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Narrow Networks: Obamacare's broken promise and how doctors and patients can fight back


Several states are considering variations on “any willing provider” laws that would make payers accept broader provider networks.

This fight is about money, and it’s about patient choice. In the aftermath of a lawsuit targeting UnitedHealthcare after it dropped thousands of physicians from its Medicare Advantage network-despite a public pledge by President Barack Obama that patients could keep their doctors-insurance companies are reportedly using healthcare reform to tighten their physician networks. While the goal, payers say, is to rein in healthcare costs, the consequences will impact all practicing physicians as they scramble to implement provisions of Affordable Care Act (ACA) and guide patients through an increasingly complex payment maze.

Narrow provider networks-which allow insurance companies to keep premiums down by including physicians they see as providing less-costly, more value-based care-are not a new phenomenon.

The trend, however, has accelerated since enactment of the ACA, under which payers are using narrow networks to keep premiums lower in the federal and state health insurance exchanges.

In November 2013, narrow networks’ impact on physicians was highlighted when UnitedHealthcare targeted 2,200 Connecticut doctors for removal from its Medicare Advantage network. That move is now embroiled in a legal battle.

Experts in the healthcare field say that this trend is not going away as the nation’s healthcare system attempts to evolve from one that pays for volume to one that tightens costs and delivers value. But if insurance companies want to avoid a rerun of the managed care battles of the 1980s and 1990s-when they were seen as opponents of patient choice-they must negotiate a treacherous political landscape and balance the needs and wants of physicians and patients against their widespread mandate to tamp down costs.

Physicians are paying attention, and are fighting back. In addition to the legal battle being waged in New England, the American Medical Association is pushing legislation on the state level and hoping to influence changes in federal policies. Several states are considering variations on “any willing provider” laws requiring payers to accept broader provider networks. The federal government announced in February that it is exploring rules that, starting in 2015, would require insurers to submit their network lists for review before being approved for the federal health insurance exchange.

“Doctors can’t afford to be passive,” says Valora Gurganious, senior consultant for DoctorsManagement LLC, a medical practice consulting firm in Knoxville, Tennessee. “Their patients are being ripped away from them and that’s not right. They’re not being allowed to practice their craft. We’re in a major transition, and it’s going to be bumpy.”

Taking cover
While narrow networks are a long-time trend, experts say the ACA was the break in the dam that has allowed insurance companies to quicken the move to narrower provider networks.
“The ACA may give insurers cover for what they wanted to do anyway,” says David E. Williams, MBA, co-founder of the Health Business Group, a healthcare consulting firm, based in Boston, Mass.

Next: A map of which states are battlegrounds for narrow networks




The ACA makes it difficult for insurance companies to drop costly patients, so “the only opportunity they have is to drop the physician” and hope the patients leave too, Gurganious says.

She expects UnitedHealthcare and other payers to drop physicians when and where they can. She says the company  picked the markets and targeted providers with costly patients to drive them to other networks with a goal of negotiating better rates.

“It’s putting more downward pressure on remaining carriers,” she says, adding it sets a precedent with a lower bar. She says it wouldn’t be surprising if other insurers soon followed suit. “It’s an unfortunate consequence we could see in the coming months,” Gurganious says.

Jeff Hoffman, a senior partner with healthcare consulting firm Kurt Salmon, says the ACA is partly responsible for the narrow networks, but even on the commercial side costs were too high and employers wanted to lower them.

“The day of a premium price model is coming to an end. These changes take time,” Hoffman says. “The Affordable Care Act influenced it but it was going to happen eventually. Insurers are looking at how to do better and how to manage.”

Insurers are investing in technology and processes to build narrow networks,  track the most expensive diseases, and find better treatment management instead of “lurching from crisis to crisis,” Hoffman says. The goal is to achieve lower costs while increasing quality of life.

Jeff Moffat, of Blue & Co., a public accounting firm in Indianapolis, Indiana with a large healthcare consulting business, says that even before passage of the ACA there was pressure to contain costs, because insurance companies were lowering reimbursements.

“Physicians feel it most as small employers. It’s ironic all these changes are affecting the providers,” he says.

Barbara Bergin, MD, an orthopedic surgeon in Austin, Texas, and founding partner of a 27-physician orthopedic group, says, “Doctors have a great feeling of instability and no ability to predict the future. This process has been going on for 20 years. ACA is the straw that broke the camel’s back.”

The payer balancing act
One of the reasons payers push narrow networks is to gain leverage over providers by forcing prices down and increasing competition between physicians. Taken to their end point, narrow networks mean providers who meet the value and cost targets will be kept in the network. Those  who do not will be removed.



“Welcome to the world of competition in healthcare, because that is what narrow networks are about,” David Blumenthal, MD, MPP, president of The Commonwealth Fund writes in a commentary on the Huffington Post website.

Tammy D. Arnold, a clinical and network communications spokeswoman for Aetna, says that patient access to affordable health plans requires affordable provider services.

“Under the healthcare reform law, there are a number of new benefits and new costs for consumers, employers, and seniors,” she says. “Given these new costs, as well as the wide variation in the cost and quality of services provided by doctors and hospitals, insurers are developing high-value provider networks to help keep health care affordable for millions of Americans.”

But insurers must strike a balance between achieving cost savings and customer convenience, says Reid Rasmussen, owner of freshbenies, a subscription service for concierge-like medical services in McKinney, Texas, with decades of experience in the healthcare industry.

“There’s a high cost to the convenience we’ve had in medical care,” Rasmussen says. “Narrow networks are the future, but it’s in flux as companies determine what patients want. Insurers don’t want to lose their customers.”

Narrowing networks is essentially the same strategy as that used by Walmart, Rasmussen says: push prices lower in order to leverage better prices from suppliers, in this case the physician. The downside to insurers squeezing physicians is that the physicians eventually will stop working with insurance companies if the companies squeeze too hard.

“There will be times when insurance companies push too hard, and during the time of flux is when it will be most ugly,” he says.
Donald J. Rebhun, MD, an internist and corporate medical director of HealthCare Partners Medical Group and Affiliated Physicians in Southern California, says he has seen narrow networks based solely on cost, which is a mistaken approach.

“The focus must first be on quality and then cost,” he says. “There have been clear outcomes that you can combine quality with cost savings to get a superb system.”
HealthCare Partners has had that focus for years, Rebhun says. The practice, which is described as the largest medical group in the United States, is more focused on patient management. “There’s a transition in America from volume to value,” he says.

Jessica Ogden, an associate principal at McKinsey & Company consultants in New Jersey, and coauthor of the McKinsey Center for U.S. Health System Reform report, “Hospital networks: Configuration on the exchanges and their impacts on premiums,” says narrowing networks is one of the way insurers are best able to lower their premiums. According to her research, insurance companies are offering almost three times as many ultra-narrow and narrow networks for hospitals as they offered in the same markets prior to the creation of exchanges under the ACA.



Both Rasmussen and Williams say that narrow networks will be the right choice for many Americans, while others will prefer to pay more and have available a broader selection of providers. In fact, a February poll from the Kaiser Family Foundation found that patients newly insured by exchange plans “are more likely to prefer less costly plans with narrow networks over more expensive plans with broader networks.”

In addition, research by McKinsey shows that patients don’t mind narrow networks for hospitals. McKinsey reviewed Centers for Medicare and Medicaid Services’ (CMS) records of readmissions and its composite score (value-based purchasing) of 20 other quality and patient satisfaction measures and found no discernible differences in performance on these scores among the hospitals participating in ultra-narrow, narrow, and broad networks. There was also no meaningful difference when it compared lowest-price to higher-price products.

Fighting back
Still, many physicians and their patients have sounded the alarm regarding narrow networks, and powerful forces are lining up to support physicians who say insurers are harming healthcare by coming between doctors and their patients.

In Connecticut, where physicians are battling UnitedHealthcare’s Medicare Advantage cuts, the Fairfield and Hartford county medical associations have successfully fought the elimination of more than 2,200 physicians thanks to a federal Court of Appeals decision that forced UnitedHealthcare to grant the physicians arbitration hearings.

“It was positive for us,” says Robin Oshman, MD, PhD, a dermatologist practicing in Westport and New Canaan, Connecticut and president of the Fairfield County Medical Association.

“We won the initial battle so doctors could remain in the plans and patients could remain with their doctors.”

Oshman says she hopes other medical associations across the country will follow their lead and seek injunctive relief.

Ardis Dee Hoven, MD, president of the American Medical Association (AMA), says the association is concerned about the creation of more narrow networks on the healthcare exchanges, and that they are “going to have to monitor them for adequacy of care.”

The most immediate concern, Hoven says, is making sure that payers are open  with providers about the reasons for the cuts.
“It’s how they’re doing it,” she says. “It needs to be transparent to patients and doctors so the healthcare community can help determine standards.”

Along those lines, the AMA is pushing new legislation on the state level and hoping to affect changes in federal policies. Hoven says state insurance departments will provide better oversight on the continuity of care issue and provide better monitoring and measurement of care.


The new federal proposal will force insurers to submit plan details, including lists of providers to CMS by June 27, 2014, for products they wish to sell during the 2015 enrollment period so that CMS can determine network adequacy. Federal officials will review the plans over the summer and notify insurers about any deficiencies so fixes can be made by mid-October.
“As consumer interest grows and puts pressure on the companies to say ‘we want broader networks,’ there will be a new filing for Qualified Health Plans for 2015,” U.S. Health and Human Services Secretary Kathleen Sebelius told Medical Economics during a February visit to Cleveland. “And I think insurance companies are hearing that from a lot of their customers. They want more choice. They’re willing to pay more money for broad access to a network, and I think we’ll begin to see that.”

Bob Doherty, senior vice president, governmental affairs and public policy for the American College of Physicians (ACP), says the ACP was pleased with the proposal to strengthen network adequacy requirements. But the ACP would like to see the federal government improve the current network adequacy standards by taking into account additional criteria, including patient-to-physician ratios, use of out-of-network clinicians and hospitals, and urban, suburban, and rural area-relevant standards as indicators of access. It also wants compliance and complaint information from network adequacy monitoring be made available to the public, Doherty says.

Payer transparency is key, Hoven says. “Insurance companies need to standardize this,” Hoven says, adding that the system should be evaluated regularly to make sure it is running smoothly.

“I think that includes CMS, the federal government, and everybody involved. This is something that is doable. It all goes back to transparency. If we invoke the rule of transparency, we can make better decisions,” Hoven says.

Options for physicians
One way for physicians to avoid the stress that comes from being dropped by payers is to create a business model that minimizes the importance of insurance. Enter models such as direct pay.

Rachot Vacharothone, MD, an internist in South Jordan, Utah, created a medical membership plan for his seven After Hours Medical urgent care clinics. Members pay $25 per month and a $10 flat fee per visit that includes testing, x-rays and other treatments. Members also have 24-hour access to providers through telemedicine services.
Vacharothone says he believes the future of physician payment lies in flat fees and higher reimbursement for good patient outcomes.

“I believe 10 years from now, accountable care organizations are going to be the way for reimbursing providers,” Vacharothone says, adding that the current fee-for-service method is not sustainable. “Now you do more and get paid more, regardless of the outcome. The answer is capitation. Insurers should do that so costs are not going out of control and doctors get rewarded for good outcomes.”

Rebhun agrees that some form of capitation or integrated care involving payment per patient should be part of any future solution. In the past, Rebhun has seen patients change doctors because employers have switched insurance carriers. But when employers switch from pre-paid insurance to high-deductible preferred provider organizations, almost all of his patients have stayed with HealthCare Partners.



Hoffman, from the healthcare consulting firm Kurt Salmon, advises physicians not to get caught up in shared savings offered by insurers where they are responsible for patient management and investing in new technology to change the care model. Doctors should seek something more long-term for creating this new value for the insurers and become partners with them. Payments for shared savings will dry up as goals change annually and become more difficult to attain as more efficiencies are created and costs drop.
“Just getting a percent of savings is not enough value for bearing the risks,” Hoffman says.

Bergin, the Texas orthopedic surgeon, says doctors can quit insurance companies. In the past they have terminated relationships because the offices couldn’t afford the fees. “Insurance companies aren’t afraid of that any more. They are always going to be able to find somebody to accept their fees,” Bergin says.

Another alternative is the Patient-Centered Medical Home (PCMH) model. Moffat says PCMHs almost always focus on primary care, internal care, and pediatrics.

“They’re getting paid to keep [patients] well,” he says. They leverage mid-level providers like nurse practitioners supervised by doctors. Nurse practitioners do the follow-ups doctors used to do. But medical homes can be difficult because it involves changing the way a practice operates at a fundamental level.

Advocacy is going to be an important step for physicians to take. Gurganious says physicians need to become more involved in their local medical associations and encourage more advocacy and negotiation. “They need to be as massive a force as the other side,” she says. “There is always strength in numbers.”

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