Costs, Quality, and Provider
Integration in the Local Health
Care Marketplace
What Can Research and Recent
Experience Tell State Policymakers?
February 16, 2011
Technical Issues
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cursor to the top right corner of the screen
Live technical assistance: 1-800 number
listed in the “notes” box
Submitting Questions
•
•
•
•
•
Questions may be submitted at any time
during the presentation. To submit a question:
Click in the dialog box below the Chat window
on the left side of your screen
Type your question and press enter or click
on the arrow to the right of the dialog box
Staff will direct your question to the
appropriate speaker
We will try to respond to as many questions
as possible during the time allotted.
Costs, Quality, and Provider
Integration in the Local Health
Care Marketplace
What Can Recent Experience Tell
State Policymakers?
February 16, 2011
Purpose of Webinar
•
•
•
•
Second meeting in series to provide
policymakers with insights from research and
experience
Intended for state policy officials
Hear from researchers and state officials
dealing with issues on the ground
Recent trends: rising insurance premiums,
shortages of primary care physicians, large
number of hospital mergers, push toward
integration through ACOs
Speaker Introductions
•
•
•
•
Martin Gaynor, Ph.D., Carnegie Mellon
University
Lawton Burns, Ph.D., Wharton School
of the University of Pennsylvannia
Christopher Koller, Health Insurance
Commissioner, State of Rhode Island
Glen Shor, Executive Director,
Massachusetts Health Connector
Submitting Questions
•
•
•
•
•
Questions may be submitted at any time
during the presentation. To submit a question:
Click in the dialog box below the Chat window
on the left side of your screen
Type your question and press enter or click
on the arrow to the right of the dialog box
Staff will direct your question to the
appropriate speaker
We will try to respond to as many questions
as possible during the time allotted.
Integration, Concentration, and
Competition in the Provider
Marketplace:
Research Insights for Policy
Martin Gaynor
E.J. Barone Professor of Economics and Health Policy
Heinz College
Carnegie Mellon University
Academy Health
Invitational Webinar for State Policymakers
February 18, 2011
Outline
1. Integration – Facts
2. Impacts of Integration
a. Hospital Consolidation
i. Efficiencies
ii. Harm to Competition
b. Physician-Hospital Integration
i. Efficiencies
ii. Harm to Competition
Integration -- Facts
1. There has been a great deal of provider
integration over the last 15 years.
2. “Horizontal” – hospital mergers and
acquisitions, system membership.
3. “Vertical” – hospital/physician integration.
Hospital Integration
1. 1990s merger wave – 900+ deals from 19942000.
i.
Many urban markets now dominated by 2-3 large
hospital systems -- 6-12 independent firms used to
be typical.
ii. Proportion system members grew from 40% in 1985
to 60% in 2000.
iii. By 2003 ~90% of people in larger MSAs faced highly
concentrated markets.
2. Trend has picked up again recently.
Hospital Mergers
350
305
300
Number of Deals
310
287
Number of Hospitals
260
250
249
236
230
200
175
149
139
150
132
110
86
100
118
101
88
83
58
56
38
59
2002
2003
2004 2005
50
51
57
58
2006
2007
0
1994
1995
1996
1997 1998
1999
2000
2001
Source: Irving Levin Associates, Inc., The Health Care Acquisition Report, Thirteenth Edition, 2008.
Hospital Systems
2,800
Hospitals
2,700
2,600
2,500
2,400
2000
2001
2002
2003
2004
2005
Number of Hospitals in Health Systems 2000 – 2007
Source: American Hospital Association
2006
2007
Hospital-Physician Integration
1. Integration between physicians and hospitals
grew rapidly from the late 1980s until the
mid-1990s, declined, then ticked up.
2. Physician employment by hospitals has been
increasing rapidly.
Physician-Hospital Trends
Percentage of Hospitals
35%
30%
25%
20%
15%
Employment
Physician Hospital Organization
IPA
Management Service
Organization
10%
5%
Group Practice without Walls
0%
94
95
97
98
99
00
01
02
03
04
Percentage of Hospitals with Physician Affiliation, 1994-2007
Source: American Hospital Association
05
06
07
Hospital Integration -- Efficiencies
1. Efficiency gains from integration.
a.
There are potential gains from integration.
i. Scale economies.
ii. Eliminating duplication.
b. Savings realized only if facilities are truly combined.
i. Consolidate services; close some facilities.
ii. Ownership integration alone doesn’t lead to savings.
c. Evidence is mixed.
i. Facility combining mergers result in significant savings.
ii. Primary motivation for merger seems to be bargaining
power.
16
Hospital Integration -- Competition
1. Harm to competition.
a. Fewer competitors; less pressure on price, quality.
b. Evidence
i.
Price – substantial increases due to consolidation
– 5%+ in markets with many (120) hospitals (LA + Orange counties).
– 50%+ in markets with few (3) hospitals (San Luis Obispo).
ii.
Quality
– Medicare – substantial increases in heart attack patient mortality
due to consolidation.
– Private – mixed results.
– On balance, evidence suggests that consolidation lowers quality.
» Evidence is less firm than for price.
Hospital-Physician Integration -Efficiencies
1. Gains from coordination, collaboration, volume,
information, assurance of supply, contracting costs.
a. Physicians and hospitals coordinating on patient care –
lower costs, higher quality.
b. Physicians and hospitals collaborating on activities to
reduce costs, increase quality (long term activities).
c. Concentrate physicians’ patient volumes – improve
quality.
d. Better information about doctors, patients.
e. Assured supply – both ways.
f. Reduced contracting costs.
Hospital-Physician Integration -Efficiencies
1. Evidence
a.
b.
c.
d.
Costs – No impact.
Quality – Mixed results.
IT linkages – Little impact.
Clinical integration – little impact.
2. Bundled Payment
a.
Seems to lower costs, improve quality.
3. Overall, few consistent effects of integration.
a.
b.
c.
Impact seems to depend a great deal on specific form of
integration.
Most integration fails to align physician and hospital
incentives.
Most integration focused on financial, not clinical factors.
Hospital-Physician Integration -Competition
1. If both the hospital and physician markets are
competitive, then integration can’t harm competition.
2. If not, then integration can be anticompetitive.
a.
b.
c.
d.
Foreclose rival hospitals from physicians, or vice versa.
Allow formerly independent firms to collude.
Hospitals (doctors) may have to compete less strongly head to
head by integrating with different physicians (hospitals).
If hospital market is less competitive than physician market,
then doctors may acquire market power by integrating with a
hospital.
3. Integration often seems to be a strategy to increase
bargaining power with insurers.
Hospital-Physician Integration –
Competition
1. Evidence.
a. Not a lot of research evidence.
b. Doesn’t seem to be much impact on treatment,
outcomes, costs, or prices.
c. Conflicting evidence on prices.
Antitrust Enforcement in the U.S. for
Vertical Restraints in Health Care
1. There has been a lot of antitrust activity
concerning physician-hospital relations in
health care in the U.S.
2. The antitrust enforcement agencies have
been concerned about integration.
3. Courts have not often found integration to be
anticompetitive (but that could change).
22
Summary and Conclusions
1. There has been a lot of integration over the past
15 years.
2. There is potential for improved efficiency and
better quality through integration.
3. Those potentials mostly seem to be unrealized.
4. Hospital integration is often anticompetitive.
5. Physician-hospital integration less clear, but
there seem to often be anticompetitive motives.
Horizontal & Vertical Integration:
Looking Under the Hood of Hospital-Hospital and
Hospital-Physician Relationships
Lawton Robert Burns, Ph.D., MBA
The James Joo-Jin Kim Professor
Professor of Health Care Management
The Wharton School
burnsL@wharton.upenn.edu
215-898-3711
Presentation to AcademyHealth Webinar
February 16, 2011
Lawton R. Burns-The Wharton School
24
Lurking in the Background …
All Provider Arrangements
Scrutinized for Achieving
Three Policy Aims
Lawton R. Burns-The Wharton School
25
The Iron Triangle of Health Care
Cost Containment
High Quality Care
Patient Access
Lawton R. Burns-The Wharton School
26
Need to Distinguish :
Horizontal Integration
Vertical Integration
Lawton R. Burns-The Wharton School
27
Horizontal Integration of Hospitals
into Hospital Systems
Corporate Parent
Hospital A
Hospital B
Lawton R. Burns-The Wharton School
Hospital C
28
Vertical Integration of
Physicians and Hospitals
Input Markets
Physician Offices
Ambulatory Care
Outpatient Care
Hospitals
Output Markets
Skilled Nursing Facility
Post-Acute Care
Lawton R. Burns-The Wharton School
29
Vertical Integration
of Providers and Insurers
Buyers
Suppliers
HMOs
PPOs
Hospitals
Physicians
Lawton R. Burns-The Wharton School
30
Horizontal & Vertical Integration
Physician Offices
Ambulatory Care
Outpatient Care
Hospital
HMO, PPO
Hospital
Hospital
Skilled Nursing Facility
Post-Acute Care
Lawton R. Burns-The Wharton School
31
A Look Under the Hood :
Horizontal Integration
Lawton R. Burns-The Wharton School
32
Hospital Systems (theoretically)
Corporate Parent
Hospital A
Hospital B
Lawton R. Burns-The Wharton School
Hospital C
33
Allegheny Health, Education and Research Foundation
AHERF
Allegheny University
Hospitals
Western Region
Allegheny
General
Hospital
Allegheny
University
Medical
Center
Allegheny University
Hospitals
Eastern Region
Allegheny
University
Hospitals
Southwest
Allegheny
University
Hospitals
Northwest
Allegheny Integrated
Health Group
Allegheny University of
the Health Sciences
Allegheny
University
Hospitals
Allegheny
University
Hospitals
Centennial
Allegheny
University
Hospitals
New Jersey
Allegheny
University
Medical Centers,
Allegheny Valley
Allegheny University
Ohio Valley Medical Center
MCP Hahnemann School
Allegheny
Allegheny
Allegheny
East Ohio Regional Hospital
of Medicine
University
University
University
School of Health Professions
Hospitals,
Hospitals,
Hospitals,
Medical Centers,
& Geriatric Center
Hanemann
Graduate
Rancocas
Allegheny
Allegheny University
University
Hospitals, City Avenue
Peterson Rehabilitation Hospital
School of Public Health
Canonsburg
Allegheny University
Hospitals, MCP
Medical Centers,
Forbes Regional
Allegheny University
Allegheny
Allegheny University
University
Hospitals, Parkview
Hospitals,
Medical Centers,
Bucks County
Forbes Nursing Center
Allegheny
Allegheny University
University
Medical Centers,
Hospitals,,
Forbes Hospice
Lawton R. Burns-The Wharton School
Elkins Park
34
St. Christopher’s
Hospital
for
Children
Three Types of Integration
Health Systems Integration Study
Lawton R. Burns-The Wharton School
Lawton R. Burns-The Wharton School
36
Two Issues:
Challenges of Multi-Unit Enterprises
Centrifugal Forces That
Thwart Hospital Systems
Lawton R. Burns-The Wharton School
37
Lawton R. Burns-The Wharton School
38
A Look Under the Hood :
Vertical Integration
Lawton R. Burns-The Wharton School
39
Lawton R. Burns-The Wharton School
Three Types of Hospital-Physician Integration

Non-economic Integration

Economic Integration

Clinical Integration
Lawton R. Burns-The Wharton School
Economic Integration of Physicians & Hospitals
Physician
Part-time
Recruitment Compensation Shared Risks
•Location
Assistance
and
Relocation
Expense
•Medical
•PHO/IPA Risk
Directorships Contracts with
Payers
•Department
and Program •Bonus/
Chairs
withhold
•Start Up
Contracts with
Support: e.g. •Management Employers
Contracts
Salary
•Pay-forGuarantee
•On-call
Performance
Contracts
•Support for
Contracts
Group
•Medical
•Payer
Practice
Executive
“Guarantees”
Growth:
Positions
Incubator
(CMO,
•Physician
Model,
VPMA)
Hospital
Temporary
Organization
Employment •Professional
(PHO)
Service
•Liability
Agreements •Management
Coverage
Services
Assistance
•Exclusive
Organizations
Coverage
(MSO)
Contracts
•Independent
Practitioner
Association
(IPA)
Shared Gains
Leases
•Supply Chain •Equipment
Management Leases
Programs
•Time-share
•DRG –
Leases
Specific
•Block
Bundled
Leases
Payments
•Hospital
Provision of
In-kind
Services for
Cost Savings
Participating
Bond
Transactions
Service
Lines
Equity
Joint
Ventures
Employment
•Subordinated •Centers of
Debt Issued
Excellence
to Physicians
•Clinical
Institutes
•Ambulatory •Practice
Surgery
Acquisition
Centers
•Salaried
•Diagnostic
Employment
Imaging
•Patient Unit Centers
•Foundation
Model
Model
•Hospital-ina-Hospital •Hospitalists
•Procedure
Labs
•Medical
Office
Buildings
•Specialty
Hospitals
•Retail
Clinics
•Product
Line
Centers
Lawton R. Burns-The Wharton School
•Inter-entity
Transfers
and Funds
Flow Model
Outsourcing
and Sale of
Service
•Syndicate
Hospital
Ownership
and
Management
to Physicians
Clinical Integration Components












Guidelines, pathways, protocols

a) development
b) implementation

Physician & episode profiling
Physician performance feedback
Physician credentialing
Common patient identifier
Disease registry
Case management
Medical management committee
Disease management
Demand management
Clinical information systems
Patient self-management skills
and education
Quality improvement steering
councils
Continuous quality improvement
a) inpatient
b) outpatient

Clinical service lines
a) inpatient
b) outpatient
Lawton R. Burns-The Wharton School
Lawton R. Burns-The Wharton School
Lawton R. Burns-The Wharton School
Lawton R. Burns-The Wharton School
Lawton R. Burns-The Wharton School
Thank you for listening
Lawton R. Burns-The Wharton School
48
Promoting Delivery System Reform
in Rhode Island’s
Commercial Insurance Market
Academy Health Webinar
February 17, 2011
Christopher F. Koller
Overview
- Office charge and overview
- Rate review in Rhode Island
- Affordability standards for health plans
Office of the Health Insurance Commissioner
Charge:
Enforced via:
Guard Solvency of Insurers
•Financial Exams
Consumer Protection
•Contracts Review
•Complaints
Ensure Fair Treatment of
Providers
•Complaints
•Provider Survey
See system as a whole and
direct health plans towards
policies that promote system
improvement
•Reports
•Comprehensive,
simultaneous and
transparent rate review;
•Conditions for insurers
OHIC Strategy: Rate Review = Lever
Coordinate existing rate review authority using new
review standards:
• Standardized underwriting rules in small group market
(2000 Legislation)
• Approved rate manual for large groups on file with Office
• Annual review of rate factors (“inflation”) to be used by
plans in rate manuals – for small and large group – for all
rates the following calendar year.
• Public information and meetings.
• Final Decision by OHIC
• 2010 process details: here
Result – Shifts Policy and Decision Focus from Cost
Shifting  Cost Reduction
Annual Inflation rates of 11+%
OHIC Affordability Standards
• Articulate the “policies to improve the system” expected
of commercial health insurers in RI
• Developed by OHIC’s Health Insurance Advisory Council
in 2008/2009
• Apply only to commercial insurers (fully insured business)
• Focus on System Affordability (not Quality or Access)
– Priority Issue
– Standards must be within the control of health plans
OHIC Affordability Standards
Health plans must focus on payment reform, starting with
primary care. Specifically*:
1) Increase the portion of their medical expenses spent on
primary care by one percentage point per year for 5 years
(2010 to 2014)
2) Support RI’s statewide all payer medical home project.
3) Align incentives across insurers to promote adoption of
electronic medical records.
4) Participate in hospital payment reform efforts
*Additional details here.
OHIC Affordability Standards
Accountability:
• Failure to meet standards = negative rate factor review
consideration
• Applies for fully insured commercial business only – 40%
of state population and one third of spend.
56
Why Primary Care?
• Literature suggests efficiency and quality of health care
systems may be linked to strong primary care presence.
• Deficiencies of FFS payment, RBRVS calculation and
private negotiation
• Pipeline issues
• Tremendous leverage – 20% increase in PCP expenses
for 1% of premium
• Health plan leaders acknowledged primary care need
Where is RI on Spend Target?
OHIC holds quarterly update meetings with each health plan; highlights described below:



Health plans reported 2008 Actual Primary care spend
OHIC Set 2010 targets based on 2008 reported actuals
Health plans submitted 2010 primary care spend plans
April 2010


Health plans reported 2009 Actual Primary Care Spend
OHIC revised 2010 targets based on 2009 reported actuals
October 2010


Reviewed 2010 YTD Actual primary care spend
Health plans proposed 2011 primary care spend plans
Ongoing


Quarterly Monitoring of spend amounts and categories
System evaluation: ED visits, hospital admits/readmits, primary
care staff
October 2009
Work supported by RWJ/SCI and Federal Grants
58
By the Numbers: Overall
Total Medical Spend ($M)
$
Total Primary Care Spend
$
% Primary Care
vs. Targeted PC%
Primary Care Spend Detail
FFS Payments
Medical Home (CSI)*
Medical Home (Other)
EHRgrant program
Loan Forgiveness
Other Allowable
$
$
$
$
$
$
$
2008A
Actual
Base Year
823 $
47 $
5.7%
5.7%
47
44
0
3
$
$
$
$
$
$
$
2009A
Actual
2010A
Actual
1st 6 months
866 $
396
56 $
28
6.5%
6.9%
6.2%
6.7%
56
51
1
0
1
4
$
$
$
$
$
$
$
28
23
1
3
0
1
2010F
Forecast
$
$
$
$
$
$
$
$
$
2011F
Forecast
793 $
55 $
7.0%
6.7%
55
46
1
5
1
1
$
$
$
$
$
$
$
868
68
7.9%
7.7%
68
51
2
8
2
5
% Primary Care Spend Detail
FFS Payments
Medical Home (CSI)*
Medical Home (Other)
EHRgrant program
Loan Forgiveness
Other Allowable
5.7%
5.3%
0.0%
0.0%
0.0%
0.0%
0.4%
6.5%
5.8%
0.1%
0.0%
0.0%
0.1%
0.5%
6.9%
5.8%
0.2%
0.7%
0.1%
0.0%
0.2%
7.0%
5.8%
0.2%
0.7%
0.1%
0.0%
0.2%
7.9%
5.9%
0.2%
1.0%
0.2%
0.0%
0.6%
FFS as % of Total PC Spend
92%
90%
84%
84%
75%
59
By the Numbers: Carrier focus
2008 (Base Year) vs. 2011 Primary Care Spend
PC Spend Levels
2008 Actual
2010 Actual YTD
2011 Forecast
BCBSRI
UHCNE
Tufts
5.8%
6.8%
7.8%
5.5%
6.3%
7.5%
7.7% (2009)
9.0% (2010)
How they are getting there (distribution of extra spend)
FFS Improvements
6%
55%
60%
Medical Home (CSI & Proprietary)
69%
25%
8%
EMR subsidy
12%
3%
33%
Other
13%
17%
0%
60
Enrollment Impacts
• Commercial enrollment declines have limited impact of affordability stds
Thousands
Total Commercial Enrollment (Self Insured + Fully Insured) of Rhode Island Residents
% Fully
Insured
66%
66%
65%
61%
61%
60%
61
Primary Care Spend: Assessment
The affordability standards are working
 Carriers are on target to increase primary care spend from 5.7% to
6.7% of total medical spend
However, the drop in enrollment due to economic decline and lower
rates of medical inflation reduced impact of this spend
 Eight percent decline in fully insured enrollment since base year (2008)
Carriers tended to focus investments on top priority categories – and
dropped lower priorities.
 Two top priorities: Medical Homes and FFS improvements
Carrier priorities were quite different
 BCBSRI: major bet on their proprietary Medical Home initiative
United: major investment in FFS fee improvements
62
Primary Care Spend: Assessment
Implications
• Hitting first year targets is critical – both for
credibility/momentum AND for longer term success.
2011’s target is much more achievable if we hit 2010…
• Effect of Affordability Standards:
Additional $17.3 M in 2011 to Primary Care (7.7% vs 5.7%)
Why Hospital Payment Reform?
• Current private negotiation model appears to reward size –
NOT quality or efficiency
180%
CY 2008 BCBSRI & United Inpatient Med Surg Payments Indexed to
Medicare
167%
160%
140%
120%
127%
113%
112%
126%
121%
116%
100%
106%
104%
96%
100%
79%
80%
60%
40%
20%
0%
Rhode
Island
Miriam
Kent County St. Joseph
Women &
Infants
Roger
Williams
South
County
Memorial
Newport
Westerly
Landmark
Average
Why Hospital Payment Reform?
Because Change is Challenging
• Very significant cross subsidies between payers
(Medicaid, Medicare and Commercial). Payment
pressures from public payers increasing
• Margins are thin – financial stakes of miscalculation are
huge.
• OHIC surveys of health plans show little payment
innovation and small portion of payments to hospitals for
any kind of incentives.
OHIC Conditions on Health Plan
Contracts with Hospitals
• Articulates required elements in health plan contracts
with hospitals.
• Promulgated as an order in 2010 as part of rate factor
review process
• Goals:
-
act on Affordability Standards
-
encourage payment reform by insurers
-
limit financial risk with change for hospitals
-
increase transparency and public accountability for what are seen
as largely public assets (hospitals); some with significant market
power.
-
create a conversation
-
revisit regularly
Health Plan Conditions - Overview
• Apply to Commercial Contracts only (no Medicare or
Medicaid)
• Apply to contracts renegotiated between 7/2010 and
6/2010 (revisited in Spring 2011) –estimated that 6
contracts are effected
• Apply to Health Plans – not hospitals. Tied to rate factor
review
Health Plan Conditions - Overview
1. Units of Service – pay for IP and OP services using
units service that encourage efficient resource use (e.g.
Medicare DRGs and APG’s – same as RI Medicaid or more innovative)
2. Rates of Increase – Medicare CPI (same standard as
Medicaid in RI)
3. Quality Incentives – mutually agreed to quality
incentives based on nationally accepted measures
worth at least an additional 2% of revenue
Health Plan Conditions - Overview
4. Administrative Simplification – terms that define
mutually agreed to obligations.
5. Care coordination – terms that promote and measure
improved clinical communications
6. Transparency for these six terms.
Health Plan Conditions - Concerns
• Consequences for health plans if they cannot be met, in
spite of best efforts
• Length of time for implementation by hospitals and
health plans
• Process for promulgation and authority of OHIC to set
terms
• Does not move system fast enough and does not reduce
cost increases
• Preserves current inequities in system.
• Extent of coordination with other public payers.
Health Plan Conditions – Effect to Date
Health Plans Report:
• Most contracts do not expire during this period (multi
year)
• has changed conversations with hospitals significantly:
general acceptance; some resistance – particularly on
rates of increase
• Support from other stakeholders
Health Plan Conditions – Effect to Date
• Only one contract closed – Lifespan and BCBSRI signed
one year extension that BCBSRI attests meets the
conditions. Significant accomplishment for both parties.
• Second system has taken OHIC to court over its
authority to enforce.
• Support from businesses.
• OHIC will examine all contracts more fully and
disseminate findings.
Update: Other Affordability Standards
•
Rhode Island’s all payor medical home project (CSI)
- Expansion in place. Initiative is well established.
- No requirements in Affordability Standards for 2011 and beyond.
•
Electronic Medical Records
- Health Plans have incentive programs in place.
- Report flat take up.
- Will improve coordination with Medicare and Medicaid work on
meaningful use.
National attention on affordability standards:
•
“Rhode Island’s Novel Experiment To Rebuild Primary Care From The
Insurance Side” Health Affairs May 2010 29:5 941-947
• Governing Magazine - February 2011
73
Metrics are important:
In process but not there yet
Process Measures
Outcome Measures
1.
Primary Care Physician Satisfaction
-- Annual survey
-source: OHIC survey
2.
Primary Care Supply
-- Primary care provider count
-- Primary care share (PC/total providers)
source: Department of Health licensure
3.
System Efficiency Improvements
-- Hospital Use (Total, ACS)
-- Re-hospitalization
-- ER Use (Total, Preventable/Avoidable,
ACS)
1. Primary Care Spend Percentage
-- Target vs. Actual
2. All-Payor Medical Home Initiative (CSI)
-- Number of sites
-- Total spend
3. EMR Incentive
-- Participating primary care providers
-- Bonus payments ($)
source: Health Plan self report. Eventually All
payer Data base
4.
Total Medical Trend
source: rate filings
74
Role of Evaluation
• No third party evaluator of this work
• As implementer, tension between monitoring and
evaluation
• No doubt we got it wrong – but goal is culture change,
not the exact intervention.
• Anticipate many mid-course changes
OHIC Rate Review – Areas for Improvement
• Engaging consumers and businesses
• Coordinating with other state levers: licensing, provider
regulation, public employees and Medicaid.
• Data reporting and monitoring
• Institutionalization: Move these standards from guidance
to regulations.
Provider Networks and
the Health Connector
Academy Health Webinar: Costs,
Quality and Provider Integration in
the Local Health Care Marketplace
Glen Shor
Executive Director
Health Connector
February 16, 2011
Key Considerations –
Provider Networks
 Provider networks are a key area of competition among health insurance plans
 Most health plans in Massachusetts, for both commercial and subsidized products, have
very broad networks with virtually all providers
 Experimentation with limited networks has emerged in recent years
• Recent state legislation (Chapter 288) includes a provision requiring health insurance carriers to
offer a limited or tiered network plan that is 12% less expensive than a comparable broad network
plan
• Some carriers in Massachusetts have started to introduce both limited and tiered networks as an
alternative to broad network plans
 Exchanges have a role to play in promoting innovation while ensuring the quality and
affordability of insurance products and a level playing field for competition among health
plans
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Connector Experience –
Commonwealth Care
 Commonwealth Care (CommCare) is a subsidized health insurance program for adults who
have incomes up to 300% FPL (and no access to affordable ESI)
 Most participating health plans have similar broad networks
 A lower-cost health plan with a limited network started to participate in CommCare two
years ago
• Broad network of PCPs and Community Health Centers, limited network of hospitals (40%)
• Excludes majority of large Integrated Delivery Networks (IDNs) in the market
• Materially lower cost structure
 The Health Connector’s approach:
• Require that all health plans, including the limited network MCO, meet network adequacy standards
• Ensure quality of care and member satisfaction – current membership is satisfied with and
understands limited networks, and there is no evidence that care is deficient
• Apply risk adjustment to mitigate adverse risk selection
• Promote competition among MCOs to deliver cost-effective, comprehensive and reliable coverage
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Connector Experience –
Commonwealth Choice
 Commonwealth Choice (CommChoice) is an unsubsidized health insurance exchange for
individuals earning > 300% of FPL and small businesses with 1-50 employees
 Plans from 7 health insurance carriers are offered through CommChoice
 Plan benefit designs are standardized (Gold, Silver, Bronze, Young Adult Plans)
 Network differences among carriers may lead to adverse risk selection
 Until risk adjustment in an unsubsidized environment can be established, need to require
broad networks to ensure level playing field
 Similar to our approach on CommCare, we do encourage carriers to experiment with limited
networks
 A provider search tool to help shoppers make purchasing decisions with information on
network configuration is currently being developed
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Submitting Questions
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To submit a question:
Click in the dialog box below the Chat window
on the left side of your screen
Type your question and press enter or click
on the arrow to the right of the dialog box
Staff will direct your question to the
appropriate speaker
We will try to respond to as many questions
as possible during the time allotted.
Thank You for Participating!
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Please take a few moments to fill out a
brief evaluation:
https://www.surveymonkey.com/s/8ZFC
2K6
We will also send a follow up email with
the survey link.
We will release a related issue brief on
the topic in a few weeks.