Employers Value High Performance Networks

Joseph Berardo, President and CEO, MagnaCare. (Aaron Houston NJBIZ)By Joseph Berardo Jr.

In the process of exploring strategies to improve efficiency, clinical effectiveness and value as a way to slow unsustainable levels of healthcare spending, employers have embraced a highly effective approach called “high performance” networks, also known as “narrow networks.”

Comprised of exclusive groups of quality healthcare providers and health professional organizations recruited to serve a defined patient population, these networks help to raise the level of care and make healthcare more affordable — at a price point that is potentially 15-20 percent below broader networks.   

High performance networks use sophisticated data analysis that enables providers to demonstrate improvement across evidence-based guidelines, and focus on making meaningful decisions for improving patient care. They do this by carefully tracking patient experiences, measuring satisfaction levels and continuously improving services to consistently:

  • Achieve excellent clinical outcomes
  • Ensure safe practices
  • Improve patient care and health through evidence-based practices
  • Apply the most up-to-date medical knowledge

The concept of a high performance network is not one that simply and negatively results in more limited choice, but rather one that carefully and selectively puts together networks based upon sophisticated data analysis that identifies providers that deliver quality care while keeping costs low. Any apparent ‘limiting,’ in other words, is very deliberate and meant as an overall improvement to the network.

Employers and benefits payers anticipate that by choosing the highest-quality providers, they can better meet the healthcare needs of plan members, improve individual outcomes and enhance personal satisfaction with healthcare coverage.

Important Advantages of High Performance Networks

The benefits of the “less is more” strategy of high performance networks include: emphasis on quality rather than quantity, elimination of costly but ineffective providers, preservation of health benefits and stronger collaboration across the healthcare continuum.

Research conducted by McKinsey & Co. found that the size of a plan’s network is not correlated to its performance as measured by the U.S. Centers for Medicare and Medicaid Services, in terms of outcomes, patient experience and clinical process. Nevertheless, skeptics want to know how less choice in a health plan translates into lower costs. The answer is two-fold:

A health plan can decide to sign contracts only with the hospitals that charge lower prices. This is important given that there can be enormous variation in healthcare prices. For example, an appendectomy can cost anywhere from $1,529 to $186,955. By signing contracts only with providers who are much closer to the $1,529 end of that spectrum—and who demonstrate good outcomes—health plans can lower the price of providing healthcare without compromising quality.

Also, benefits payers that work with fewer providers have the ability to negotiate lower prices. Basically, they are promising to buy in bulk from a smaller set of physicians, and can therefore reduce the cost they pay for each visit. This leads to lower out-of-pocket costs for enrollees.

High performance networks focus on identifying providers with a demonstrated ability to deliver quality, efficient healthcare, and then offering consumers incentives such as reduced cost-sharing to obtain care from those high-value providers. This is made possible by increased access to vital data from claims, prescriptions and clinical settings that can be used to identify the best physicians while avoiding ones who tend to order more tests, prescribe more brand-name drugs or take on more complex patients.

It’s important to note that high performance networks only work if there is a sufficient supply of providers, both physicians and hospitals, in a geographic marketplace to create some competition. Ultimately, once benefits payers see the positive results from high performing networks – better outcomes, lower cost – they will play a larger role in steering patients in this direction.

Joseph Berardo Jr. is CEO of MagnaCare, an administrator of self-insured health plans for employers in New York and New Jersey.

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