There is no doubt that health insurance can be costly. Both health insurance companies and medical providers share some of the blame for that. In general, patients have been caught in the middle: doctors and hospitals charge health insurers higher fees for services, which insurers then pass onto the consumer. Reimbursement rates are negotiated periodically, normally without controversy. However, United Healthcare is now playing hardball with a group of New York hospitals.Continuum Health Partners runs five major hospitals in the New York City area. Their facilities include St. Luke’s-Roosevelt Hospital Center and Beth Israel Medical Center. United Health Care is insisting on a stringent notification standard: specifically, that the health insurance company be notified of a patient’s admission to a hospital within 24 hours. From United Healthcare’s perspective, prices will go down while the quality of care improves. That is because a United case manager would be able to get involved quicker and control costs. For example, they would be able to ensure that the hospital is using approved, effective treatments that will be reimbursed–as opposed to those that may not be covered by the health insurance plan.Understandably, physicians and other hospital staff are leery of allowing health insurance companies inject employees with little or no actual medical experience into the decision-making process. Hospital groups in other states have also expressed objections to the onerous administrative burden, as well as the lack of accomodation for short-staffed facilities during holidays and weekends. Besides those issues, why is the requirement for timely notification so controversial? You would think that individual health insurance providers, such as United Health Care, already have such requirements. Technically, many of them already do (although some other major insurers, like Blue Cross Blue Shield, do not); the issue is that their noncompliance penalties are rarely enforced, or relatively minor. On the other hand, United Healthcare’s proposed penalty is significant. If hospitals fail to notify them of an admission in time, they will forfeit 50% of their reimbursment for treatment. That will cost them up to $20,000 for a joint replacement or $25,000 for bypass surgery. Being reimbursed for only half of the care they provide could make treating patients with United Healthcare health insurance unaffordable. As a result, nearly 85,000 United Health Care patients may no longer be able to use their individual health insurance coverage at Continuum hospitals.Why would United Healthcare make this move, which has the potential to anger customers? It is a matter of cutting costs. Healthcare reform may establish exchange markets to encourage price competition among health insurance companies, making cost reduction imperative for United Health Care and other health insurers. Meanwhile, even scaled-back proposals would forbid insurers from denying individual health insurance policies to people with pre-existing conditions. Doing so is currently one of the most common ways for private insurance companies to keep costs down. Therefore, the strict notification standard is a way to compensate for the potential shutdown of that revenue stream.For its part, United Healthcare claims that Continuum was becoming too greedy in its demand for increased reimbursement rates. Continuum claims that United has negotiated exceptions to the notification requirement with large hospital groups, instead squeezing the smaller guys for income. While United and major hospital groups have declined to disclose whether or not such immunity exists, it is likely. After all, the small percentage of United Health Care policyholders who use Continuum hospitals is a drop in the bucket compared to their million-plus individual health insurance policyholders in New York.