In de­fense of nar­row provider net­works

Modern Healthcare - - COMMENT - By Joseph Ber­ardo Jr. Joseph Ber­ardo Jr. is CEO of Mag­naCare, an ad­min­is­tra­tor of self­in­sured health plans for em­ploy­ers in New York and New Jersey.

Health plans are re­design­ing ben­e­fits to en­cour­age the use of higher-value providers. Em­pow­ered by data, they have been able to iden­tify providers with a demon­strated abil­ity to de­liver qual­ity, ef­fi­cient health­care and they en­cour­age mem­bers to use th­ese providers by of­fer­ing in­cen­tives such as re­duced cost-shar­ing.

Th­ese high-per­for­mance net­works, also called “nar­row” net­works, rep­re­sent an im­por­tant op­por­tu­nity for plans to pre­serve ben­e­fits and keep pre­mi­ums af­ford­able in re­sponse to health­care re­form.

A re­cent study on small em­ploy­ers’ per­spec­tives on health in­surance cov­er­age found that most were in­ter­ested in health plans with smaller provider net­works if they re­sulted in lower costs. Specif­i­cally, a majority of small-em­ployer re­spon­dents (57%) in­di­cated that they would choose a smaller provider net­work if it re­sulted in a 5% re­duc­tion in pre­mi­ums, and an even greater num­ber (82%) would choose a smaller net­work if it re­sulted in 20% lower pre­mi­ums. A poll of con­sumers also showed sim­i­lar pref­er­ences.

That said, em­ploy­ers and con­sumers de­mand qual­ity. The con­cept is not about limited choice, but rather about con­struct­ing net­works based on so­phis­ti­cated data anal­y­sis that en­ables providers to demon­strate im­prove­ment across ev­i­dence-based guide­lines and fo­cus on mak­ing mean­ing­ful de­ci­sions for im­prov­ing pa­tient care.

Any ap­par­ent “lim­it­ing,” in other words, is de­lib­er­ate and meant as an over­all im­prove­ment to the net­work. For those who ques­tion how less choice in a health plan trans­lates into lower costs, there are two com­po­nents.

A health plan can de­cide to sign con­tracts only with hos­pi­tals that charge lower prices. This is im­por­tant, given that there can be enor­mous vari­a­tion in health­care prices. For ex­am­ple, an ap­pen­dec­tomy can cost any­where from $1,529 to $186,955. By sign­ing con­tracts only with providers who are much closer to the $1,529 end of that spec­trum— and who also demon­strate good out­comes—health plans can lower the price of pro­vid­ing health­care with­out com­pro­mis­ing qual­ity.

Se­condly, health plans that work with fewer providers have the abil­ity to ne­go­ti­ate lower prices. Ba­si­cally, they are promis­ing to buy in bulk from a smaller set of physi­cians, and can there­fore re­duce the cost they pay for each visit. This can lead to lower out-of­pocket costs for plan mem­bers.

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