As the rest of the world is rushing towards narrow networks and ACOs, I'm going the other way. I think provider networks are at best an anachronism and at worse are dangerous to consumers.
Networks have become the proverbial hammer to which every problem looks like a nail.
In a recent post (All Things to All People Isn't Working), I pointed out that it's extremely unlikely that the best care for all conditions will be found at any one hospital, and very unlikely that such care can all even be found in any one city. Maybe your network will include some hospital in some city that has the best condition for what your particular need might be, but there's no assurance that it will, unless you happen to believe in the Lake Wobegon effect.
A recent study in Health Affairs, by Glance, et. alia, reiterated that care is not the same everywhere. The authors found that major OB complications for C-sections varied nearly five-fold between low-performing and high performing hospitals, with double the risk for vaginal deliveries in low-performing hospitals as well. You better hope the hospitals in your health plan network are high performing.
Networks implicitly assume that, for most people, access to OK care is good enough. Maybe it is, but that kind of settling should be an explicit decision by the patients, not an implicit one by the health plan.
Let's say you are diagnosed with, say, cancer. Being a diligent consumer, you do your research, Miraculously, you're able to find not only mortality and complication rates, but also costs. Although your local, in-network health system can certainly treat your condition, MD Anderson has the best outcomes and is the least expensive. Unfortunately, though, MD Anderson is out-of-network for your health plan, so your plan would only pay 70% for them, versus 90% if you went to the local hospital -- even though it is more expensive. If you want the best likelihood of surviving, it will cost you tens of thousands of dollars.
Do we really want to penalize consumers for making good choices? I don't think so.
David Dranove and Craig Garthwaite recently wrote a thoughtful defense of narrow networks, noting: "Make no mistake, restrictive networks are essential to cost containment." They see them as forcing needed competition, and are concerned that the backlash against narrow networks will lead to "any willing provider" requirements that could gut health plans' ability to negotiate with providers. However, they also admit that "narrow network plans are only effective if there are multiple high quality providers offering services in an area," which may not always be true.
Dranove and Garthwaite don't see either high deductible or reference pricing in themselves as viable solutions, noting both cause issues for chronically ill patients. I don't agree that reference pricing couldn't work for chronically ill patients, as I suspect some enterprising health systems (or disease management vendors) would find upfront fixed payment attractive. I also don't think narrow networks are the only -- or the best -- way to make providers compete.
Arguing between narrow networks or all providers in a network is looking at the problem myopically.
Let's try to remember why we have provider networks. Most people would probably speculate that it is so health plans can negotiate better prices with providers. Consumers look at outlandish provider charges -- as Steve Brill skewered last year in Time -- and are glad they have the benefit of those discounts. Of course, the only reason providers have such excessive charges is because no one (except unfortunate people without insurance) actually pays them. If providers had to really compete on cost, it's a good bet those charges would be more reasonable.
One reason health plans have approached price transparency very cautiously is because they worry that lower paid providers will see what higher paid providers are getting, and demand increases. I suspect that concern is valid, and it illustrates better than almost anything I can think of how these negotiated prices are ending up distorting market competition more than helping.
Let's think about other reasons why we have provider networks.
As HMOs -- which were then typically small network group models -- started to gain market share in the 1970's and early 1980's, two big selling points to employees were that they covered preventive care and that no claim forms were required. These reasons will sound implausible to younger readers who have only had benefits in the past 20 years, but I can assure you that they were true (and helped persuade me to be an early HMO enrollee!).
Administrative features like dealing with claim filing, patient eligibility, and medical management rules all are examples of "advantages" that in-network providers have had over non-participating providers. Well, the multiplicity of health plans and their varying administrative demands pose a huge administrative burden on providers. A 2009 study found that physicians reported spending 3 hours a week dealing with them, which researchers equated to as much as $31b in added costs annually. I doubt anyone would claim that the burden last decreased in the past 5 years.
For heaven's sake, the AMA actually calculates an annual Administrative Burden Index that scores how tough various payors are to deal with.
I would argue that we don't need networks for most, if any, of these administrative matters. WEDI says that 85% of claims are submitted electronically, although various other administrative needs are under 50%. With claims clearinghouses and sophisticated practice management systems, it's hard to see that a provider would actually have to be in-network to figure out eligibility, benefits, and where to send claims.
As for the medical management administrative burdens, I wonder if we're going the long way around the barn with all the pre-authorization and other requirements. Wellpoint just published a study that found that by giving consumers comparative prices for MRI providers, they shopped effectively, leading not only to a significant reduction in costs but also causing higher cost MRI providers to lower their prices.
As Sam Nussbaum, Wellpoint's Chief Medical Officer, told The New York Times: "We acted as a concierge and engaged consumers giving them information about cost and quality." I had suggested a similar concept in 20th Century Health Plans in a 21st Century, advocating that health plans transition from being network managers to being "provider brokers." In that role, they would help consumers find the best providers, based on price, quality, and other consumer preferences.
That's got to be better than "mother-may-I?" approaches.
Sandra Boodman recently profiled an interesting company called MediBid, a so-called "medical auction site." It allows consumers to request bids for specific health needs, and interested providers can respond with specific quotes. I had called for similar provider-bidding "exchanges" in Exchanges for Everyone! earlier this year, and it is exciting to see a company is actually testing the concept.
Critics complain that the MediBid processes focuses too much on price and not enough on quality. I agree that we need to do a much, much better job of defining and making available more quality measures (see What, Us Measure?), but it's hard to see that patients have any less information on MediBid than they would if they were trying to pick from a health plans' provider directory.
We just need more providers willing to compete on the basis of their cost and quality. Unfortunately, that may be as much of a challenge as trying to persuade health plans to get rid of networks.
I'm not saying health plans should pay whatever any provider charges. They should be able to set reasonable limits on payment, based on competitive bids and analysis (e.g., as in reference pricing). But I don't think they should restrict as much to whom those payments can go.
We have to remember that networks evolved in an era when health plans and providers held information very closely, and connectivity was difficult. Neither has to be true in the transparent, connected health system most of us say we want. Give consumers more and better information, give them incentives to shop prudently, and force providers to compete. But don't make consumers settle for mediocre providers simply because they happen to be in network.
We can figure out better solutions than provider networks.