What Do Narrow Networks Imply for Anesthesia?

 

In a health plan featuring a “narrow network” (NN), the carrier substantially reduces the number of participating physicians, hospitals and other providers.  Limiting the panel to providers offering lower prices is nothing new.  In the mid-1990s, HMOs and PPOs sparked a backlash from patients and a multitude of state laws requiring that insurers include any willing provider in their networks. The dynamic has changed since the Affordable Care Act (ACA) went into effect, however.

Previously, employers imposed NN plans on their workers.  In May, the National Business Group on Health (NBGH) conducted a poll of 46 large employers and found that 17 percent already have a narrow network in place.  The poll results, which were made available to NBGH members, also found that an additional 24 percent of large employers were considering narrow network health plans for 2015 and 2016, and another 20 percent were mulling narrow networks for 2017.

With the choices among health plans offered through the ACA-Health Insurance Exchanges (HIEs), it is the cost-conscious patients who are signing up for NNs.  Price has become the paramount consideration for consumers and employers alike in the view of many payers:  according to a PwC survey, 91 percent of insurers participating in the public exchanges believe consumers will care most about premiums, with concerns about out-of-pocket costs coming in a distant second.  Another consumer survey, the August 2013 Morning Consult National Healthcare Tracking Poll, found that a majority of respondents preferred “less expensive plans with a limited network of doctors and hospitals” to “more expensive plans with a broader network of doctors and hospitals.”

Generally, NN plans offer cheaper coverage options to consumers. A recent McKinsey and Co. study found that premiums were 13 to 17 percent higher for broad-network plans, depending on the level of coverage the consumer selected. In addition, more than two-thirds of the cheapest plans available were narrower-network options.

Insurers contend that cost pressures exerted by patients and health purchasers are driving the need to reduce network size.  To be affordable, HIE plans must offer restricted networks made up of lower-cost providers.  McKinsey defines a NN plan as excluding 30 to 70 percent of the 20 largest hospitals in an urban area.

Approximately half of the products sold on HIEs this year were NN plans, according to the McKinsey. study.  The figure was even higher in larger cities.

Once the federal and state HIEs became operational, complaints started to surface about narrow networks that offered patients little choice among providers.  A Medicare regulation on minimum network adequacy standards requires Qualified Health Plans to establish networks that, among other things, are sufficient in numbers and types of providers to ensure that all services will be accessible without unreasonable delay.  Nevertheless, in some states, a limited number of plan offerings, combined with the narrow networks offered by the plans, leave entire delivery systems out of the marketplace offerings, frustrating those patients who wish to continue receiving care from the eliminated providers.  In response to these and other network-related complaints, in February 2014 HHS proposed a new rule, Exchange and Insurance Market Standards for 2015 and Beyond, that imposes a more rigorous review of network adequacy in the Federally Facilitated Marketplace.

State regulators have also engaged in the effort to maintain network adequacy.  Many are planning to revise their current network adequacy standards and their plans to revise them to address the new requirements and related problems.  To assist with that effort, the State Health Reform Assistance Network team at Georgetown University has developed a planning tool for states to use when analyzing and updating their network adequacy standards.  With respect to NN plans specifically, the Network Adequacy Planning Tool for States recommends the following standard for identifying and regulating NNs:

1. Determine a definition for “narrow networks”
2. For networks that meet definitions
   • Require full disclosure of all criteria used to select network providers
   • Require full disclosure of selection process
3. Require issuer to establish and disclose an appeals procedure for providers who are not selected for the network
4. Require issuer offering narrow networks to offer alternative plans
   • Offer a broad network program at each metal level
   • Offer a plan with less out-of-network cost-sharing at each metal level
5. Require the issuer to disclose whether the narrow network is tied to quality improvement and care management; and to submit an annual certification that the two types of activities were completed
6. Require issuers offering a plan that meets the definition of a narrow network to also offer a plan that either:  1) had a broad network (to be defined by state); or 2) has less out-of-network cost sharing at each metal level at which a narrow network plan is offered

This standard would protect patients by mandating that insurers offer alternatives to NNs, among them a broad network at each of the ACA “metal levels” (bronze, silver and gold plans with increasing levels of coverage).

The Georgetown standard would also protect physicians and hospitals by requiring full disclosure of all the criteria by which networks select providers and of the selection process itself.  A legitimate appeals procedure would make the disclosure meaningful.

Exclusion from narrow and other networks is a threat that physicians including anesthesiologists must counter by enhancing their value proposition.  Not only should anesthesiologists keep working to enhance the quality and cost-effectiveness of their services; they should be helping their hospitals and ASCs be competitive when it comes to selection by a NN or any other managed-care plan.  If any of the anesthesia group’s facilities is eliminated from a network, the group will effectively be eliminated too.  Rob Saunders, a senior strategic consultant with McKesson Business Performance Services, was quoted in Providers Face New Pressures as Networks Shrink (McKesson ReveNEWS:  Insights for better financial health, July 2014) as saying:

[A]ll physician organizations—whether facility-based or independent—must be continually looking for opportunities to reduce patient care expenses and operational costs while improving quality of care …. Physicians groups should work closely with their facilities to jointly identify areas where the cost of care can be reduced and efficiencies enhanced so that the facilities appear attractive to payers for network inclusion.

Additionally, practices should find new ways to minimize operating overhead. Outsourcing revenue cycle management, for example, may represent an opportunity for significant savings. Sustaining an appropriate balance between clinician staffing and volume is also important ….

You’ve got to be able to demonstrate that you’re cost-effective in order to enhance your chances of staying in network with various payers… So instead of telling them during contract negotiations that you need a 10% increase, maybe you can say instead that `we’ve reduced our costs and we only require a 2% increase this year, and furthermore, we’ll tie future increases to cost and quality performance.’

In an ironic twist, physicians and hospitals themselves are creating de facto NNs as they reorganize to achieve greater cost-effectiveness through efforts such as integrated delivery systems (IDSs) and other accountable care initiatives.  The value-added endeavors that anesthesiologists are undertaking in order to become players in their hospitals and IDSs will be useful down the road if financial pressures motivate the hospitals or health systems to open their own health plans or to seek insurer partners.

Even if an anesthesia group can demonstrate the type of value sought by a particular NN plan, there does come a point at which the payments offered are simply too low to cover the group’s costs—with which the group’s representatives should be extremely familiar.  The group will have to continue to evaluate participation opportunities on a case-by-case basis. 

The growth of NNs, then, is one more reason for anesthesia practices to measure, benchmark and enhance their quality and efficiency.