By Ransdell Pierson
(Reuters) - UnitedHealth Group Inc
The largest U.S. health insurer, whose earnings have been hurt by lower government payments for private Medicare services and prescriptions for older people, said the affordable care contracts will range across its employer-sponsored Medicare and Medicaid health benefit businesses.
"UnitedHealthcare is placing much greater emphasis on rewarding care providers for better care and lower costs as it dramatically reduces the use of exclusively fee-for-service contracts," the company said in a release.
In fee-for-service contracts, insurers reimburse healthcare providers for individual tests, treatments, medical procedures and prescription medicines.
Existing UnitedHealthcare affordable care programs - now worth more than $20 billion a year - instead reimburse patients according to quality and cost-effectiveness outcomes or by paying for bundles of medical services.
The company said it already has accountable care relationships with more than 575 hospitals, 1,100 medical groups and 75,000 doctors across the country, but expects more care providers to move to accountable care contracts over the next five years.
The planned changes come as the company and its rivals are planning how to cope with changes from the federal Affordable Care Act, which sets profit margins for insurers and outlines mandatory coverage requirements changes. In 2014, UnitedHealth and other insurers will start selling coverage on public health exchanges, with the aim of providing benefits to millions of Americans who are currently uninsured.
Dr. Sam Ho, UnitedHealthcare's chief clinical officer, said accountable care contracts now represent more than 15 percent of company revenue and about 20 percent of company reimbursements for medical expenses.
"But beyond 2017, we think this will become the dominant form of reimbursement," Ho said in an interview. "Value-based payment is the major lever we have for improving the quality and affordability of health care."
The accountable-care approach rewards doctors and medical centers for measures that improve patient outcomes, including cancer screening and management of chronic diseases like diabetes and heart disease, Ho said. Moreover, he said reductions in hospital readmission rates and in the average length of hospital stays imply better patient care.
Shares of UnitedHealthcare were up 0.3 percent at $68.20 in afternoon trading on the New York Stock Exchange.
(Reporting by Ransdell Pierson; Editing by Gerald E. McCormick, Chizu Nomiyama and Bernard Orr)