The Benefits of High Performance Networks 

Updated on August 11, 2014

By  Joseph Berardo Jr., Chief Executive Officer, MagnaCare 

High performance networks are health plans that offer fewer provider options as a way to control costs and pass the savings on in the form of lower healthcare costs. This strategy requires primary care physician alignment and structured benefit design to encourage consumers to make cost-effective choices. 

With the growing adoption of high performance networks, federal officials are developing standards to ease consumer concerns about limited selections of doctors and hospitals; provide enough doctors to mitigate unreasonable delays; and give consumers transparency when shopping for health insurance, according to Fierce Health Payer.

Some skeptics question how fewer options benefit patients but, according to McKinsey, 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.

Less choice in a health plan typically means lower costs for two reasons: 

A health plan can decide to only sign contracts 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 only signing contracts with providers who are more in the $1,529-range – and who demonstrate good outcomes – health plans can lower the price of providing healthcare without compromising quality.

Health plans that work with fewer providers have the ability to negotiate lower prices. They’re essentially promising to buy in bulk from a small set of physicians, and can therefore reduce the cost they pay for each visit. This allows them lower out-of-pocket costs for plan members. 

A number of insurers selling plans on the exchanges are looking at high performance networks in order to leverage more favorable pricing from providers, drive down unit cost and lower premiums, according to Health Affairs. Health plans say they can lower costs with high performance-network plans because they can choose more cost-effective providers and, in some instances, pay them lower reimbursement rates in exchange for sending more patients their way.

Health plans embrace high performance networks for cost savings, and are willing to eliminate more expensive hospitals and provider groups. Well-designed high performance networks should also enable members to go outside the network if necessary.

Less is More

For new high performance networks to thrive, they must have three key characteristics, according to Becker’s Hospital Review:

Defined population: Because insurers must keep patients within a defined network to be able to control the costs of the defined population, they must involve an exclusive group of providers. In addition to controlling costs, this strategy enables the high performance networks to manage patient information and outcomes across all of the participating providers.

IT infrastructure: Health plans need robust data analytics and risk management tools in order to address the needs of the member population. These IT tools must be capable of population health management, allowing high performance networks to improve performance with evidence-based guidelines. To do this, they must be able to share claims and clinical data at the point of care to improve decision making, according to Fierce Health. 

Employer-Provider alignment: Health plans and providers must align to strengthen the high performance networks. Providers can use coordination and transparency to transform care models, while health plans can leverage their reporting and risk management skills to enable data-driven decisions. This approach fosters an environment in which data sharing enables better monitoring of costs and utilization. It also is the precursor to moving reimbursement to value and outcomes versus fee for service.

As networks become more high performance, it’s important to strike a balance between consumer choice and cost containment – which is where regulatory standards and transparency will play a role in protecting consumers. 

Experts predict that high performance networks will begin to emphasize providers who deliver coordinated, high-quality care rather than only reduced costs, making them that much more appealing. In the long run, the high performance network approach will benefit hospital systems that deliver superior health outcomes, service experience and affordability, according to Modern Healthcare. It will also support the necessary shift in reimbursement methodology.

With more consumers embracing less-expensive plans on the exchange, the move toward efficiency and lower cost signals the era of true healthcare reform.

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