Friday, March 18, 2016
March 18, 2016
California Insurance Marketplace Wants To Kick Out Poor-Performing Hospitals
By Chad Terhune
California's insurance exchange is threatening to cut hospitals from its
networks for poor performance or high costs, a novel proposal that is
drawing heavy fire from medical providers and insurers.
The goal is to boost the overall quality of patient care and make
coverage more affordable, said Peter Lee, executive director of the
Covered California exchange.
"The first few years were about getting people in the door for
coverage," said Lee, a key figure in the roll-out of the federal health
law. "We are now shifting our attention to changing the underlying
delivery system to make it more cost effective and higher quality. We
don't want to throw anyone out, but we don't want to pay for bad quality
It appears to be the first proposal of its kind in the country. The
exchange's five-member board is slated to vote on it next month. If
approved, insurers would need to identify hospital "outliers" on cost
and quality starting in 2018. Medical groups and doctors would be rated
Providers who don't measure up stand to lose insured patients and suffer
a black eye that could sully their reputations with employers and other
By 2019, health plans would be expected to expel poor performers from
their exchange networks.
The idea has already sparked fierce opposition. Doctors and hospitals
accuse the exchange of overstepping its authority and failing to spell
out the specific measures they would be judged on.
Health insurers, normally at odds with providers, have joined them in
the fight. The insurers are balking at the prospect of disclosing their
negotiated rates with providers. Health plans have long resisted efforts
that would let competitors or the public see the deals they make with
doctors and hospitals.
But scrutinizing the negotiated rates would help the exchange identify
high-cost providers and allow policyholders with high deductibles to see
the differences in price before undergoing a surgery or imaging test.
Lee said it's time for the exchange to move beyond enrollment and flex
its market power on behalf of its 1.5 million members. He said insurers
haven't been tough enough on hospitals and doctors.
"California is definitely ahead of the pack when it comes to taking an
active purchasing role, and exclusion is a pretty big threat," said
Sabrina Corlette, a research professor at Georgetown University's Center
on Health Insurance Reforms. "There may be a dominant hospital system
that's charging through the nose, but without them you don't have an
adequate network. It will be interesting to see how Covered California
threads that needle."
A study last year found that 75 percent of Covered California plans had
narrow physician networks, with more restricted choices than all but
three other states.
"I don't know of anyone even close to trying this," said Dan Polsky, the
study's author and executive director of the Leonard Davis Institute of
Health Economics at the University of Pennsylvania. "I applaud Covered
California for being bold to improve quality and reduce costs, but I
worry about the implementation."
Polsky said measuring quality can be complicated, and steps must be
taken to ensure hospitals and doctors aren't penalized for treating
sicker patients or serving lower-income areas. Most quality-boosting
efforts use financial bonuses and penalties rather than exclusion.
Under the Covered California plan, hospitals would be judged on a wide
range of performance and safety measures, from rates of readmission and
hospital-acquired infections to adverse drug events. The exchange said
it will draw on existing measures already tracked by Medicare and other
groups, and it will work with hospitals, consumer advocates and other
experts over the next 18 months to finalize the details.
California physicians warn that the exchange's proposal could further
reduce networks that are already too thin for patients.
Charles Bacchi, chief executive of the California Association of Health
Plans, predicted that Covered California's idea will backfire,
discouraging hospitals and doctors from participating in the exchange
and driving up premiums as a result.
"It's the right goal but the wrong approach," Bacchi said. "Covered
California is proposing a top-down, arbitrary measurement system that
carries a big stick. This can make it difficult for health plans and
providers to work together constructively."
Comment by Don McCanne
California has been an "active purchaser" of health plans for its ACA
exchange - Covered California. To help keep insurance premiums down, it
has contracted with plans that have amongst the narrowest provider
networks in the nation. Now they want to measure quality and costs and
expel providers, beginning with the hospitals, that rank poorly on these
measurements. What could be wrong with this?
Choosing physicians and hospitals is much more involved than merely
exercising personal preferences. Impaired accessibility, instability,
lack of continuity with changing contracts, lack of integration of
services, surprise out-of-network billings, and the like are just a few
of the reasons that narrow networks are disadvantageous for patients,
and, after all, shouldn't the system be designed primarily to take care
The purported reason for active purchasing is to obtain higher quality
at lower cost. But we don't even know how to measure quality beyond
token star-type ratings. Outcomes are much more dependent on
socioeconomic factors than they are on the quality of the delivery
services. So then is cost alone an adequate reason to pursue active
purchasing? The traditional Medicare program is far more effective at
controlling costs than are the private sector health plans, including
those offered through the exchanges. So forget quality and cost as
determinants of optimal provider networks.
Dedicated physicians and hospitals who care for some of the sickest and
most deprived patients do not score as high on quality measures simply
because the measurements are more focused toward the carriage trade.
What an injustice it would be for the poor and sick if we expelled their
physicians and hospitals merely because they failed the tests of some
naive policy wonk from behind the scenes.
Patients should have free choice of their physicians and hospitals in a
system that is affordable for all. We could have that by changing to a
single payer national health program - an improved Medicare for all.
at 1:58 PM