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(HealthNewsDigest.com) – Employers and other benefits payers have been exploring strategies to improve efficiency and clinical effectiveness as a way to slow unsustainable levels of healthcare spending. Toward that end, a growing number are embracing a highly effective approach called “high performance” networks (also known as “narrow networks”) to deliver this value.
Comprised of carefully selected quality healthcare providers and health professional organizations recruited to serve a defined patient population, these networks help to raise the level of care and make healthcare more affordable – at a price point that is potentially 15-20 percent below broader networks.
The Mechanics of High Performance Networks
High performance networks take advantage of sophisticated data analysis to identify providers with best practices, better outcomes and efficient cost control and include those providers in the networks. That data analysis also aids the providers in achieving further improvement across evidence-based guidelines, and helps them focus on making meaningful decisions for improving patient care. High quality healthcare providers carefully track patient experiences, measuring satisfaction levels and continuously improving services to consistently:
- Achieve excellent clinical outcomes
- Ensure safe practices
- Improve patient care and health through evidence-based practices
- Apply the most up-to-date medical knowledge
The concept of a high performance network is not one that simply and negatively results in more limited choice, but rather is one that identifies providers that deliver quality care while keeping costs low. Any apparent ‘limiting,’ in other words, is very deliberate and meant as an overall improvement to the network.
Employers and benefits payers anticipate that by choosing the highest-quality providers, they can better meet the healthcare needs of plan members, improve individual outcomes and enhance patient’s satisfaction with their healthcare coverage.
Key Advantages
The benefits of the “less is more” strategy of high performance networks include: emphasis on quality rather than quantity, elimination of costly but ineffective providers, preservation of health benefits, and stronger collaboration across the healthcare continuum.
Research conducted by McKinsey & Co. found that the size of a plan’s network is not correlated to its performance as measured by the U.S. Centers for Medicare and Medicaid Services, in terms of outcomes, patient experience and clinical process.[1] But how does less choice in a health plan translate into lower costs?
First, a health plan can decide to sign contracts only with the 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 demonstrate good outcomes – health plans can lower the price of providing healthcare without compromising quality.[2]
Second, benefits payers 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 leads to lower out-of-pocket costs for enrollees.
High performance networks focus on identifying providers with a demonstrated ability to deliver quality, efficient healthcare. To further achieve their goal, the networks also offer consumers incentives, such as reduced cost-sharing, to ensure they obtain care from the high-value providers within the network. This is made possible by increased access to vital data from claims, prescriptions and clinical settings that can be used to identify and then avoid contracting with physicians who tend to order more tests, prescribe more brand-name drugs or take on more complex patients.
Opportunities
As more benefits payers recognize the positive results from high performing networks – better outcomes, lower cost – they will play a larger role in guiding patients in this direction. In particular, self-insured employers will see an opportunity to align interests and incentives with patients, and lower provider utilization. This is especially true for employers who are seeking to align incentives for employees by rewarding them to focus on wellness and prevention and adherence. A healthier population benefits payers, providers and patients alike.
High performance networks increase affordability and create transparent choices for members based on value. With more consumers becoming highly price sensitive, and the market itself shifting toward price, the rise in high performance networks is inevitable. Ultimately, this will push the healthcare system toward a more competitive environment that will benefit every stakeholder across the healthcare continuum.
Joseph Berardo Jr. is CEO of MagnaCare, an administrator of self-insured health plans for employers in New York and New Jersey.
[1] Stolz, Richard; Benefit Controls; June-July 2014; http://www.benefitcontrols.com/site/user/files/0/FYB_JunJul2014.pdf; accessed August 18, 2014.
[2] Kliff, Sarah; How much does an appendectomy cost? Somewhere between $1,529 and $186,955; Washington Post; April 2012; http://www.washingtonpost.com/blogs/wonkblog/post/how-much-does-an-appendectomy-cost-somewhere-between-1529-and-186955/2012/04/24/gIQAMeKMeT_blog.html; accessed August 18, 2014.
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