The CFA Perspective

Have You Been “Narrow-Networked” Yet?

Posted by Peter Rastello

5/6/14 2:45 PM

describe the imageSo called “narrow (or preferred) networks” are a big issue today and they will increasingly impact cardiovascular services program planning.  Payers are setting up these networks in response to the Affordable Care Act to offer plans that limit choices of hospitals and physicians to attempt to control medical costs.  Many higher-cost providers are being excluded (especially academic medical centers, children’s hospitals and costlier ones with famous names).  This trend has triggered push-back from some excluded hospitals, large medical groups and even some state officials. Some excluded hospitals have sought relief in court, and some state insurance commissioners have refused to allow insurers to exclude some providers in what they believe are “too-narrow or inadequate networks.” If you think this issue applies only to patients buying health care plans through exchanges, think again – payers are selectively using narrow networks for other offerings as well and your cardiovascular center of excellence faces a real threat!


The cardiovascular service line figures prominently in this debate because of its specialty focus, importance to so many providers, wide variation in quality outcomes, and, most importantly, overall cost position and relative lack of transparency in costs.  One may think this is a debate that rages at the policy and regulatory levels and that there is nothing the average service line administrator (SLA) can do to impact its outcome.  However, many issues underlying the selection (or non-selection) of facilities and physicians are directly in the purview of the SLA.  Why have payers narrowed their networks?  To save money.  How can the average CV SLA help their hospital compete?  By outperforming the competition in their service line through program/service offerings, patient experience, transparency and overall cost of services rendered.


Notice that “reputation” isn’t mentioned in this list. Reputation is a double edged sword for payers.  It is important to both payers and patients, but by itself does not trump cost.  Highly reputable hospitals are being excluded from networks because their reputation often comes with a high cost position. Unfortunately, research shows that high cost position does not necessarily equate to best clinical outcomes. Unavoidably, cost trumps everything, particularly when other just-as-important metrics are obtuse and hard to obtain and evaluate amongst peer groupings. In a February 7th editorial in the Los Angeles Times entitled “Narrow Networks and You,” it was stated:  “Still, having narrower networks as an option is a step toward a more competitive and efficient healthcare system.  If consumers move en masse towards less-expensive plans, the message to high-cost medical practices will be clear:  efficiency matters.  That’s an important part of the process of slowing the growth of healthcare costs.”


Here is what CFA recommends forSLA’s concerned about narrow networks and potential exclusion from payer contracts and/or networks:

  • Enlist your physicians and clinical partners in the effort to address underlying factors important to enhanced performance of all types.  Maybe it’s time for co-management and the incentives that go with it?
  • Know your costs (without this information, you will simply be stumbling in the dark)
  • Know where you stand with pricing (charges and any bundled pricing your program may be offering) amongst your peer hospitals. If a major payer subjected your hospital to “reference pricing” (basically saying they will only pay the average price amongst all providers for a specific procedure), where would you stand? 
  • Be prepared to package/bundle price all procedures and surgeries over an entire episode of care.  Start with the most important procedures/surgeries and continue through your list. If you haven’t done this before, know that this is a much more complex, time-consuming, labor intensive, all-encompassing, and collaborative process than you probably realize.
  • Realize that, increasingly, costs must be managed over a complete episode of care, not just the hospitalization period.  Conduct an analysis of the cost and patient care implications to cover the episode of care including three days pre-op, and 30-, or 60-, and even up to 90-days post-op.
  • Recognize that reducing costs implies that you successfully address innovation in care delivery and do not rely solely upon fine-tuning historical care practices and vendor pricing.
  • Continue to address related overall performance issues:  efficiency and effectiveness; clinical outcomes; and overall patient experience. These issues are important and will always influence payer decision-making.  


At present, no one clearly understands how payer efforts, the new health care exchanges, the Affordable Care Act and other financing mechanisms will truly impact providers in the near-term future in terms of volume and reimbursement, or if push-backs will be successful.  But we do know that addressing the underlying issues, specifically cost and related innovative care practices; will be rewarded no matter what changes occur and in what timeframe.


As always, CFA invites your comments, suggestions and questions.

Topics: healthcare reform