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.