How to Evaluate a Provider Network for Your Health Benefit Plan in Three Steps
By Mike Roche, Member Services Manager at The Alliance
Choosing a network of doctors, hospitals and other health care services will have a big impact on your health plan costs.
Unfortunately, every bidder for your health plan’s business claims their network of hospitals, doctors and health services will save you money. These three steps can help you decide which network is really the best fit for your bottom line.
STEP 1: FIGURE OUT HOW THE NETWORKS DIFFER
Network differences that can impact savings include:
STEP 2: USE THE ‘GOLD STANDARD’ TO COMPARE AND CONTRAST NETWORKS
- Geographic coverage. Look at both the territory covered and the type of providers available in specific communities. The network might have doctors but not hospitals, for example.
- In-network providers. A network could cover a large geographic area, yet offer only a single health system’s providers.
- Contracting philosophy. Does the network emphasize inflation controls, paying for performance or aiming for high-value care? Or does it focus solely on discounts?
- Negotiated discounts by provider. Again, look at the full scope of the network. Some networks have a high discount rate with rarely-used providers while giving you minimal savings on the providers who deliver most of the care your employees need.
Some networks produce “disruption reports” that emphasize scenarios where they come out on top. Unfortunately, those scenarios can be fantasies when it comes to producing real-time savings.
Use this “gold standard” process to get realistic projections:
STEP 3: ASK THE RIGHT QUESTIONS
- The employer provides 12 months of claims data, based on how covered lives actually used health care services. This data will show what types of care were used and which doctors, hospitals, health systems provided that care.
- The employer’s submitted claims are sorted by each in-network provider based on each provider’s tax identification number.
- Each network provides a database of six months of actual claims, which are also sorted based on each in-network provider’s tax identification number. These claims show actual savings produced by the network’s discounts.
- The employer’s data is analyzed based on the network’s aggregated savings. This projects what savings can be expected based on covered lives’ actual use of services.
- The combined results reveal the value of each network’s agreements with providers. The results should show both the overall discount achieved by the network and expected savings based on the submitted claims.
Asking these questions can reveal vital differences between networks and the true value of their savings projections.
AIM FOR BOTTOM-LINE RESULTS
- How are discounts calculated? Check the process against the gold standard.
- Does the discount evaluation use billed charges or paid charges? The network discount delivered by the network’s provider contract should remain the same either way; however, using billed charges will result in lower projected total savings than using the paid amount.
- Is the impact of your plan design included in the savings projections? Excluded services, patient copays and co-insurance will greatly impact your total charges. Your plan design should always be figured into savings estimates to prevent network savings projections from appearing artificially high.
- Did the evaluation use the average area discount or a specific discount for a specific provider? Using specific discounts with specific providers is always best. Savings should be calculated based on the doctors, hospitals and health services that your employees and family members are actually using. When networks base projections on an average that includes their “best” rates, the result will again be an artificially high savings estimate.
Remember, your goal should be to compare networks in a way that shows where they truly differ and what that means to you in health plan dollars. That’s the best way to find the network that will deliver bottom-line results for your health plan.