Fwd: qotd: Wall Street’s view of narrow networks

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Subject: qotd: Wall Street's view of narrow networks
Date: Thu, 5 Dec 2013 13:56:26 -0800
From: Don McCanne <don@mccanne.org>
To: Quote-of-the-Day <quote-of-the-day@mccanne.org>



Center for Studying Health System Change
November 21, 2013
HSC's 18th Annual Wall Street Comes to Washington Conference

From the conference transcript:

Paul Ginsburg (President, Center for Studying Health System Change): Let
me move on to network innovations. And one thing that came up a little
bit in our first session was narrow- or limited-network products. And
let me start by asking about how are plans building limited networks? I
mean, in a sense, what are they looking for as far as which providers
would they like to have? How sophisticated are they in assessing the
value of different providers?

Carl McDonald (Director and Senior Analyst, Citi Investment Services): I
can go quick: Price. I'm done.

Paul Ginsburg: Okay. Actually, how sophisticated is the price?

Carl McDonald: Sorry? "How sophisticated..."

Paul Ginsburg: How sophisticated is the price? Is it price per episode?
Is it simply, you know, unit prices?

Carl McDonald: Yes, I mean, generally it's going to be the unit price,
or price per episode.

Matthew Borsch (Vice President, Goldman Sachs): Let me just offer one
thing that's happening. This is not quite to the tiered-network
strategy, or narrow-network strategy, per se, but it's topical right now
in that you've seen some of the health plans in Medicare Advantage
taking some pretty strong steps to narrow their networks. On the
physician side, it's been the most notable. In fact, there was a,
there's been some communication about that. There was a letter that was
posted yesterday from the health insurance industry to CMS, stressing
how important it was for the plans to be able to make these network
exclusions. But obviously, for doctors who've been, you know, contracted
in Medicare Advantage to suddenly be, to be terminated, where, in most
cases, they continue to participate on the commercial side, has created
some real blowback.

Paul Ginsburg: I had noticed that, and was wondering, it sounded to me
that this was different way that a plan pursues a more limited network.

Matthew Borsch: It is.

Paul Ginsburg: It seems as though, and I saw The Wall Street Journal
article a week or two ago about United, and it almost seemed as though
they were trying to get their star quality scores up by culling out the
physicians who contribute to low scores. And is that what it's about, Matt?

Matthew Borsch: Well, the truth is we don't really know.

Paul Ginsburg: Yeah.

Matthew Borsch: You know, that, that is, from our perspective, somewhat
of a black box, in terms of the decision making there. There are
multiple criteria. There's how each physician group feeds into the star
quality scores. There are utilization, efficiency metrics that they can
run on a broad, you know, larger companies can run on a broad set of
claims data.

There's also, frankly, the consideration of which Medicare Advantage
members are assigned to those physician groups. And again, I'm not
pointing to any one of these three as a factor but there you could
possibly have some effort to change the risk distribution of the
underlying membership.

Sheryl Skolnick (Managing Director & Co-Head of Research, CRT Capital
Group): So, just to put this in context, Medicare Advantage rates are
coming down very significantly next year. They're actually going down
next year from United's perspective, what? about 3 1/2 percent or so.

And when your rates go down, some of your plans, and some of your
providers in those plans will have to be terminated, because you need to
essentially shrink to a profitable size, or a sustainable size. So
that's part of what you're seeing, is instead of the proactive "We're
introducing a new benefit plan, we're going to build a narrow network,"
now you're seeing the reactive effect of United's always been a very
inclusive and broad based network. They've had some issues of adverse
publicity in St. Louis and some other places when they've tried to
narrow the network based on quality. There is a lot less push back on
that sort of thing now.

But they're getting some push back on this one because in Connecticut
alone, for example, it's 2,000 providers. That's a lot in Connecticut.
It's not that big a state.

So, what you're seeing is, first, the unwinding. Second, I agree with
you completely, I think it is absolutely a strategy to get their star
scores up, because they're a major embarrassment. And they're clearly,
from their last conference calls, a focus of the company strategy for
Medicare Advantage for the next couple of years, is to get the star
scores up.

But I also, I agree with Matt, that there are many other factors at
work, most notably that they need to get all of these markets that
they've expanded rather broadly to get rid of the marginal plan, to get
rid of the marginal provider and, in some cases, the high cost member.

Robert Berenson (Institute Fellow, The Urban Institute): But I think
it's important to point to a major difference between the Medicare
managed care situation and commercial, which is that in Medicare, out of
network services are paid at Medicare rates, so that changes the whole
leverage situation. And it's the reason, I think, that hospitals
basically are in network at Medicare rates, or near to Medicare rates,
because they don't have the leverage.

Balance billing is a whole different situation. I'm actually surprised
that MA plans weren't more aggressive in the past, because they have the
protection for the out of network care. And others, there won't be such
push back from the beneficiaries hit with the complete balance bill, if
their physician is not in network, or something like that.

Paul Ginsburg: So, getting into the employer based, the commercial
space, you know, it looks like there's been substantial growth in small
group plans to have narrow networks. And, of course, so many of the
products of the exchanges are narrow networks.

And, any comments about that strategy, how it's going, is there going to
be, is there going to be push back by the public?

Sheryl Skolnick: For a long time the hospitals were telling us that
while Wall Street was busy talking about the narrowing of networks, they
weren't actually seeing it.

It was only when the exchange contracts came up that, even in the
beginning, there was some concern that some of the contracts that were
being signed weren't narrow-network contracts, in the very beginning of
the contracting. Towards the end of the contracting for reform these are
commercial, by the way, these are fundamentally commercial contracts.
So, by the end of the contracting, though, almost all of the contracts
being signed were for some sort of a narrowed network.

So, I think there was a very quick evolution in the thought process of
the plans in negotiating these things, where they very quickly realized:
This is one of the very few levers we have, we better pull it.

Paul Ginsburg: Yes. And, to what extent, as they form these networks, to
what extent are the savings going to come from keeping high cost
providers out, or getting discounts from providers?

Sheryl Skolnick: Yes. Yes.

Paul Ginsburg: Which is the dominant piece, or are they both very important.

Sheryl Skolnick: Very important.

Paul Ginsburg: Okay. That's the answer.

http://www.hschange.org/CONTENT/1396/?id_conf=32


Comment: If insurers were marketing products designed primarily to get
their clients the health care that they need, you would think that they
would do their best to make sure that they cover essentially all of the
physicians that their clients would select. But they don't, and they are
narrowing even further their lists of contracted providers. Why? Wall
Street understands. It's not about quality or access. It's about the money.