Narrow Networks Put Hospitals on the Offensive

Narrow network has been a big buzzword in healthcare over the last few months. Insurers’ efforts to offer lower-cost, but more restrictive plans, are welcomed by cost-conscious consumers, but leave higher-cost hospitals worried.
While the volume of narrow networks plans is currently dwarfed by less restrictive employer-sponsored plans, growth in exchange-purchased plans and employer efforts to reduce healthcare costs mean we’ll see more and more patients enrolled in these plans in the years to come. Will higher-price hospitals be shut out? And if they are, what does that mean for the hospital’s survival?
A RAND study released earlier this week found that higher-priced hospitals don’t provide higher-quality care. In fact, some lower-cost hospitals actually performed better on readmission and patient safety measures, which suggests narrow network plans offer access to a high-level quality of care, despite their lower price.
The RAND study does note, however, that insurers can’t simply cut any high-priced insurer from their network and still offer a product with comprehensive access to care. For example, in markets where only one level one trauma center exists, that center will be a must-have provider, even if it’s higher priced.
For patients in markets with multiple, competing health systems that offer the most comprehensive trauma care and subspecialty breadth, a narrow network plan has the potential to offer significantly lower premiums while maintaining access to high-quality, specialized care.
For those in markets with a single dominant player, the promise of narrow networks is, well, less promising.
A situation where narrow networks led to restricted access to specialized care is playing out in a rather dramatic fashion in Seattle, where Seattle Children’s Hospital is out-of-network for many of the new plans offered on Washington State’s health benefit exchange.
In October of last year, Seattle Children’s went on the offensive, filing suit against the state’s Office of Insurance Commissioner, arguing its approval of the narrow network plans fails to meet mandated requirements for adequate access to care.