Narrow networks: ASC industry boon or bane?
Defining the narrow network
What constitutes a narrow network, like so many ideas in the new healthcare landscape, is subject to opinion. Before rushing to make a strategic judgment to join or abstain, it's important to understand the core concept.
"The generally acknowledged definition for a narrow network is an insurance plan developing a network that contracts with less than 70 percent of the hospitals within a well-defined area," says Stephen Kinsley, senior director of managed care with Surgical Care Affiliates. The majority of narrow networks have sprung into existence as a result of the health insurance exchanges mandated by the Patient Protection and Affordable Care Act, whether public or private.
Thus far, the healthcare field is hesitant to judge what effect these narrow networks have had. Payers exhibit similar caution in launching these networks; they have not become the sole, or by any means main, network model. "We are finding in most markets that payers participating in exchange plans will run a dual network. They will maintain a broader network, which oftentimes ASCs are already a part of, alongside a narrower network," says Marty Winslow, director of reimbursement with Nueterra.
The highest concentration of narrow networks is, unsurprisingly, in urban areas. The high levels of physicians, hospitals, ASCs and other providers lend the market to this model: everyone can afford a little exclusivity. "On the other hand, rural exchanges are built on existing networks. These areas are using larger, traditional managed care networks," says Mr. Winslow.
Even in densely populated metro areas, narrow networks have had a minimal impact to date. Some ASCs have not been invited to join these networks, while others continue to wait to see how it pans out — either good or ill — that will determine their stance. A good portion of Nueterra centers, are contracted with these narrow networks to some extent, perhaps with one plan but not another. Neither scenario has dealt a crushing blow or sweeping victory to ASC business.
Forced in or shut out?
Narrow network structure and provider response will vary widely from market to market. It's up to ASC leaders to analyze the market and their center's position. If unprepared, ASCs can either be cut out completely or wrangled in at unattractive rates.
ASCs serve two sets to customers: patients and physician, and these two groups of people are a significant influence. If more and more patients are absorbed by narrow networks, physicians and by extension their ASCs will want and eventually need access. "Physicians who join narrow networks with an incentive tied to quality will push for their ASC to join these networks too," says Mr. Kinsley. "There is a steady evolution of aligning with physicians and other post-acute providers to offer these services within narrow networks."
If ASCs resist narrow network participation, while physicians thirst for it, the ASC will eventually lose. By the time a surgery center decides to join up, negotiating more attractive rates may be more difficult or it may be too late entirely. "It is paramount that ASCs engage their physician leadership on their overall healthcare delivery strategy," says Mr. Kinsley. "Joining a narrow network or any network is only valuable when synergies exist between all medical professionals associated with the ASC."
ASCs are small players on a vast field; hospitals and health systems wield significantly greater clout. "For narrow networks, payers want a narrow scale solution. Instead of going to independent providers, they go to an integrated provider. This is where we are finding ASCs are getting locked out," says Mr. Winslow. "Not everyone is in the network. That is managed care at its essence."
Though there are bigger players in healthcare, ASCs hold a unique bargaining chip in the ACO discussion. "Narrow networks include low-price providers or they give incentive payments to providers who meet certain quality metrics," says Mr. Kinsley. Surgery centers have demonstrated consistency in quality outcomes and low costs, a perfect fit for the narrow network criteria. Use that data to leverage rates that will make contracting with a narrow network beneficial.
"Apply the same criteria you would apply for any contracting decision," says Mr. Winslow. Consider issues such as:
• Potential volume
• Reimbursement rate
• Referral patterns
Oftentimes narrow networks will offer exchange rates below Medicare. If the numbers just don't add up, treat it like any other business decision. "Choosing not to contract with a health plan's narrow network product is an operational decision that involves risk, but is not much different than similar decisions healthcare providers make to terminate agreements or not contract and operate under an out-of-network structure," says Mr. Kinsley.
Predicting the future can be an exercise in futility, especially when it comes to healthcare, but ASC leaders must make an educated guess. "We may have a push back, like we did in the 1990s, but short-term we won't see that," says Mr. Winslow. Narrow networks are focused on cost containment and the need to drive down the price of healthcare may be one point everyone can agree on. For the time being, narrow networks are here to stay.
"The ultimate success rests with an ASC's ability to provide a value proposition to the community through its relationships with physicians and health insurance plans," says Mr. Kinsley. "ASCs have tremendous value in the healthcare space as we move away from fee-for-service and demand transparency and cost-effective care."
More Articles on ASC Issues:
Bundled Payments Save $33M in Cancer Care: How Can Other Specialties Do the Same?
CMS Proposes 2015 ASC, HOPD & Physician Fee Schedule Payment Changes: 5 Things to Know
90% of Physicians Rely on Traditional Fee-for-Service Model
© Copyright ASC COMMUNICATIONS 2012. Interested in LINKING to or REPRINTING this content? View our policies by clicking here.
To receive the latest hospital and health system business and legal news and analysis from Becker's Hospital Review, sign-up for the free Becker's Hospital Review E-weekly by clicking here.
New from Becker's ASC Review