” says development director Oliver Jones. “We are happy to work with specialists on their bills but this has to be seen in the context of our arrangement with Spire which arranges for the care of almost all our policyholders.”
Intermediaries stress that there will always be a market at the very top end with a guaranteed full refund and a free choice of hospitals including the most expensive in central London. But beyond that, they are supportive of moves to contract specialists.
“Shortfalls are a serious problem,” says Brian Walters at specialist intermediary Regency Health. “It’s as if your bashed car had a new door fitted but the repair shop billed you additionally for the paint. Consumers don’t want to be involved in this so the more insurers get consultants to sign up to these contracts, the more attractive a policy will be. There has to be a meeting of minds here as insurers and consultants need each other. Patients are generally not concerned whether the insurer pays too little or the consultant charges too much – they just want to get better without extra bills.”
Richard Holden, commercial director at intermediary Chase Templeton, broadly welcomes the AXA PPP move.
“With one or two caveats I’d say this is good news for the market,” he says. “Everybody has to contribute to controlling medical inflation and applying pressure to clinical providers will help achieve that.
“AXA PPP’s scheme is thinly veiled open referral but its introduction is being handled very differently to that by Bupa. Rather than going for the big bang and immediate and significant savings, AXA PPP is looking to grow this incrementally. I think that steady-as-she-goes is a better way of doing it as, while it may take longer for AXA to achieve desired savings, it could help minimise lapse rates. The marketing of this initiative as a ‘fast-track’ appointment scheme is also pretty savvy.”
On the minus side, he adds: “It’s not clear as yet whether AXA PPP plans to make this mandatory for all. If they do, high net worth clients probably won’t like it. They won’t be dictated to, they want to be seen by whom they want, when they want and where they want. I would like to see some flexibility so that the Fee-Approved Specialist model is not applied universally, but could exclude those with little personal financial constraints to continue to determine choice of care.”