● Part 2


Advancing to the starting line


I


n medieval Europe, monasteries were filled with diligent monks who carefully copied, codified and filed the knowledge of antiquity. In health plans today, a compa- rably impressive array of people are needed to manage


the volumes of data required to direct the various care models, manage the provider contracts, and process the claims that make the delivery of healthcare possible. To become more strategic and agile in our payment and


delivery models, the network management function needs to be overhauled and upgraded. In this second part of our series, we’ll look at the features that health plans must reconsider, with the aim of getting health plans positioned for change.


Toiling at the books By definition, network management involves a complex interplay of network design, provider information manage- ment, contracting and reimbursement. A health plan deter- mines which providers it wants in its network, what services should be included, how contracts will be written, and how providers will be reimbursed to meet the needs of employer groups and members. Te design of the network satisfies a variety of consider-


ations. What is the geographic region in question? How many primary care physicians, specialists, health systems and other provider services are included? How loose or tight should access be? Will specific outcomes be targeted for a given population? Tose variables, among others, are the basis for the contracts with providers and the value proposition offered to members. In a world of preferred provider organizations (PPOs) and


fee-for-service (FFS) payments, network management can be relatively straightforward. Broad networks are not overly restrictive in terms of access, nor are they highly selective in the providers that are included. Information about providers and members has little strategic value. Contracts may include a complicated range of fee schedules and rate sheets, but they have few wrinkles in terms of performance or quality incentives. Providers are paid, more or less, on a relatively simple FFS basis. Even so, the process of managing contracts, filling claims and making the appropriate reimbursements is time-consum- ing and labor intensive. Much of the work is done manually, gumming up the system, increasing the potential for errors, and making it difficult to share information and improve care coordination.


Tese limitations are a major impediment to the success of


new care delivery models, such as accountable care organiza- tions (ACOs) and patient-centered medical homes (PCMHs),


4


which require reimbursement strategies that support change because they are in alignment with new goals. Significant experimentation is occurring with both care delivery and re- imbursement innovations, yet their potential will be limited if health plans are unable to efficiently cope with their complexity, flexibly adjust based on market feedback, and scale to larger dimensions without incurring significant additional resources.


Why is network management important? First, the network management function defines the health


plan’s ability to manage its supply chain. Amazon and Wal- Mart leverage their supply chain strategically to deliver the right products to the right consumers every time while mak- ing improvements, wherever and whenever possible, in cost, efficiency and quality. Healthcare is becoming a similar kind of deliverable. A health plan will need to go beyond the status quo of adequate service at set cost. Competitive advantage will be achieved through a tactical understanding of the supply chain and constant innovation and improvement.


For a health plan to be competitive, effective network management must be considered not only a core competency but a competitive differentiator. This requires that the four critical functions of network management – provider information management, network design, contracting and reimbursement – be managed at optimal levels and automated as much as possible.


Second, in order to manage its supply chain, health plans must understand what their networks can actually do, and what incentives are in place to drive desired behavior. Provider contracts serve as the means for structuring and directing this capability. Tird, the network management function is responsible


for reimbursement, and it is through this mechanism that costs are managed. In innovative payment models, contracts are particularly complex and dynamic. However, even cur-


Page 1  |  Page 2  |  Page 3  |  Page 4  |  Page 5  |  Page 6  |  Page 7  |  Page 8