Restrictive Medical Networks

 

We know that insurance companies are cutting costs by narrowing networks for physicians and for hospitals, or “tiered networks.”  Our problem is this conjunction that flows off the tongue, "physicians and hospitals."

To be more concrete, here is how it works for a primary care practice.  You as a primary care practice receive a contract proposal from Blue Shield, say.  You can sign up for network, A, B, C, or D.  If you sign up for Network A, all your charges will be paid for at 70% of the Medicare base price.  Patients who sign up for Network A, which costs the insurance company somewhat less because the fees paid are lower, will pay a lower premium than for other networks.  If you sign up for Network B, you will be paid say 80% of Medicare – a somewhat higher fee – but the only patients who can come to you will be those who sign up for Network B and pay the higher premium.  And so on.

From the patient’s point of view, it will be a juggling act – sign up for a Network and figure out where you can go.  If you already have a primary care doctor, see which Network you can sign up for and not change doctors.  We have seen by experience that many, many patients will sign up for a cheaper plan and make the doctor switch.

I’m not quite sure how it will work for hospitals.  It might be that patients in Network A will need to go to a hospital that signed up for that network, and thus will receive a lower payment from the insurance company.  Or it may be that the plan will be so-called “reference pricing.”  In this approach the patient can go to any hospital, but the insurance will pay the charge given by the lowest (or maybe second lowest) hospital in the wide area, and the patient needs to pony up the rest if he or she chooses a more expensive hospital. 

Now, there is every reason to restrict choice of hospitals.  This is where the money is, this is where the savings will be, and this is exactly where the excessive charges are.  There is plenty of evidence of great variability of charges with no correlation with quality (as far as quality can be measured, but that measurement is pretty good for hospitals as compared to outpatient quality.)  It's hard to narrow this network because of hospital consolidations and local monopolies that have resulted, but it must be done, somehow. 

On the other hand, there would appear to be no reason at all to restrict access to primary care.  Primary care impacts only minimally on the health care budget.  Good primary care, high quality primary care, is generally cost-saving rather than cost-enhancing.  There is no evidence whatsoever of primary care being excessively priced.

In fact, what might happen is the reemergence of so-called Medicaid mills.  One can save money in primary care by having clinics staffed by midlevel professionals – nurse practitioners and physicians assistants – and restricting access to patients by a variety of means.  Decreased quality of care in Medicaid mills is inevitable.  But because of the limited impact of primary care onto the health care budget, virtually nothing will be gained by this approach and much will be lost.  It is well established in health policy that the United States has too little primary care, not too much, and the restricted network approach will only further exacerbate that deficit.

[Note that I have not discussed specialists here, only primary care and hospitals.  Probably the best approach would be to split specialists into proceduralists and non-proceduralists, and treat the proceduralists like the hospitals, and the non-proceduralists like the primary care docs.  There are a lot more imaginative approaches that could be followed, but this might be a simple first step.]

Anyway, that’s my view.  There will doubtless be lots of confusion and some conflict, but if the insurance companies are in charge, as the ACA puts them, there is every reason to expect difficulties and missteps. 

Budd Shenkin