Becker's Hospital Review

30 Financial Management L ooking to appeal to consumers with lower premium prices, some health insurers sell- ing policies through the Patient Protection and Affordable Care Act health insurance exchang- es have turned to narrow provider networks. There's been a flurry of media attention, and in- dustry experts have predicted the networks could have downsides for both providers and patients. Here are six key things to know about narrow provider networks. 1. Health insurers selling individual policies through the PPACA exchanges are turning to nar- row networks as a way to compete on premiums by lowering their unit cost (what a health insurance company pays to a provider for services), accord- ing to a Health Affairs blog post by David Cusano, JD, a senior research fellow at Georgetown Univer- sity's Health Policy Institute, and Amy Thomas, a research associate at GU's Health Policy Institute. 2. Insurers forming narrow networks generally take one of two approaches, according to Mr. Cu- sano and Ms. Thomas. They either include only low-price providers in their limited networks, or they give incentive payments to providers that meet certain quality metrics and help the insurer achieve the federally required medical loss ratio threshold of 80 percent. 3. It seems limited provider networks could succeed in reducing healthcare costs considerably. According to an analysis of network data from 120 unique 2014 individual exchange plans, the McKinsey Center for U.S. Health System Reform found products with broad hospital networks had premiums 26 percent higher than narrow-network products of the same carrier, product type, metal tier and rating area. 4. However, the rise of narrow networks in the in- dividual insurance market could be bad news for hospitals. According to Moody's Investors Service, hospitals included in the networks face potential- ly decreased revenue by accepting lower payment rates than what they would receive from broader contracts, while those that are excluded risk losing market share. 5. Narrow networks could potentially prove harmful to consumers as well. According to a re- cent analysis conducted by Georgetown Univer- sity researchers and released by the Robert Wood Johnson Foundation, narrow network health plan enrollees face a more limited choice of providers and could face significant financial issues if they seek medically necessary care out-of-network. Health insurers should be required to meet a minimum standard for adequate access to pri- mary care, according to the report. 6. Legal battles over narrow networks are already in progress across the country. Seattle Children's Hospital — which is out-of-network for many of the new plans offered on Washington State's health benefit exchange — filed a lawsuit last year against the state's Office of Insurance Com- missioner on the grounds that the state's ap- proval of the narrow network plans doesn't meet requirements for adequate access to care. Mean- while, Anthem Blue Cross and Blue Shield's nar- row networks in New Hampshire, Maine and Missouri became the target of criticism for simi- lar reasons, with some policymakers and exclud- ed providers saying the narrow networks could limit access to care. n What Narrow Networks Mean for Providers and Patients: 6 Things to Know By Helen Adamopoulos New Reimbursement Models to Eclipse Fee-for-Service by 2020 By Ayla Ellison P ayers and hospitals both expect fee-for-service to dramatically de- crease over the next five years, according to a study commissioned by McKesson and conducted by ORC International. The study, titled "The 2014 State of Value-Based Reimbursement", was based on survey responses from 114 payers and 350 healthcare providers. The study found 90 percent of payers and 81 percent of hospitals currently offer a mix of fee-for-service and other reimbursement models. The study also found payers and hospitals anticipate two-thirds of payments will be based on complex reimbursement models with value measures by 2020. The payers and healthcare providers surveyed had different views on how value-based reimbursement models will affect the financial health of their organization. The study found 60 percent of payers believe making the tran- sition to value-based care will have a positive financial impact on their orga- nizations, while only 35 percent of providers believe value-based models will have a positive financial impact. n Financial Need is No Longer Leading Driver in Healthcare Acquisitions By Ayla Ellison A study released at the Healthcare Financial Management As- sociation's 2014 National Institute in Las Vegas found acqui- sitions and affiliations in the healthcare industry are being driven more by strategy than by financial need. In the past, acquisitions typically involved a stronger healthcare system acquiring a weaker one. The researchers found the current trend involves more mergers and acquisitions between organizations that are financial equals, with an aim of improving quality or cost-effectiveness of care. The study identified many of the key drivers of acquisitions and af- filiations in the healthcare marketplace today such as operational ef- ficiencies and creating clinically integrated care delivery networks and access to sufficient populations for population health management. "Affiliations that improve value for patients and other care purchas- ers are likely to be well received," said Joseph J. Fifer, CPA, president and CEO of HFMA, in a news release. "When a merger or acquisition happens for the right reasons, everybody wins." n

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