CHICAGO, March 6 (Reuters) - Nearly two weeks after the

ransomware attack on UnitedHealth's ( UNH ) Change Healthcare

unit that has disrupted claims processing across the U.S.,

doctors are beginning to face a no win choice - stop treating

patients or stop paying staff.

The attack, which was disclosed on Feb. 21, shut down the

system that many doctors depend on to verify insurance coverage,

file claims and get paid, sparking a campaign by hospitals and

doctors for the U.S. government to provide financial relief as

it did during the COVID-19 pandemic.

On Tuesday the government said it would push its Medicare

contractors to provide flexible payment terms.

"We have an impending disaster on our hands," said Mel

Davies, chief financial officer of Oregon Specialty Group, an

independent practice that treats more than 16,000 patients with

cancer, infectious disease and autoimmune conditions.

So far, the practice has found ways to pay the $500,000 to

$1 million daily cost of chemotherapy and other intravenous

drugs delivered at their infusion centers out of cash flow, but

reserves are running low.

"If this doesn't get fixed, we can't treat patients because

we won't have the money to pay for labor to even keep our doors

open," she said.

Many practices across the country have been unable to submit

insurance claims for reimbursement since the hack, according to

the American Medical Association (AMA).

UnitedHealth ( UNH ) on its website on Tuesday said as providers

implement workarounds, 90% of claims are going through, but

added that there are still "a number" of providers who are

unable to submit claims or receive payment.

The company said it expects to bring the claims technology

fully back online, but not until after it restores its pharmacy

services connection, another line of its business brought down

by the hack, which it said is targeted for Thursday.

Davies said her practice is exploring lines of credit and

other measures as the trickle of payments coming in from

insurance companies does not cover their bills.

Although the practice has been able to absorb some of the

cost of IV infusions, they have had a major issue with patients

who take oral cancer drugs because most of those must be filled

at retail pharmacy chains that are also struggling with

prescription processing.

"We have to rely on the pharmacies in town to be able to get

the prescription, fill the prescription, and get it in the

patient's hands without financial devastation," she said.

Amy Gleason, who works in healthcare IT in Nashville,

learned of the hack last week when CVS and another

private specialty pharmacy declined to accept the manufacturer's

assistance coupons her 25-year-old daughter uses to cover her

treatment for Juvenile Dermatomyositis, a rare disease that

causes muscle weakness and skin rashes.

Gleason was told by pharmacy staff the system was "broken"

and only learned it was part of the Change Healthcare hack when

she called a phone number given to her by a pharmacist.

Gleason, whose daughter is still on her insurance policy,

last week spent $1,260 out of pocket to cover the cost of

Roche's CellCept, and this week paid $2,500 to cover the

cost of Pfizer's ( PFE ) Xeljanz.

'IT'S SCARY'

Ted Okon, executive director of the Community Oncology

Alliance, which lobbies on behalf of non-hospital cancer

clinics, said oncologists have to deal with a lot of prior

authorization before a patient can get expensive treatments. "In

many cases, that's ground to a halt," he said.

Dr. Howard Luks, an orthopedic surgeon who runs a solo

practice in Dobbs Ferry, New York, said the hack has caused

significant difficulties in getting approvals for procedures,

certain injections or for tests, and there has not been any

reimbursement coming in.

Luks left a large academic orthopedic practice two and a

half years ago. "We run on razor-thin margins," he said.

He has not had to postpone any elective surgeries, but said

it will happen for many patients. "Like anything else, if you

can't verify someone's eligibility, it's going to be canceled."

AMA President Jesse Ehrenfeld, a Wisconsin-based

anesthesiologist, said one of his patients was forced to

reschedule an elective surgery because of difficulties in

verifying their eligibility for the procedure.

The hack has taken an especially hard toll on mental health

providers.

Laura Steensen is a licensed psychologist and partner at

GBCC Behavioral Health, which has six locations in Maryland

employing 80 providers and 20 administrative staff and bills

insurance companies on a daily basis. Since the hack, they have

been unable to bill anything.

Steensen said no patients have been affected so far and she

has kept the issue from staff. But she's starting to consider

drawing money out of her own retirement savings to cover

payroll.

"When you have nothing coming in," she said, "it's scary."