Building Narrow Networks: 3 Steps to Containing Healthcare Costs

Travis Turner

Are Narrow Networks the Key to Containing Healthcare Costs? | Travis Turner | Corporate Synergies

There’s a shift from narrow networks that just focus on containing healthcare costs to networks that focus on value-based care. And that’s a good thing.

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Historically, healthcare networks have been limited, or narrowed, for the purpose of containing healthcare costs. Plan sponsors use a network of providers in a smaller geographic area because costs vary widely from zip code to zip code.1 That’s the primary appeal of narrow networks—they have been found to support better healthcare cost control.

Employers and carriers are now shifting from creating narrow networks just to reduce costs to developing smaller networks that focus more on value-based healthcare. These networks are made up of providers that offer service at a reasonable cost that’s well-coordinated and results in fewer readmissions, focuses on prevention and takes a conservative approach to care. Narrow networks often don’t just involve primary care physicians, but typically include specialists, such as surgeons, and surgical facilities and hospitals.

If this sounds complicated, it is. These steps should help you get a good grasp on narrow networks.

Step 1: Build the Provider List.

Employers and carriers review qualitative elements to measure cost efficiency and high-quality outcomes (what those specific elements are will vary by network). Some value-based networks are built around hospitals that provide exemplary service. However, not every hospital, surgical center or individual provider excels at all the services they provide. For example, a hospital may excel at maternity care, but not at joint replacement surgery.

Most employers rely on carriers to build narrow networks.

That’s because carriers have access to necessary data. Carriers review data across providers to determine which ones meet certain criteria centered around care to patients, zeroing in on those with low cost, low readmission rates, a history of preventive care and patient satisfaction.

Providers drawn to narrow networks may see an increase in patients, as well as an increase in revenue per patient. In addition, some narrow networks may offer providers incentives to treat patients within the network.

This leaves the plan sponsor to focus on an equally important issue when it comes to implementing a narrow network. See steps 2 & 3 below:

Step 2: Build an Employee Education & Communications Program.

Narrow networks that promise a higher quality of care with a lower cost are enticing to employers and carriers, but may be a harder sell to employees. Yes, these networks are likely more cost-effective for employees, too, but the notion of having a smaller list of doctors to choose from can be disappointing, especially for plan participants whose preferred providers are no longer in-network.

The requirement that an employee change providers can often lead to decision paralysis, and even resentment. They may not know how to choose a new physician, or they may have used one primary care physician for several years and don’t want to change. However, providing information on the “why” of a narrow network can help overcome indecision. And in this age of spiraling healthcare costs, employees are also motivated by potential healthcare savings.

Making sure employees understand how it works is key to the network operating correctly. Carrier-driven narrow networks often include tools that allow employees to search for in-network providers and read ratings and reviews so that they can find the highest-quality care.

Transparency is another way to gain employee buy-in, increase appropriate healthcare utilization and generally keep them “on board.” An employee education & communications campaign can explain, among other network details, how providers are selected. Plan participants are likely to be receptive to the idea that a high-quality provider can keep them and their family members out of the hospital, a win for everyone.

Step 3: Build on Employee Engagement.

There’s evidence that narrow networks work—but only if they’re tended to properly. That means ensuring that employees have access to primary care doctors, which are more cost-efficient than specialists. In one well-documented example, members of a narrow network offered by the Massachusetts Group Insurance Commission spent 36% less on healthcare because they used their health insurance more efficiently. The plan saw fewer emergency department visits and a lower per-visit cost for outpatient care—thanks in part to ensuring that members had plenty of access to primary care doctors.2

Containing healthcare costs comes at a price. It’s impossible for employers to continue offering the same provider options without seeing steep increases. But narrow networks could help them and employers save significantly.

1 Modern Healthcare, “Healthcare Costs Vary Widely by Region”
2 New York Times, “Savings? Yes. But Narrow Health Networks Also Show Troubling Signs.”


© 2018 Corporate Synergies Group, LLC. No part of this material may be republished or distributed without prior written consent.

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