Another Domino Starting to Fall- The Narrowing of Physician Networks

In previous posts, I've discussed the inevitable squeeze that high cost/ low quality physicians will feel from payers as the system becomes more discriminating about paying more "reasonable" rates and only for performance. There now seems to be evidence that we are seeing the largest health insurers get tough by trimming their networks of the physician value outliers, in some cases doing this en-masse with entire physician groups barred from participating in several Medicare Advantage programs. This week, the Boston Globe ran a prominent piece on United Healthcare's recent decision to cut 700 Massachusetts physicians from participating in the UHC Medicare Advantage program.

These cuts in physician participation follow large-scale cuts in other states and show that UHC does't seem to have a lot of fear about disrupting access to specialist in wide geographies.  In Ohio UHC was bold in cutting physicians:

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In explaining the cuts, UHC indicates that cost and quality were factors leading to the move.  What's unclear is whether UHC is referencing the rate demands of participating physicians, or their utilization of services.

Kaiser Health News quotes another UHC spokesperson reflecting on cuts in other states:

Most commentators agree that the cuts ultimately seem to be the consequence of the the Affordable Care Act which has made Medicare Advantage programs more accountable for cost and quality.  Under the new legislation, quality becomes a driver for reimbursement to the Advantage programs, while rates are expected to fall.   The Kaiser Family Foundation notes:

So, here we have a funny issue.  

What we are seeing, I think, is the federal government pushing the private insurance companies to take "risk" and not simply serve as conduits for Medicare FFS payments.  

The insurance companies have responded by becoming more aggressing in lowering their price points by limiting their networks to only value (cost/quality) providers.

I wonder how the government plans to control costs in the traditional Medicare FFS program.  By selecting the highest value providers to participate in Medicare Advantage, low value physicians will be clustered in traditional FFS.  

In other words, UHC is creating a two-tiered setup where high value physicians are invited to participate in potentially lucrative programs while others are left exposed in traditional FFS with few incentive opportunities

. What happens next is anyone's guess: perhaps indiscriminate across the board rate cuts for the traditional FFS program to trend the rates commonly seen in FFS Medicaid? It seems clear, though, that there is great opportunity for insurers and providers to generate value in well-managed Advantage programs.  I certainly see the benefit of having seniors receive well-managed care through a captivated Advantage program that focusses on prevention, addresses drug costs and the like.  HMO plans constitute over 60% of the Advantage program as seen in this slide from the Kaiser Family Foundation.

But these is no mistaking the fact that what we are witnessing is an insurance company making careful decisions about who to partner with in order to maintain a profit.  The same calculus will, no doubt, play out among physician groups taking risk from insurance companies

. One final note: The massive amount of hyperventilation that has accompanied UHCs decision to winnow its physician network has been notable.  Howls of outrage are coming from both politicians and from physician medical societies.  The Boston Globe quotes a senator:

I'm not going to say much about the advisability of creating laws which would restrict the market's ability to differentiate providers on the basis of cost and quality.  Certainly consumers will be inconvenienced by UHCs changes to their networks, and they have been reaching out to their political representatives. But, ultimately, patients aren't served unless there is some degree of provider accountability.  The political opposition supports my assumption that having provider groups police their own value generation through provider risk contracting is a more politically tolerable approach to value as opposed to having insurance companies serve as the policemen. There will be a lot of hard questions for physicians ahead, particularly those with a value problem:

I'd be pretty comfortable that UHC's actions aren't going to limit any access to care in the aggregate, and that what we are seeing is simply a question of musical chairs where the total number of caregivers doesn't change in the least, but that patients and providers get new dance cards.  And, I'm also pretty sure that UHC doesn't make any arbitrary decisions about restricting networks and inconveniencing its membership. Their actions are based on rigorous analysis. But, Dr. Pieters (who, in addition to his role at the medical society also serves as a respected radiation oncologist at the University of Massachusetts) and I can agree on a few things:  This is unsettling, and is probably supposed to be.  And, yes, the dominoes are falling with a thud.