Despite helping reduce costs, are narrow networks the true way of the future?
It's time for a change. As limited provider choice in exchanges rises, and the need to track quality across the patient’s care delivery continuum creates a bigger impact on providers’ bottom lines, practices will need to find means to protect their revenue. This is forcing more and more provider organizations to develop preferred partner lists—another way of saying narrow networks.
There are two key groups impacted by this shift, and they seem to have different feelings about the pros and cons of narrow networks.
- Patient benefits: The healthcare industry can expect to see more narrowing as time goes on. This is, in part, thanks to the benefits to healthcare consumers. Narrow networks offer cheaper premiums—on average, those premiums are 17 percent less than plans with broader networks.[i] In fact, nearly 70 percent of the lowest priced plans are built around narrow networks, ultra narrow networks, and tiered narrow networks.[ii] The downside, though, is higher prices for out-of-network costs—which were, on average, 300 percent higher than the average Medicare rates for 97 common medical procedures.[iii]
- Provider concerns: This trend is causing some anxiety amongst providers, and for a couple of different reasons. Providers’ ability to retain their patients may be challenged if their system of narrow networks is not clearly defined. In addition, providers may not have a clear understanding of how their participation or performance will be measured—or what may cause them not to be invited to participate in an ultra-narrow network.
Despite these anxieties and benefits, the reality is that narrow networks are on the rise—especially in urban areas, where narrow network prevalence is 60 percent. This is thanks to a higher excess bed capacity and more fragmentation in the provider and payer arenas. Interestingly, while 42 percent of patients enrolled in narrow network plans though the Affordable Care Act, 26 percent of participants were unaware of the network type selected.[ii]
For some quick facts about the rise of narrow networks, take a look at our recent infographic by clicking here or the link below.
In Continuum’s local market area, however, we noticed an anomaly to the trend of increased narrow networks in urban areas. Philadelphia is an outlier to the trend, where the market is dominated by broad networks. One of the prevailing reasons for this is the domination the Blues have in the area. They have historically favored broader networks because of their own business imperatives, since the national association grants franchises that are geographically limited.
Regardless, narrow networks are still on the rise, and as that happens, the industry is seeing some of the growing pains associated with a paradigm shift, For example, while consumers have said they’re less satisfied with narrow networks, they are still more likely to prefer them over broader networks because of the cost savings. In addition, many consumers have expressed dissatisfaction with access, unexpected charges, and poor provider directories. If narrow networks hope to capitalize on their current growth and thrive in the future, addressing these kinds of issues will be paramount to success.