Stuart Piltch on the Intense Scrutiny of Healthcare Provider Networks

The building and management of medical provider networks serve as a reflection of a payor’s foundational value to plan sponsors and members. Their value is often assessed by the financial discounts and other arrangements negotiated with various providers as well as the depth, breadth, and size/ access of the provider panel included within. However, provider networks have come under intense scrutiny for numerous reasons including fee-for-service and value-based contracting models, utilization management practices, and the need for quality metrics.

Fee-for-Service Arrangements (FFS)

With fee-for-service arrangements, the majority of network financial agreements, providers are paid for the number and type of units of service they provide to patients. The market has come to believe this financial model creates incentives for inefficient and/or overuse of care and services rather than a focus on the overall value of care including quality, experience, cost efficiency, and equity.

The government and market response to this issue has been to create a variety of value-based models of care such as value-based contracting (VBC) arrangements, designed to address value over volume of services. However, the definition of “value” has evolved over time and measuring success fairly for all constituents in these programs has been challenging. Moreover, payment mechanisms and aligning incentives within the VBC models have changed in response to learnings.

Regardless of the type of VBC arrangement in which providers participate, with an FFS payment model frequently as their underlying payment mechanism, the volume of services revenue may outweigh incentive payments received through VBC models, undermining progression.

Accountable Care Arrangements

Accountable care arrangements frequently sit on top of an FFS chassis of payment. In other words, the total cost of care management of the patient population attributed to the accountable care organization (ACO) is measured year-over-year through evaluation of claims payments made throughout the performance period. When improvements are made, the ACO and the payor/ plan sponsor share in the savings achieved, which are typically partially dependent upon meeting quality outcome measures. Because the provider/ ACO has the FFS payment model in place, they still must meet organizational volume requirements such as those for number of visits, admissions, surgeries, and testing. The provider must also invest in tools and resources to help them meet the demands of VBC including more patient outreach, analytics and reporting, digital upgrades, social determinants of health inclusion, and more. The clinician most certainly believes these are the right actions to take for their patients but living in both FFS and VBC worlds is not a simple task.

Utilization Management (UM)

Another reason provider networks have come under scrutiny is that a common belief exists that payors have typically created and deployed UM tools rather than clinical or care management strategies. The feeling is that existing approaches are designed to unduly limit care, adversely affecting optimal quality outcomes for the patient. In fact, significant frustration continues that payors fail to understand and address the member experience from administrative and clinical standpoints. This is especially true for providers in risk-sharing VBC arrangements. Their position is that if they are at risk for the services they provide, they have an inherent incentive to only order procedures and tests that are clinically necessary and to reduce unnecessary services; therefore, they do not need UM oversight that simply slows down the provision of care and causes an administrative burden to their office staff. In response to provider abrasion, some payors have recently announced they will be decreasing UM for certain types of procedures.

Quality Metrics

Both payors and providers are reluctant to design and implement deep and thorough quality of care metrics that hold both parties accountable for creating true, high-performance networks that enable patients and plan sponsors to better know that the providers, and the care they are delivering, are of optimal value. This reminds some of us of the capitation models and their associated health maintenance organizations that failed in the 1990s with the lack of supporting data and analytics and the concern for underutilization. The industry has come a long way with availability of data and reporting; however, the amount of data is not as important as the type of data. In other words, show clinicians where they are doing well, where gaps continue, and how they can improve the quality and cost for their patients. This means to not focus on whether a test was completed; instead, focus on how the treatment of the abnormal result from the test improved the health of the patient over time and how this improved costs to the patient and plan sponsor. To do this well, data needs to be real-time, not simply retroactive claims-based, and needs to be available across the entire patient journey. Interoperability solutions must be in place to connect disparate electronic medical records and data sets longitudinally.

The bottom line is this. There are numerous factors that impact the true value of the provider network for patients across the care continuum. More of these elements go beyond discounts and pricing but include quality, experience, and social drivers that need to be made available and measurable through real-time data exchanges, interoperability, and collaboration across care teams.

Watch for the next Risk Strategies Consulting white paper where our team of experts dives deeply into the topic of provider network valuations, one of the most important aspects of employee health benefits.