Visual Analytics • Analytical Monitoring • Information Management

Narrow Networks: Great Idea or White Elephant?

At company parties we sometimes get hooked into a gift exchange game called the White Elephant.  While the rules do vary the object is still the same and that is to take home the best gift.  In the beginning (and during) there is invariably a lot of time bickering about the rules and how to play.  To enhance the fun as well as the disappointment, the game allows other players to steal the most desired gifts.  So while most participants are thrilled to open a gift and get a $35 Starbucks gift card by the end of the gift exchange they get stuck with a bright pink fleece snuggie.

In ancient Asia owning a white elephant was regarded (and still regarded in Thailand and Burma) as a sign that the monarch reigned with justice and power, and that the kingdom was blessed with peace and prosperity. White elephants were considered sacred and laws protected the animals from performing labor.

However, receiving a white elephant gift was a blessing and a curse. On one hand it was a blessing because the animal was considered sacred and a sign of the monarch’s favor and anyone gifted one was considered of great stature.  But ultimately it was a curse because the recipient now had to maintain the animal he could not give away and its use was impractical.

The only positive for receiving a white elephant is that it fed the ego of the person who owned one.  But once someone accepted the gift they immediately had to assume the maintenance burden to take great care of this highly regarded animal and there weren’t many pleasant options to exit ownership.

Are white elephants presenting themselves in the form of a solution?

It seems there are no shortage of firms presenting opportunities (e.g. tax shelters, cost recovery, compliance, improved quality, etc.) to improve corporate finances or the well-being of employees and their dependents.  One such opportunity gaining interest is the concept of the Narrow Network.  If a benefits consultant walked in and said, “we can reduce costs by 8%-15% from the institutional providers” most of us will probably lean in and say “tell me more”.  By the time they were done talking or showing you the numbers one might believe there is a real opportunity to reduce future medical spend.  Or perhaps you would have additional questions that the benefit consultant would be all too happy to research and answer for you.  In reality, most plan sponsors don’t have the clairvoyance to know the exact challenges, barriers, costs, managed care contracting practices, vendor limitations, employee adoption and exit strategy when implementing and maintaining a Narrow Network.

Admittedly, the concept of developing a Narrow Network is new to most employers.  The Narrow Network concept sounds really simple and easy: require covered employees and dependents to obtain medical treatment, equipment, devices and services from providers whose costs are lower than other comparable providers.  Let’s fast forward and assume the prospect of reducing costs by double digit percentages pushes you to move forward with creating a Narrow Network for your group.  With the help of your vendor, the provider selection and drafted communications are completed.  You feel the selection criteria and communications were done effectively and now you are ready to get going.

Whoa, Nelly!  If for any reason you feel things are moving a bit fast, trust your instincts!  While most benefit consultants and managers have the best intentions, here are the top 3 tasks and analyses to consider to ensure the Narrow Network concept doesn’t blow up on the launch pad.

  • Price Variability – When your consultant examines the data make sure the calculation considers not only the average and the mean costs for major service categories but also the girth of those expenses for a reasonable period of time. This will not only help set reasonable savings expectations but will also affirm the feasibility of whether developing a Narrow Network investment is worth it.
  • Pricing Methodology – During the vendor’s analysis of your data, ask if they could determine the pricing methodologies used in the carrier and provider contract. With limited data this could present a challenge but if the consultant can determine the pricing methodology and present it to you visually it could prove to be very helpful in making you feel confident about pricing predictability for the Narrow Network.  Pricing methodologies could be consistent throughout the provider contract or have a combination of different calculations to determine reimbursement.
  • Physician Privileges or Affiliations – It’s often difficult for employers to get in the middle of the physician and patient relationship. If a physician is not affiliated with a Narrow Network hospital facility, it’s likely that patient will go to an extended in-network provider for inpatient and outpatient procedures.  Usually physicians will not go outside their affiliated hospital because of the existing financial relationship not to mention the scheduling commitments they already made.  Using visual analytics can be helpful in verifying these existing affiliations allowing benefit managers to assess employee adoption.  Don’t eliminate the possibility of performing a GeoAccess but a costly GeoAccess can be avoided and may even be invalid for your population.  Interrogate your paid claims data properly to determine the extent of which physicians work with Narrow Network hospital facilities.

During pre-selection it’s wise to extend your due diligence and speak with your carrier to see if they have tools, other insights and means to assist in patient choices.  They could provide invaluable intelligence that wasn’t originally contemplated and could supplement your efforts.

Now that you’ve performed the necessary due diligence and want to execute on your Narrow Network design you will need to make further investments in performing network maintenance.  Just like the White Elephant you are going to have to maintain the network.  This is where the danger lies.  Companies who sell printers know this game all too well.  Sell the printer below cost but make sure the toner, drum and fuser are sold at ten times cost.  It is critical to estimate your maintenance costs and ensure you will have continual access to competent, cost-effective resources and have a visual analytical tool where you can measure, monitor and share results with your team and upper management.

During the maintenance phase, I suggest that plan administrators compare employee utilization of the Narrow Network to selling a consumer product.  Be prepared to regularly assess consumption and performance to enhance and/or adjust your messaging, inventory and pricing in order to gain further adoption.  Deploying a visual analytics solution can help you answer the following questions:

  1. Is the provider pricing stable or changing over time?
  2. By integrating and interrogating additional information within our visual analytics platform can we better understand habits and consumption patterns of our population?
  3. Based on consumption patterns and augmented analytics,
    1. Is there a subset of employees where we can augment our messaging to address widened or extended network utilization?
    2. Is a change in provider inventory warranted?
    3. Do we need to change our employee contributions or rewards the following plan year?
    4. How versatile is my population in making Narrow Network selections?
    5. Are there other analytical observations providing insight on how to better organize and optimize the program?

The discussion points above merit analysis and further discussion with your carrier and analytics support team.  Effective collaboration can help avoid costly causation and correlation errors when analyzing your population’s consumer habits and provider costs.

In closing, most ideas to curb or control costs are plausible but plan administrators have to be vigilant to determine whether it’s the right fit and the upside opportunity exists.  While some simple calculations suggest an inpatient obstetrical care visit at one facility is 25%-35% cheaper than another comparable facility just a few miles away, the main question to answer is whether it’s likely the plan administrator has done the proper analysis to determine pricing predictability and network analysis to know if it can influence consumer choices.

Most participants in a White Elephant gift exchange initially seem excited and full of anticipation to play under their perceived notion of how to play and the game’s rules. But I can promise you most participants who had high hopes don’t go home happy.  When someone offers an attractive idea to reduce costs make sure everyone knows the rules, how to play and set reasonable expectations before it’s too late and realize the blessing is really a curse.

If you would like to learn more about selecting and maintaining a Narrow Network, please contact us to speak with a Prothentix managed care expert.