Implications of Narrow Healthcare Networks on Laboratory Providers

June 26, 2017 By: Quadax

Labs need to understand the implications of narrow healthcare networks on their ability to access patients and collect reimbursement.

In less than three short years (2014-2017), narrow and ultra-narrow networks have increased from 48% to 53% of all networks. With their majority influence, these networks are reshaping the healthcare industry. It is important for laboratory managers and pathologists to understand the reasons behind insurers’ creation of narrow networks and their perceived value by consumers and employers.

How do plans with limited networks provide cost savings for health insurers and health consumers?

The goal is to deliver increased patient volume (and revenue) to the provider in return for lower costs to the insurer (and ultimately the patient) achieved through reduced rates. Insurers limit the number of doctors, hospitals, and other providers a patient can visit in order to negotiate a lower cost for services with networked providers in return for a higher volume of patients. Insurers also promote to consumers that narrow networks allow insurers to influence the delivery of coordinated healthcare by offering targeted in-network solutions to help physicians and providers give patients more personalized care.

Looking for value, consumers prefer health plans with lower premiums over higher-priced health plans that offer access to more providers—22% and 19% respectively. Similarly, employers prefer the benefit of lower health plan premiums with 56% of employers considering narrow networks as a way to reduce medical costs. The level of savings could be a very good deal for consumers and employers, but whether these health plans can deliver value depends on whether or not the insurer’s selected network can provide adequate care.

With limited accessibility and availability, can narrow networks provide adequate care?

While narrow network plans might save money for insurers, consumers, and employers, they could make it harder for patients to get the care they need, where and when they need it. The plans may not include enough nearby providers and the providers they do include may be too busy to take new patients in a timely fashion. This could be problematic if a patient is unable to obtain the timely healthcare they need within their network. It can be further compounded if the plan provides limited or no out-of-network benefits.

Network Adequacy Standards

Federal and state regulations qualitatively state that networks should provide for reasonable access, without unreasonable travel or delay. Regulation of health plan provider networks often includes quantitative standards that may review the number of providers, provider-to-enrollee ratios, the mix of provider types, and the distribution/location of providers from whom enrollees may reasonably be expected to obtain services. Encouraging network transparency, regulation may also require that provider directories are updated at least once each month. The key to any successful regulation is compliance and enforcement. Without means to measure and enforce Network Adequacy Standards proactively, federal and state regulators are limited to respond after-the-fact to patient complaints regarding network compliance.

Implications laboratory providers may want to consider

Whether your laboratory pursues an in-network or out-of-network strategy, it is important to consider the effect narrow provider networks will have on your lab’s ability to access patients and collect reimbursement.

  • If your lab is seeking to be an in-network provider in a limited network plan, it may be helpful to learn about the network’s size, mix, and distribution/location as well as any governing Network Adequacy Standards that may be in effect. This information can help you communicate how your lab will fit within and add value to the network’s model. Also, be prepared to discuss price. It may be helpful to approach the topic of price from a value-based perspective. Payers will be interested to learn how your lab testing services can contribute to improve patient outcomes and reduce the cost per episode of care. You may want to demonstrate your lab’s value by sharing relevant statistics. 
  • If your lab remains an out-of-network provider, your lab will need to balance offering a low price through the narrow health network with preparing for patients to be responsible for paying the entire cost of the test. Be aware that out-of-network providers face new constraints on their ability to balance bill members of government-funded and commercial plans, while commercial payers are continuing to sue out-of-network providers to stop improper referrals and cost-sharing waivers.

Regardless of your network strategy, it is important to know the implications of narrow healthcare networks on your lab’s business model and to have available your lab’s performance statistics so you can negotiate value and drive efficiency and cost containment measures. 

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