finding success in ACA narrow networks

The proliferation of narrow networks in most insurance markets as a cost-saving measure for health plans has created a challenge for hospitals in identifying how they can benefit from them.

Narrow network health plans have taken on a large and growing role within the individual insurance marketplaces established under the Affordable Care Act (ACA). Health systems have responded to such plans in various ways-and with various effects. Many providers have sought to join insurers' narrow networks to capture the expected volume surge from such lower-cost plans. But a growing number of health systems have sought more control over the impact of such plans by either partnering with an insurer or launching their own narrow network plan.

Although it's too early to determine long-term financial outcomes, the experiences of several systems in the first year of the ACA marketplaces demonstrate the promise and peril of working with narrow networks. That early experience also demonstrates the need for thorough planning, a comprehensive view, and careful execution.

A Market Trend

Among the factors driving health systems into narrow networks according to Frank Williams, CEO of Arlington, Va. -based Evolent Health, are the growing millions of subsidized enrollees in the ACA marketplaces and the priority of the U.S. Department of Health and Human Services (HHS) to tie a growing share of payments to value in the coming years.

Evolent, which helps large health systems manage costs and change the way they are paid for care, has seen a growing share of providers moving into narrow networks, Williams says. Among the largest U.S. health systems with clinically integrated networks (CINs), 30 percent have been moving into narrow networks in recent years, with one-third of that movement occurring this year alone.

"They are not all forming plans, but some are partnering with payers to allow them to manage the dollars," Williams says.

But it's not an easy journey, he says. Hospitals moving into narrow network plans need to develop a comprehensive strategy to execute the changes necessary to enable the transition.

Importance of an Insurer Partnership

Arizona-based Banner Health is among the systems offering a narrow network to established insurers, both in the traditional commercial market and in the Phoenix-area government-run marketplace. The Banner Health Network (BHN) provides medical management through its hospitals, 4,000 physicians, and network of post-acute providers. The payers provide the plan design and sales, including management of brokers and administrative components.

Results from the four exchange plans Banner provided to its network in 2014 are not yet available because of delays in finalization of the three ACA risk-stabilization programs. However, outcomes from Banner's narrow networks' products on the commercial side-particularly with Aetna-have been sufficient to provide $4.5 million in combined savings in 2014, according to Greg Wojtal, CFO of Banner.

Narrow networks still provide a relatively small share of Banner's volume, however. The population health initiatives of BHN provide about 20 percent of the system's total volume, and only 10 percent of that comes from the narrow networks.

The key element Wojtal identifies in Banner's most successful narrow network plan is the formation of a "true partnership" with the insurer. In particular, the process for onboarding enrollees in the narrow network plan was key to BHN's ability to medically manage them, Wojtal says. Specifically, Banner forged an agreement with Aetna to share information about the services offered by both parties when they bring a new employee on board.

Close coordination also can prevent areas of friction, such as when the insurer has its own casemanagement programs and components it looks at from a high-risk perspective. When the insurer doesn't coordinate with a provider offering similar services, confusion erupts in the process, enrollees fall through the cracks, and enrollees receive multiple phone calls from different sources.

"So the more we delineate up front what Banner is doing and what insurers are doing as a part of it, the better for the patient and for the outcomes, and we believe that is a critical element to the success," Wojtal says.

That coordination extends to the division of clinical responsibility, which the contract helps define. "If we're going to case manage the top 10 percent of high risk, then the insurer will let us do that while it does something else-maybe it runs a diabetic program," Wojtal says. "And then we are able to work within those parameters, so we're not tripping over each other and duplicating efforts or confusing the patient."

A common complaint of some health systems in narrow networks is that the sponsoring insurers provide little information, and Wojtal acknowledges that Banner has difficulty getting enrollee information from a few insurers. Such information sharing has proven to be a "key element" in its successful narrow network plans, Wojtal says.

"That actually expands out to our attributed commercial plans, but it is very important in narrow network plans if we are going to medically manage those patients," Wojtal says.

The emerging importance of enrollee data in narrow network plans leads Banner to include such data in the insurer contract. Much like a division of financial responsibility, Banner created a division of care responsibility, to clarify which elements of medical management are the responsibility of the network and of the insurer, respectively.

The challenge of information sharing with an insurer is both philosophical and operational. Initially, Banner and insurers struggled with the concept of sharing information with what was typically a negotiating competitor and then organizing a contract with which both parties were comfortable. Practical challenges included installing the file structure, choosing a system, deciding how the information would move, and determining whether all of the enrollee information could be shared.

The Aetna plan was selected by about 85 percent of the people at the large employer where it was offered, but Wojtal says the narrow network plans' success hasn't yet been fully measured.

"So we have had some positive experiences," Wojtal says. "But the jury is still out."

Another important component of the system's network is post-acute care. BHN includes home health services, hospice services, and nursing homes. All post-acute providers are independent, and their participation in the network is created through a request-for-proposal process.

"We have taken the whole county and narrowed it down, and used some quality components that are required to be part of the network," Wojtal says. "And then we have some incentive payments that are part of the quality with the nursing homes. We've done a similar thing with the home health and hospice agencies in the area. We are working with long-term care hospitals like that."

Determining the specific size and scope of a narrow network was a challenge, Wojtal says.

"The objective is to have a sufficient network that is attractive to the insurer and, ultimately, the patient who selects the plan," he says. "There is a fine line between having a network that is broad enough to satisfy that and one that is narrow enough to control costs, and have the outcomes that you expect. There is a sweet spot in there somewhere."

The standards Banner used were developed for BHN as a whole and then applied to the narrow networks. BHN also serves as Banner's Pioneer accountable care organization (ACO) and takes on risk contracts for Medicare Advantage patients. In total, the network governs about 450,000 lives, of which narrow network plan enrollees constitute up to 10 percent.

Enrollment in the exchange plans was "a little slower than anticipated," but Wojtal expects it to grow as ACA tax penalties increase under the individual mandate. Banner hopes to grow overall enrollment in the BHN plans by about 10 percent to about 510,000 in 2016, and to about 1 million by 2020.

Overall, Banner officials see narrow networks as both an inevitable movement of the market and an opportunity.

"There is an offensive component where you want to be involved and a defensive one where if you don't, somebody else will," Wojtal says. "There's been both discussions in Banner. But we pretty much take the optimistic view that this is the direction of health care and where we are going, so we need to participate."

Creation of 'Something in Between*

Milwaukee-based Aurora Health Care aimed to help create something in between a narrow network and traditional broad networks when it helped start AboutHealth Network in Wisconsin. That network, which is offered in four ACA marketplace plans and directly to large Wisconsin employers, includes Aurora and seven other health systems in the state. The goal of Aurora and its fellow systems was to create a highperforming ACO-type network in between the network extremes.

"It's more than just a semantics issue," says Rick Klein, executive vice president of Aurora's enterprise business group. "It really does speak to the ability to access care and an opportunity to drive efficiency from access points for patients that are obviously superior to what would be the traditional narrow network."

Health systems were carefully chosen based on efficiency and quality, creating a network that is up to 9 percent more efficient than other providers in the state of Wisconsin. Aurora's share of the network has grown to 20,000 enrollees over the last two-and-a-half years.

Ellen Lukens, a senior vice president for Washington, D.C.-based Avalere Health, urges systems that aim to become the preferred network for an insurer to figure out the goals of the specific health plan and tailor their pitch to those goals. For instance, a Medicare Advantage plan may be focused on obtaining higher star ratings to receive more pay.

"The insurer may not care about the thing that the provider is focusing its performance on," Lukens says.

Aurora took a different approach by first assessing its own capabilities as an integrated system to focus on episodes, health and wellness, and population health. Then, the health system contacted different carriers about their flexibility and willingness to let Aurora manage that care.

"This was a care-delivery discussion relative to who exactly is doing disease management, and who exactly is reaching out to that patient under what circumstance," Klein says. "And we thought that having conversations about patient care and patient care delivery and access, and who is talking to that patient under what circumstance-whether that was an integrated system or the payer-was more important rather than just taking a look at the carriers themselves."

Some payers were more interested in Aurora's ability to more quickly connect patients with physicians and other caregivers to improve outcomes, rather than "continuing to answer questions through some sort of telephonic interface, where the nurse may be three states away," Klein says.

Aurora offers payers the ability to take care of populations through an integrated system that allows evaluation and management of enrollee populations and then evaluates the episodes for efficiency over time. For instance, Aurora aggregates episodes into per-member-per-month trend lines to allow ongoing analysis and use of the integrated system to improve patient outcomes.

"So the challenges and opportunities for us are no different than those for anybody else in that you are now accountable for populations and the health and wellness of those, as well as premiums and, specifically, the trend line in the incidences of health care, as well as the health of the population," Klein says. "That is central to the ACO, and that is the initial challenge of any ACO getting into this."

Although some systems have based their interest in narrow network plans primarily on price, Aurora has used a somewhat different approach.

"With anyone buying something off of the exchange, price is obviously going to be important," Klein says. "What we are trying to do with our ACO customers and employers of over 100 workers is to tailor the interventions with those employers, and in, some cases, with the health plans, to fit exactly what healthcare needs are occurring within that defined population."

The network tailors offerings based on the predominant age or gender among members of the workforce, and it offers worksite nurses to engage the employees directly and provide a key to alignment within the ACO structure.

It's a different dynamic in the retail environment of the ACA and private marketplaces, but Aurora sees a good model where the enrollee makes decisions based on cost and quality. Over the past year and a half, both marketplace enrollments and admissions from those plans has increased. But Klein urges systems to use caution in launching preferred networks if they lack the core components of an integrated delivery system.

"If you don't have the necessary and efficient components of integrated care, I would be very concerned that other systems might take a deeper discount and continue to take deeper discounts- or try to-by managing the cost of care to a price point through altered fee schedules, without actually impacting the health and wellness of their patient population," he says.

How to Differentiate

Other systems are taking a more limited approach to the ACA marketplaces. Sparrow Health System in Lansing, Mich., has engaged its own health plan and newly formed CIN to help manage its employees.

Sparrow's 13,000-member employee group is cared for by the Sparrow Care Network, the CIN it established in 3014. This physician-led organization is the beginning of a high-performing network, instead of a narrow network.

"Even though it's a CIN, the criteria for a provider to continue to belong over time is its ability to perform from a quality and a cost perspective," says Paula M. Reichle, Sparrow's senior vice president and CFO.

The Sparrow Care Network, which is a combination of more than 550 independent and employed physicians, provides a way for the system to have non-employed physicians participate in governance, quality, and cost metrics for managing a patient population.

Sparrow Care Network is a strategic priority for Sparrow to grow and manage lives for employers in its geographic region. Some of the narrow network lessons it has learned may apply to other systems aggressively moving into the ACA marketplaces.

"As we demonstrate our value, employers and patients would be accepting of all Sparrow Health System options," Reichle says.

In addition to the quality performance, Sparrow seeks to create a track record of meeting payer demands for an affordable network.

"Quality is great, but if it costs a fortune, then it is not going to be sustainable," Reichle says. *

AT A GLANCE

Health systems should carefully consider the specific details of their local market before deciding to launch a narrow network plan or to join an existing insurer's narrow network. Key steps to take in the evaluation process include:

* Determining insurer interest in forming a true partnership

* Assessing capability for greater efficiency

* Assessing insurer priorities

* Obtaining access to enrollee data

* Identifying capabilities that differentiate it from other narrow networks

About the author

Rich Daly

is a senior writer/editor in HFMA's Washington, D.C., office. Follow Rich on Twitter: @rdalyhealthcare.