HSC’s 18th Annual Wall Street Comes to Washington Conference
Center for Studying Health System Change, November 21, 2013 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:
By Don McCanne, M.D. 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.
]]>