The missed opportunity of narrow networks

The Affordable Care Act hastened efforts by health plans and employers to bestow preferred status on a limited number of care providers, resulting in “narrow networks.” Narrow networks typically exclude providers that exceed local or national cost-for-service norms as well as those whose services are not mandated by the ACA. In exchange, plans and employers extract lower prices for services.

Despite perceived cost savings, however, most narrow networks have actually missed the opportunity to improve value — and their lack of transparency threatens to unleash a ferocious consumer backlash.

Narrow-network pitfalls

Care is often viewed as an undifferentiated commodity. But not all care providers are the same, and no provider delivers effective and efficient care for every medical circumstance. Some, such as the Cleveland Clinic, demonstrate world-leading outcomes in heart surgery. Others, such as Boston’s Joslin Clinic, excel at treating people with Type 1 diabetes.

Clustering all care in a small number of providers, without regard to how well those providers succeed in treating particular medical circumstances, discounts the dramatic variations in outcomes that can result across providers in a network. Plans should instead direct subscribers to different care providers based on that provider’s demonstrated success with patients who have particular medical circumstances.

Restructuring networks this way doesn’t just significantly improve quality in care; it also allows scale economies — lower costs at higher volumes — to occur: A hospital with a steady demand for cataract surgery, for example, can develop significant scale economies in the provision of that care. But simply piling more patients into a hospital, without regard to their medical circumstances, gives that hospital few, if any, cost savings in volume.

Many narrow networks are also treading dangerously close to the line crossed in the managed care debacle of the 1980s. Within the fragmented care delivery system, the complexity of narrow networks trumps efforts to mandate transparency. Even patients who confirm the presence of a hospital within their plan’s narrow network can be easily surprised when non-employed physicians and other service providers participate in their care. Many medical specialists do not work for the hospitals in which they practice and many are not included in the narrow network. Excluding some traditionally covered services can also create nasty surprises for patients who discover their plan’s limitations only when the bills arrive.

Harnessing high-value care
Several large employers have taken a more nuanced approach to securing high-value care. These employers, either directly, through contractors (such as Colorado’s BridgeHealth) or through collaboratives (such as the Pacific Business Group on Health) commissioned health care providers for certain types of care for their employees. Most target common episodic and non-emergent medical conditions for which a provider demonstrates superior health outcomes, with heart surgery, joint replacement and surgical cancer care among the most common conditions covered under direct contracts. Employers report that employees who serve under direct-contracting arrangements return to work 20% faster than those receiving care locally and miss fewer days of work due to fewer follow-up medical appointments.

Intel constructed a novel arrangement with Presbyterian Healthcare of Rio Rancho, N.M. Intel’s benefits program provides financial incentives for employees to seek care at Presbyterian. In exchange, the hospital committed to a range of health improvement efforts to reduce demand for acute care. Although this arrangement doesn’t segment Intel’s employee population on the basis of medical conditions, it does provide a measure of value through more early-stage and preventive care for Intel employees.

How to optimize your network

Ultimately, cost, though relatively easy to measure, is not the sole basis upon which health care decisions should be made. Were that not the case, we could eliminate all advanced care institutions — which are costly — and replace them with simple and inexpensive palliative care services that keep patients comfortable but don’t try to heal them. Value — the improvement in health outcomes for the cost — is much a more compelling basis for decision-making. By ignoring (or even worse, not knowing) the variations in health outcomes of care by specific medical conditions, narrow networks miss securing the highest-value care for their subscribers.

Those constructing networks can improve the value of care by following several guidelines:

• Understand the needs of your employees, and look for care organizations that can be meet those needs.
• Ask providers how much value they provide. Can they demonstrate excellence treating the specific medical conditions of your employees?
• Establish clear measures of success and methods for reporting outcomes. For example, days of work missed for knee replacement surgery, severity reductions in patients with congestive heart failure and weight loss and symptoms improvement in people with Type 2 diabetes.
• Clearly identify any non-network providers who are providing care, and push contracted providers to include all needed services within the contracted care bundle.

By centering on value over cost and prioritizing transparency, employees will benefit from improved outcomes and general health — a difference you’re sure to realize in overall productivity, attendance and satisfaction.
Wallace, a Visiting Professor of Family and Community Medicine at the Geisel School of Medicine at Dartmouth, works in the U.S. and internationally with employers, health care providers, health plans, governments and others to conveniently and effectively treat chronic medical conditions, create employee health strategies, and develop new health benefit and care delivery models to improve health.