Network management: What becomes possible with integration
By James Evans, VP, financial and network management, McKesson Health Solutions, December 20, 2012
As I’ve written about in the first two parts of this series, network management must be retooled if health plans and their provider network are to meet the cost, quality, and access challenges we now face. By integrating and automating four critical functions – provider information management, network design, contracting, and reimbursement – plans can develop a policy-driven environment in which the complex and dynamic interactions between payments, benefit plans, and medical events are fully and efficiently synchronized. This helps health plans and providers work in concert to achieve a pressing goal: to better, more cost-effectively manage populations through advanced care delivery models built on some form of value-based reimbursement.
We’ve looked at the reasons why the network management function is under pressure to evolve, and the pieces that need to be in place to do an overhaul and upgrade. In this last part of our discussion, I’ll describe the advantages that are gained by optimizing the network management function. I will also lay out some considerations for assessing readiness in taking this next step, and be frank about why some organizations might be hesitant to push forward, in spite of compelling reasons to do so.
Administrative cost efficiencies
The benefits of integrating the network management function begin with administrative cost efficiencies.
Improvements in the administrative domain make it easier for a health plan to enroll and manage the right providers for its programs, benefit plans, and designs. As a prerequisite for doing so, a health plan must have all the relevant data on those providers – obtained from a variety of sources (ranging from third parties to in-house analytics) and pertaining to a variety of categories (from credentials to quality measures). The administrative efficiencies come from having a single automated system capture and manage that data, and deliver it through a solution set. Once the data is populated, the enrollment of the provider can be done very rapidly, and the management of the network is much more adroit, as we’ll see.
Improved provider relations
Another advantage to a single automated system is simplicity of verification – not only for the payer but also for the provider. A portal allows providers to reach into the payer’s system and actually validate, update, and manage their own data. For instance, a provider that has changed offices, added a new team member, or updated a credential can apply that change to the system on its own and know that it will cascade automatically.
The resulting administrative efficiencies are easy to imagine, and so is the improvement in relations between the payer and the provider. We have found that even providers who work with multiple payers are more satisfied with those relationships when they have access to a portal system to manage their own data. After all, time and resources are no longer wasted on administrative oversight, and reimbursements are processed correctly the first time.
A robust data management system also gives payers the ability to understand the role that providers play within a network. This frees the payer to think in terms of systems of providers, rather than discrete providers, and to understand the exchanges between providers along the supply chain. As a result, a payer can see the natural flow of a patient through the healthcare path and determine whether the network is adequate for a population or a particular patient. That kind of nuance creates more service satisfaction among every stakeholder.
Increased speed to market
Historically, a health insurance product has been composed of a set of benefits aligned against a suite of providers. The network of “any willing provider” was able to support even wide network access without much concern. In today’s environment, however, without the ability to medically underwrite, payers need every tool at their disposal to create benefit plans that are cost efficient. In addition, with more regulations to implement in a very short window, speed to market can not only determine a payer’s share of market but also its profitability.
As a result, the network itself becomes the strategic management infrastructure for delivering new products. For example, in a given market, a payer may retain some products under a fee-for-service model while shifting a number of specific procedures to an episode-of-care model. If the right providers and relationships are in place, the payer can deliver that product to the market with confidence. If the product is financially attractive, it might gain market share among employee groups or members and even be brought to scale across markets.
Medical cost efficiencies
Until now, few payers have used network design strategies to manage medical risk. Yet, doing so can have a major impact on medical costs. For example, a knee replacement may cost $20,000 in the market. However, a select group of providers able to deliver that service more efficiently may be willing to accept a price of $17,500 if the health plan promises to steer more patients its way, leading to medical cost savings of $2,500 per episode.
Those cost savings are almost certainly driven by an improvement in care quality in terms of fewer complications and readmissions, reduced hospital time and better rehabilitation. Patients subscribing to that plan are encouraged toward optimal cost and quality services since they will be penalized for not using preferred providers.
As health insurance exchanges and increased Medicaid enrollment bring an influx of high-use, high-churn members, the need for a network structure that is highly efficient in the delivery of optimal care will be essential to manage medical risk. Benefits and providers must be administratively tight, economically aligned, and structured to encourage the type of performance — from providers, payers, and patients — that improve outcomes. The payer that has a data-backed ability to understand and manage its provider network will be in a better position to manage medical risk.
Ready and willing?
The advantages of an integrated network management function are intuitive and flow logically in step. In determining whether such a benefit structure can be delivered, a payer needs to consider readiness in line with those steps. If data can’t be accessed efficiently, a payer won’t be able to understand its providers sufficiently nor enroll and manage them efficiently. If that can’t be done, the other steps in turn can’t be accomplished.
The larger questions about readiness surround urgency and leadership. In conversations with payers and providers, I often ask three questions:
1. Do you believe that in the next 3 to 5 years you will need to manage significant change in your care delivery framework or reimbursement designs?
2. Do you believe that a different relationship between payers and providers will be necessary to enable those changes in care delivery and reimbursement?
3. Do you believe that your current network, processes, and procedures are adequate to support those partnerships, and those changes?
If the answer to the first question is no, then there is little need for further work. However, if the first answer is yes and the answer to either of the subsequent questions is no, then much needs to be done.
Even so, many organizations are hesitant to move forward. A high percentage of my customers and colleagues in the industry are understandably overwhelmed by the extent of the change that has been coming at them in recent years. They are also experiencing what I have heard described as “compliance fatigue.” The mindshare and financial resources devoted to mandated programs and requirements have diminished the sense of innovation and determination necessary to be an industry leader. The urgency, however, is real.
In that light, perhaps the most important question about readiness should be: “Are you willing to be a relevant participant in healthcare delivery in America three to five years from now?” If the answer is yes, it is time to begin.
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