Line Item Denials Go Against Federal Guidelines. Why Is UnitedHealthcare Insisting on Them?

Contributed by Shannon White , Chief Operating Officer at Ensemble Health Partners .

In a recently published hospital reimbursement policy for commercial plans, UnitedHealthcare (UHC) stated that it will deny specific items and services provided to members of its commercial plans which it considers to be “routine.” Identified items and services include a variety of medical and surgical equipment; nursing services and care by nurses, therapists and technicians; and key components of surgical rooms such as cardiac monitors or local anesthesia. 

UnitedHealthcare has reported record profits in recent years, yet it is now implementing a policy that could significantly reduce hospital reimbursement. While its potential impact is yet to be determined, this line item denial policy, which takes effect in December 2024, suggests that a claim can be processed for payment but reimbursement for certain items and services delivered to the patient which would have been paid in the past may now be denied. The effect of this policy on hospitals is not yet known, but it raises significant questions and concerns.  

First, this move appears to contradict federal guidelines that support separate billing for these items and services. Section 2202.4 of the Centers for Medicare and Medicaid Service (CMS) Provider Reimbursement Manual, Part I, states that a facility’s “[c]harges should be related consistently to the cost of the services and uniformly applied to all patients whether inpatient or outpatient.”  

Facilities follow this CMS requirement in their charging methodology, and further comply by including “routine services” in the daily service charge. Separately billed charges for items and services are not routine services and are therefore reimbursable under Medicare and prevailing industry norms with other payers. 

In correspondence, HHS has affirmed that CMS does not dictate providers’ charge structures or how charges are itemized. Specifically, hospitals may have basic ancillary charges for the room with additional charges for other items and services — the same types of items and services that UHC may now deny — so long as the charges are reasonably and consistently related to the cost of services and uniformly applied to all patients. 

Second, depending on how UHC implements this reimbursement policy, its effect could be a material change to its contract with any facility. If this policy becomes the basis for increasing denials and overall reductions to agreed-upon and expected reimbursement rates, then it may be argued that UHC materially changed its agreement with the facility. Hospitals that are reimbursed on a percentage-of-charge basis should pay special attention to how UHC implements this policy. Most contracts require some formal notice or agreement in writing between the parties before any material change could take effect.  

Ensemble is committed to holding payers accountable and working in good faith to solve some of the toughest challenges in healthcare — but major payers like UHC are changing the rules of the game as it’s being played. 

UnitedHealthcare’s line item denial policy is not in good faith. 

As a revenue cycle partner dedicated to the financial health of hospital systems across the nation, Ensemble is deeply concerned about the potential impact and implications of this line item denial policy from UHC. When hospitals enter into managed care agreements with payers, they do so with clearly defined expectations around payment for services. These expectations provide the basis for complex financial models and budgeting.  

If a payer were to attempt to change the reimbursement structure of a contract through a policy, it would be an abuse of the good faith negotiation process at the very least. 

As alluded to, this policy is especially concerning for hospitals in contracts with UHC where they are paid on a percentage-of-charge basis or with provisions for stop-loss, since meeting the stop-loss charge threshold may be at risk by the new denial policy. Hospitals with these reimbursement structures should carefully watch how UHC implements this policy.  

UHC’s soon-to-be-enacted line item denial policy appears to be an unfortunate example of gamesmanship designed to reduce reimbursement and increase profits at the expense of hospitals providing critical patient care. 

It’s time for providers to make their voices heard. 

We urge all healthcare providers and stakeholders to carefully scrutinize and track UHC’s implementation of this policy, which may have widespread repercussions. UHC already has a first pass denial rate of 5.2% as a percent of gross revenue as compared to Medicare’s 1.5% first pass denial rate.  

Now, already-strapped hospitals may take on additional financial strain due to reduced revenues, which often bring service cuts and other means of cost containment. Ultimately, both patients and hospitals may feel the impact. This move comes at a time when our nation’s healthcare system is facing unprecedented expense growth, much of which is attributed to payer administrative burdens. 

We must collectively advocate for fair reimbursement practices that prioritize patient care over profit. By standing together, we can challenge unjust payer behaviors and policies and ensure that our hospitals receive the reimbursement necessary to continue providing exceptional care to our communities. 

Take proactive steps to counter and offset the impact of this policy. 

1. Challenge UHC’s line item denials policy based on existing agreements. 

Right now, the highest priority is disputing this policy based on the hospital’s specific contracts or state law.  

• Collaborate with legal, contracting and compliance teams: Work closely with these teams to ensure that all billing practices are in line with federal guidelines and to build a strong case against the policy. Put UnitedHealthcare on notice by sending a formal objection to this policy in writing to them. 

• Look for material change contract provisions: Look for notice of material change contract provisions in your UnitedHealthcare managed care agreement. These provisions should be carefully reviewed to understand any formal notice requirements that UHC may be obligated to follow along with your associated rights. 

• Contest the policy: Consider sending a formal written notice like the one Ensemble has sent to UnitedHealthcare to contest this policy, if you conclude it has the potential to impact your hospital’s ability to deliver services and/or have material impact to revenue. 

2. Partner with state and national associations to share your perspective on this issue. 

Ensemble is actively taking steps to combat this policy on behalf of our clients, including an open call for UHC to reconsider this policy. Provider advocacy organizations are another tremendous resource. Align with the American Hospital Association and trade groups to ensure a coordinated industry response. 

• Work with your local hospital associations: Collaborating with these organizations amplifies the concerns of providers, presenting a stronger, unified front to help shape policies that ensure better patient care, fair reimbursement rates and sustainable healthcare policies.   

• Advocate for policy change: Engage in additional advocacy efforts to challenge the policy. This can include lobbying, participating in industry groups and collaborating with other healthcare organizations to present a unified front against the policy. In reality, this means posting, speaking up and talking to your elected officials.  

There’s no time to waste — speak up now. 

UnitedHealthcare’s line item denial policy grants the ability to reduce critical hospital reimbursements when it takes effect in December 2024. This policy is not supported by federal guidelines, operates outside of the agreed-upon terms of contracting and continues a longstanding practice of unilateral payer policy changes that work to erode negotiated provider revenues. 

Now is the time for action. By collectively pushing back on this decision, providers and their partners can help ensure that they are fairly reimbursed for the clinical resources needed and expert care provided to those in need.