Health plans are using tiered payment schemes to gain some financial leverage over groups and hospitals in certain markets, but the new strategies are still a long way from mass adoption, according to a report released today by the Center for Studying Health System Change.
Additionally, the tiered plans, most of which focus on more basic reviews of costs rather than the more complex analyses of quality and outcomes, are raising the hackles of providers, according Paul Ginsburg, president of HSC, a Washington-based nonpartisan policy research organization funded exclusively by The Robert Wood Johnson Foundation.
The study looked at nine tiered network plans in six communities: Seattle, Miami, Boston, Orange County, Calif., Syracuse, N.Y., and northern New Jersey. Operating similarly to tiered drug benefit plans, tiered provider payment schemes require plan members to pay less out of pocket at preferred providers as an inducement to use their services.
"Many of the plans experimenting with tiered networks have encountered operational difficulties and provider resistance, raising questions about the ability of these new designs to slow rising health care costs in the near term," Ginsburg says.
Additionally, the plans exhibit a reluctance to exclude providers from their preferred lists. In Orange, County, for example, only two hospitals are not in preferred tiers, but there is evidence some hospitals have lowered their costs to get into the preferred categories.
"That's what we're seeing in a number of markets," he says. "The fact there is virtually no one not on the preferred lists doesn't mean the mechanism didn't produce some savings."
Since many of the tiered plans are offered to self-insured employers, Ginsburg says the savings from these provider price reductions do get passed through to the employers and, presumably, the employees.
"This tiering is an attempt to restore some of the leverage plans had in the past," he says. "What health plans have attempted to do, in hearing how important choice is, they are trying to find a way to add incentives to preserve choice. It's serving both groups of people, those who want to preserve choice and those who want to save money."
He predicts physician executives probably won't see tiered payment plans making a big impact in their areas anytime soon.
"My sense from the experience we've had is that they have developed much more slowly than I expected them to, so the possibility that they're going to be very effective in the near future is very small," Ginsburg says.
Large hospitals with significant market power still will be able to force the plans to back down from any effort to exclude them from the premium tier. Meanwhile, employer interest has been tepid.
"They don't want to do things that would annoy their employees, and they figure that denying their employees choice would be worse than asking them to pay a higher co-pay or percentage of premium," Ginsburg says.