High Performance Networks Entice Health Plan Sponsors
In a recent SHRM article, it was reported that Health plan sponsors are taking a closer look at high performance networks—also known as “narrow networks”, an exclusive groups of high-value health care providers and health professional organizations recruited to serve a defined patient population.
High performance networks among employer-sponsored plans is growing because they promote higher-quality health care services while delivering increased value. Employers anticipate that by choosing the highest-quality providers, they can better meet the health care needs of employees, improve individual outcomes and enhance personal satisfaction with the employee benefits package. Some HR professionals question how fewer doctor and hospital options can benefit patients, and they may face employees who are critical of smaller networks that limit their choice of health care providers. However, 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.
Moreover, less choice in a health plan typically means lower costs for employers and employees for two reasons:
- A health plan can decide to sign contracts only with the hospitals that charge lower prices.
- Health plans that work with fewer providers have the ability to negotiate lower prices.
According to a National Business Group on Health poll of 46 large U.S. employers, 17 percent already had a high performance network in place, while an additional 24 percent were considering it for 2015 and another 20 percent for 2017. A University of Chicago survey found that 57 percent of small employers would opt for a high performance network if it would lower costs by 5 percent or more. About 77 percent said they would choose the high performance network if it lowered costs by at least 10 percent. The trend toward establishing high performance networks stems from the realization that a given health plan has access to vital data—from claims, prescriptions and clinical settings—that can be used to identify and “weed out” physicians who tend to order more tests, prescribe more brand-name drugs or take on more complex patients.
But for new high performance networks to thrive, they must also have these important features:
- Defined population.
- IT infrastructure.
- An incentive-based payment model. Approximately 11 percent of payments to physicians and health systems are based on performance or cost reduction.
- Employer-provider alignment.
- Consumer choice and transparency.
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