Narrow networks and MedInsight

In the late 1980s and early 1990s, managed care plans frequently featured offerings with provider networks of limited size, based on the idea that using the most cost-effective and efficient providers would result in lower healthcare expenses. As a result, these plans, which usually had lower premiums than larger network counterparts, were hoped to funnel a greater number of patients to smaller networks, resulting in an additional “volume” of traffic to the providers. Advocates of this approach also argued that a smaller network would produce a more favorable risk profile, because members willing to choose from a smaller list of providers were less likely to have an existing condition already in treatment.

A variation on this theme is the “tiered network,” in which the highest benefits are paid when members visit the most efficient providers. However, a “narrow network” is not necessarily a tiered network because the concepts involved represent two different methods for reducing costs while improving access and quality (although “narrow networks” and “tiered network” concepts are often utilized in tandem).

The narrow network approach, which was often combined with other payment methodologies such as capitation or staff-model network design, did produce significant cost savings, but several market factors, including members’ demand to see specific providers, and provider contracts that made inclusion in the most favorable tier a requirement for participation, caused typical network size to steadily increase in the years since.

Another factor that affected the success of this approach was the diverse methods payors used to define the network’s composition; in addition to fee negotiation, providers were often analyzed using a variety of measures, to determine those with the best quality outcomes. However, because these analysis methods varied between payors and were usually not completely disclosed, providers often challenged the results, arguing that important factors such as the health status of a particular group of patients had been overlooked.

Now, with the Patient Protection and Affordable Care Act (PPACA) and its associated exchange dynamics, as alternative reimbursement methodologies and risk adjustment are fundamentally changing the way health plan business is conducted, the narrow network concept is being revisited. Several plans have introduced narrow network offerings in hopes that such plans will be attractive in the exchange environment.

MedInsight has always offered a variety of innovative ways for payors to measure provider quality. The platform includes provider network management capabilities, which enable organizations to analyze, compare, and manage the performance of providers and provider networks. These analytic techniques include the ability to understand both the overall and relative cost performance of provider contracts, analyze how well specific disease and healthcare conditions are managed by providers, compare efficiency within provider peer groups, and identify best practice patterns, all of which can assist in developing and administering “narrow networks.” In addition, MedInsight supports a variety of analytic tools, both proprietary and from third parties, which assist in the quality measurement process. Table 1 below provides an example, derived using MedInsight sample data:

Table 1: Sample Provider Measurement Report

Because many new contracting methodologies, including accountable care organizations (ACOs), rely on quality measures, and because federal and state risk adjustment will incorporate payor-provided claims and electronic health records (EHR) data submitted for audit, these abilities will continue to be of increasing value to MedInsight customers. Finally, these tools can also be used to help provider organizations participating in “narrow networks” to create a better relationship with members.

This article first appeared at Milliman MedInsight.