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March 15, 2014 01:00 AM

The coming assault on narrow networks

Merrill Goozner, Editor
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    Merrill Goozner, Editor

    The outcome of last week's special election for a vacant House seat in Florida guarantees that attacks on the Patient Protection and Affordable Care Act by Republican candidates will dominate the airwaves this fall. Winner David Jolly, capturing a seat previously held by his former boss, the late Bill Young, made opposition to Obamacare the centerpiece of his campaign.

    Never mind that turnout was just two-thirds of the district's last nonpresidential election in 2010. The results will embolden anti-reform candidates across the country to spend lavishly on claims the law eliminated jobs and denied choice to patients and consumers.

    It's the latter charge that presents the most serious threat to efforts to transform the nation's delivery system. Providers and insurers engaged in building new delivery models based on limited networks must find a way to defend those efforts or they will be swamped by a hostile public convinced that restrictions on choice of providers—no matter how well structured—are an attack on personal freedom.

    The focal point will be the narrow networks that many insurers and providers are building across the country. Most are aimed at providing low-cost plans in the exchanges for uninsured low-and-moderate income people who are now required to buy coverage yet are price-sensitive.

    However, the phenomenon is growing among mainstream employer plans as well. Most of the hundreds of non-Medicare accountable care organizations are structured around a limited group of providers. So are Medicare Advantage plans. Some employers are channeling workers into a single provider system that offers nearly all necessary services, such as Intel's contract with Albuquerque-based Presbyterian Healthcare Services.

    If employers' shift toward high-deductible plans and narrow networks ratchets up another notch next October when 2015 private sector plan choices are announced, the backlash against limited choice could become the chief takeaway from the 2014 elections.

    There is, of course, plenty of irony in the politics of the situation. In the late 1990s, in the wake of a decade-long effort by employers and insurers to shift most people into HMO-led managed care, the Democrats used a physician- and patient-inspired patient rights backlash against denials of care to regain control of Congress. In the 2000s, healthcare costs exploded.

    This year, it's the Republicans' turn. Given an electoral landscape where the most vulnerable Democratic seats are in swing states hostile to Obamacare, the GOP is well-positioned to return the favor by using denial of choice as one of its main talking points. Republicans don't even have to blame the insurance industry. They can blame the president.

    The movement has already gained traction in some states. Regulators in Maine prohibited insurers from excluding some hospitals. Some states are considering “any willing provider” laws, which would essentially ban the creation of narrow networks.

    There may be hospitals and physicians who are quietly cheering on these developments. Perhaps they believe the healthcare system can return to the days when price increases were routine, the volume of uncoordinated and often duplicative services grew year after year, and high quality and good outcomes remained the goal of healthcare, not measurable and reimbursable events.

    But the evidence from the first few years of reform suggests most systems are beginning to accommodate themselves to the new reality. Quality is improving. Hospital admissions and readmissions are falling. More physicians are joining networks, and often becoming salaried in the process.

    The movement has even gotten tacit support from antitrust authorities, who traditionally look askance at powerful provider networks. As long as a market has multiple networks that offer employers and their insurers choice, many antitrust experts now see competing narrow networks and their ability to exclude some providers as a counterweight to the uncontrolled pricing power of dominant systems.

    The key is building narrow networks that work for patients. That means their exclusion criteria need to be rational and transparent. If a provider is high cost and low quality, then that needs to be publicly disclosed as the reason for exclusion.

    Workable networks also require flexibility. Care in some circumstances may require going outside the available provider network. But if outside providers use that expertise to extract monopoly rents, then public disclosure of their pricing patterns is probably a better solution than denying patients access to that higher quality care.

    Follow Merrill Goozner on Twitter: @MHgoozner

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