NPR has some extremely interesting news about Covered California. They are an active purchaser exchange model and they want to use their bulk buying capability to drive health system reform by excluding high cost and ineffective hospitals out of their network.
The exchange’s five-member board is slated to vote on it next month. If approved, insurers would need to identify hospital “outliers” on cost and quality starting in 2018. Medical groups and doctors would be rated after that.
Providers who don’t measure up stand to lose insured patients and suffer a black eye that could sully their reputations with employers and other big customers.
By 2019, health plans would be expected to expel poor performers from their exchange networks.
The goal is to start trimming the inefficient high cost extremes.
In some ways, this is not an unusual move. Narrow networks have been proliferating under the ACA, and they were around pre-ACA. As I’ve mentioned before, my employer’s best selling commercial network is a narrow network built when Howard Dean was the favorite Vermonter among online liberals. Narrow networks are usually built to get a better price and value proposition than a broad network. The goal is simple; an insurer thinks it can steer thousands or tens of thousands of members to Provider A over Provider B, so Provider A should give the insurer a volume discount.
When I was building narrow networks for Mayhew Insurance, there were a set of hospitals and provider groups that were in our broad network that we really tried not to use for the narrow products. One provider entity had good quality but a gold plated contract that was paying them roughly twice the regional rate for a set of frequently used codes. Another group had a standard contract but tended to have very low HEDIS scores on basic things They were never quite bad enough to toss from the general network but they were bad enough to steer people away from that group when possible. Other providers were in locations where we were stuck using them as they were the only specialist of that type within forty miles, but we actively tried to recruit new providers into the network and partner with hospitals and physician groups to get new docs to those regions.
So insurance companies using quality and pricing data to build a narrow network is not new. The interesting thing is the threat of en-masse exclusion to trim the outliers.
Exchange is only 4% to 6% of the entire California covered population and less of total medical spend. It is not a business closer if a hospital or doctor is excluded from all Exchange networks. But it is a mark of negative quality if a provider is excluded from Exchange on the basis of cost and quality concerns. It could be a useful marker for other purchasing entities to re-evaluate their contracts and re-arrange their steering/referral patterns.
There are some significant concerns with implementation. The big one is what exactly is quality? Is it risk adjusted and if so, how is it just medical risk adjustment or is it medical and socio-economic risk adjusted? How does a provider appeal? How does a provider get back in? Is this a process of GE like exclusion for the annual bottom 10% or is it an absolute metric. How should insurers deal with regions where only low-performing or high cost providers are the only available providers? What type of accessibility trade-off is acceptable?
Even with those questions, this is an interesting experiment.
rikyrah
I learn so much by reading your posts. I doubt I’d get this information elsewhere.
dr. bloor
To the extent this is true, they’re going to have to be very, very transparent about the criteria they use to cut someone loose. The income from the exchange plans won’t close doors, but you’re suggesting the possibility of a snowball effect where Mayhew Insurance feels free to exclude Bloor General as a matter of course simply because Covered Cal made that call.
japa21
There are many states where which are called Any Willing Provider states where a network has to accept a provider if the provider accepts the standard contract terms and meets quality standards. And this would mean standard quality standards that they use for everybody else.
As dr. bloor states, there would have to be total transparency involved and all providers would have to be judged by those standards, not just providers participating in a specific product.
I don’t know if CA is one of those states. However, I would think that if Mayhew Insurance or Japa Insurance chose to exclude a provider based upon Covered California’s decision, it could become messy from a legal point of view.
As you point our Richard, there are a lot of questions that need to be answered relevant to criteria used to measure quality.
That being said, there are many providers in all fields that provide less than high quality treatment who are, nonetheless receiving a lot of insurance money.
And I agree, I think using the bottom 10% would not be a fair way to go. After all, if the goal is to have everybody near the top, being a bottom 10 percenter does not mean lack of quality.
Every day I come across items making me glad I am retiring in 6 weeks. This is one of them.
pseudonymous in nc
What happens to narrow networks when a provider that you exclude from them goes on a mergers and acquisitions spree, motivated in part by the desire to make themselves indispensable in network plans and force insurance providers to accept their contract terms? If the choice in a city is Spendy Specialist Associates (owned by the local hospital, and functionally its outpatient dept) or Jiffy Med (independent but with questions over quality, and don’t they get on well with local hospital), how do you define your network?
(This is especially true in second-tier metro regions, where the local hospital group has decided that it needs to get big either to avoid being acquired by Big Metro Hospital or at least make for a big payday when it is acquired, and gobbles up all the specialists.)
Tom Levenson
Amazingly enough, Obama’s “health care takeover” has allowed — encouraged state-level experimentation and investigations into things like quality and its correlation (or not) with price. Who’da’thunk’it?
Lee
I think sort of healthcare related, but I just came across this article. I have no idea of it validity, but it seems at least plausible.
VA system is broken just suffered a PR campaign against it.
MomSense
I wish consumers had the information we need to be better consumers. I’d like to know infection rates, success/complication rates for surgeons, and the cost of procedures before I have them. if the states are able to access this information and use it to advocate for patient care and cost controls, I’m all for it. My concern is transparency. A well meaning, pro patient state could do a lot of good. I wouldn’t trust the Snyder or Scott or LePage administrations with this process.
dr. bloor
@Tom Levenson: The facilitation of experimentation and investigation is a good thing. The key to keep in mind is that these are essentially human-subject “experiments” they’re running, and they should be designed/monitored as such. Unfortunately, the health insurance industry has tried too many things in the past that looked more like a bunch of hyperactive fifth graders with chemistry sets.
Richard Mayhew
@pseudonymous in nc: Yep, that scenario has no good choices — cheap or good — probably going to lean towards good
@dr. bloor: Agreed, transparency and clarity on the meaning of quality is going to be a bitch especially if in California it is taken as the “Blue Ribbon Seal of Approval” or a “AAA” rating
@japa21: Agreed, Legal will have lots of billable hours if this is a perfectly rational and transparent process, and even more if there is any mud and FUD
BTW, congrats on the retirement!
Richard Mayhew
@dr. bloor: Only thing I would disagree with your statement is the 5th grader part —
We have done things that look like my 7 and 3 year old doing “science” experiments in the backyard that mainly involved moving mud from one spot to another without a hypothesis beyond “this will get us a bath tonight”
Lee
oooops link should read ‘VA system is NOT broken’
martian
We just got our insurance settled and the narrowness and rigidity of the networks has been a nightmare. Seems like none of the plans available to us had any provision for going out of network at all, not a fee, not a lower percentage covered, just zero. Since my daughter and I have completely different issues, finding a plan that covered both of our specialists turned out to be impossible. End result – I’ll be going another year without minor surgery, her opthamalogist will have to be payed out of pocket, and we haven’t yet figured out how to get her PT covered. I couldn’t see any rhyme or reason to it. The doctors were all on various plans, but the overlap seemed random.
Sorry, that sounds more like venting than contributing to the conversation. I think what I’m caught on is that what you’re talking about seems orderly and rational, and what is happening to my family, at our level, looks almost capricious.
japa21
@Richard Mayhew: Thanks. Already well past normal chronological age for it and the wife has decided she wants to do more travel. I think her preference is that I accompany her (at least I hope it is).
Els
thank you for your continued education on health insurance. This kind of thoughtful analysis is what I come to John’s place for.
Fair Economist
I’m not sure to what extent transparancy on the criteria is needed. I have a fairly high trust level in the State of California and vastly inadequate time to evaluate hospitals so if it says a hospital is too expensive or poor quality I’ll adjust my healthcare decisions appropriately. Expense isn’t *that* big a deal for me but quality is.
While Blue Cross can make its own decisions I’d guess there are a lot of smaller insurers, or insurers looking for limited coverage in remoter area, who don’t have the resources to examine every hospital and will use Covered California’s reject list to do screening.
NonyNony
@Fair Economist:
Exactly why transparency is needed. Hospitals getting dropped because of this means potential lawsuits and potentially hospitals going out of business or engaging in layoffs to get costs under control. If this process isn’t transparent and there isn’t a way for hospitals to know why they’re being essentially given a “failing grade” by the state of California then that can make this whole process useless and actively harmful. Best case is that hospitals get bad marks, don’t know why, and can’t correct themselves to get out of the hole. Worst case is that the system becomes actively corrupt due to lack of transparency and good hospitals get failing grades while bad hospitals pay off the right people to get passing grades.
Transparency for these kinds of things is always necessary, just to keep all of the participants honest. Plus it’s far more useful for a hospital to find out that they’re getting a failing grade because their rate of staph infection is too high and their drug costs are triple what other hospitals are charging than it is for them to just get knocked off the list and told “you guys suck more than the other guys”.
piratedan
the part that is rarely discussed is, what is quality?
is quality getting cost containment and a certain percentage of desirable outcomes?
or is quality treating each patient humanely and not kicking them out of a bed until their issues are under control?
Is there a third variation on this interpretation, a fourth?
Getting those circles to have significant overlap is sometimes a lot more difficult in regards to our own interpretation between what is a good deal and what is good care.
Richard Mayhew
@NonyNony: Agreed, hopefully the grades are given a year ahead of time with absolutely no consequences with a detailed breakdown so a hospital would know:
a) Re-admissions are good
b) You’re preventable infections need to be worked on by 10%
c) You’re costs (risk and geo-socio-economic adjusted) are 15% too high
d) You perform too many preference sensitive surgeries as a first course of action by 11%
etc
And then safeharbor Year 1 of active exclusions for hospitals that are still outside the boundaries but are aggressively moving to get back into bounds.
Steve in the ATL
Can I ask a question about non-California earthquakes? My mother wants to drop earthquake insurance on her house. Do we know when the New Madrid fault is going to have a big one?
TIA!
Brachiator
I guess it’s obvious that the devil is in the details, but I worry that excluding hospitals, instead of encouraging positive reforms, is the best way to go.
Recently, there were stories about the probable closing of in the upscale Orange County city of San Clemente. From a couple of news stories:
So, I guess you have a relatively healthy community and low hospital usage. On the other hand, if there is an emergency after the hospital has closed, people would have to travel farther to replacement facilities.
dr. bloor
@Steve in the ATL:
The day after she drops her insurance. SASQ.
Richard Mayhew
@Brachiator: That is always a challenge.
Spare/surge capacity is expensive to have in reserve without normal every day use covering baseline costs.
MomSense
@Steve in the ATL: @dr. bloor:
All I know is that when I leave my umbrella at home, it rains. If her luck is like mine, then dr. bloor is right.
? Martin
I’m pretty pleased with the attitude around Covered California, even if not all of it plays out exactly as hoped. One of the early ideas was to take the group plans that universities would buy into in order to cover college students (all college students in CA must have health insurance) and simply move them over to the exchange. This would put those young people not covered under their parents plan in the exchange where they might then stay after they graduate, but it also gives the exchanges a much needed low-risk pool.
I think it’s fair to say that the goal with these outliers is not to exclude them from the network but to help pull them into compliance. California is a tricky state in that we have both high density urban populations that can support a competitive hospital marketplace (which means we have places where you can remove some bad hospitals with minimal impact) and really, really rural population where a bad hospital is the only hospital because there is only one for a hundred miles or more. Texas and New York each have some of this as well (presuming that crossing the border is not an option for going to the hospital).
I imagine that CA is a little bit more willing to experiment because we have the Kaiser Family Foundation as a local organization and (from my perspective) the rather successful experiment in Kaiser Permanente.
@Brachiator: Some of this too may be due to the effectiveness of narrow networks. Kaiser Permanente is very much a walled city and is pretty strong here in OC and they’ve been building out new hospitals at a good clip. My son was born at Mission Hospital under a contract that Kaiser had with the hospital as they had no facility here in south OC, but since they built the Kaiser Hospital in Irvine that contract has expired and my understanding is that Mission Hospital’s volume has dipped enough that its struggling. Hoag has similarly expanded with speciality facilities – the new maternity hospital (really designed for wealthy Chinese and Korean parents to fly in to have a kid with US citizenship) and a new orthopedics hospital here in Irvine. These keep taking capacity off of the private general purpose hospitals like Mission. San Clemente is a bit of a drive when you’re in labor, but not that far for a hip replacement. UCI has also built a new hospital and is able to expand its speciality capacity.
And an anecdote about narrow networks – my mom who lives in Iowa has an eye condition requiring surgery but it’s a condition that they basically never see in Iowa (pterygium – surfer’s eye) and have no experience treating, so she’s coming here to CA where we have an excellent facility at UCI for that condition and where they do that surgery pretty much every day. She’s on medicare so getting it covered isn’t a particular challenge (a little bit with her supplement plan), but for other people that need to go out of network because of atypical conditions, it can be a real issue.
Getting that cost/access balance right is hard.
raven
Ya’ll love to whine and bitch about “the media”. This is the was Taureen Prince of Baylor handled a stupid question.
“You go up and grab the ball off the rim when it comes off…and then you grab it with two hands, and then you come down with it. That’s considered a rebound. So, they got more of those than we did.”
Punchy
This is some seriously inside baseball stuff. I have neither the expertise nor jargon knowledge to follow this. Can we go back to soccer?
Big Ol Hound
I hope mental health and re-hab clinics who just plain gouge the patient/provider are going to be included in this process as well as certain faith based health centers.
Big Ol Hound
@raven: If only the rest of the sports world handled stupid questions the same way. What would all the “experts” do after they complained about be wrongly treated for a week. Collect unemployment? Nope. They all get 1099s.
raven
@Punchy: That boring shit doesn’t start for a month. Right now the greatest two days in sports is in full swing. Of 13 million brackets filled out there are only 11,000 that are still perfect. Upset City Baby!!! We may even get a hoops thread whenever the blogmeister’s EERS play!
Fair Economist
@Richard Mayhew: Spare/surge capacity is a public good and ought to be addressed as such.
Ruckus
@Lee:
Ahhhh the correction makes all the difference.
Yeah the Kochsucker Bros are a couple of major fucking assholes. They of course have enough money to live their very comfortable lives – thousands of times over, provide the same for their kids – thousands of times over and yet they want to keep fucking things up for the rest of us. They are the bad example for all rich people. I think their idea is that if they can’t have everything, we can’t have anything.
Mnemosyne
@martian:
Make sure to write a complaint letter to your state’s department of insurance and send a copy to HHS. It is always worth it to get on the record with your complaints. And if you have a non-crazy state-level rep, loop them in as well.
pseudonymous in nc
@Richard Mayhew: The meta-question, I suppose, is what happens when you end up with something that’s “sorta kinda integrated” thanks to acquisitions and joint ventures and other consolidation but remains a set of discrete fee-for-service providers. At what point can insurers say “you’re basically Kaiser now, so we’re going to start treating you like Kaiser”?
martian
@Mnemosyne:
I hadn’t thought about taking the problem up the food chain, but you’re right. I should know more about my state rep than I do, too. Time to make a new friend! Onward and upward, I guess.
Richard Mayhew
@pseudonymous in nc: talk to the lawyers.. I do not know