April 24, 2024
Healthcare Payer Network Management

Healthcare Payer Network Management: Building Robust Provider Networks to Improve Cost and Quality of Care

Healthcare systems around the world are seeing rising costs of care while grappling with budgetary constraints. At the same time, populations are aging and patients have higher expectations of quality and convenience of care. To address these challenges, healthcare payers are increasingly focusing on network management strategies to build high performing provider networks that can improve quality as well as control costs. This article explores some of the key aspects of healthcare payer network management and how payers are innovating their approaches to derive better value from provider relationships.

How Provider Networks Impact Cost and Quality

Provider networks form the core of any healthcare delivery system since they determine patient access to care. Studies show that the composition and management of provider networks have a significant bearing on both the total cost of care as well as clinical outcomes for patients. Narrow networks with selective inclusion of high-quality and lower-cost providers have demonstrated better control over medical spending growth compared to open networks which lack focus on network design and management. However, narrow networks also require careful planning to avoid access issues.

Payers are learning that simply restricting networks is not enough. Proactive management of provider performance, reference pricing, value-based payment models and strong patient steering can extract better value from relationships. Networks need to be tailored based on local market characteristics as well as types of services to drive the right incentives. When done well through collaborative efforts, such strategies offer the dual advantage of improving affordability as well as the quality of care received.

Assessing Provider Performance

At the heart of network management strategy is ongoing assessment and monitoring of provider performance across various quality, cost and service related indicators. Payers are leveraging claims and clinical data along with information shared by providers and patient feedback to develop robust provider profiles. Key metrics analyzed include adherence to evidence-based treatment guidelines, readmission rates, patient experience scores and total cost of episodes of care.

Aggregate analysis helps payers identify top and low performing providers to make network inclusion/exclusion decisions as well as offer support/interventions where needed. Some innovative payers are now able to track performance at the individual physician level within institutions as well. Advanced analytics further aid in risk adjustment, outlier detection and benchmarking. Payers are also exploring value-based payment models like bundled payments and shared savings as powerful levers to incentivize quality and efficiency improvements over time.

Negotiating Contractual Arrangements

Network management requires strategic negotiation of contractual terms with providers. Agreements need to balance access needs with adequate financial protection for payers. Areas of focus include reference-based reimbursement, episodes-based payment structures, gainsharing opportunities and mutually agreed pay-for-performance metrics.

Bundled payments around acute episodes, chronic illnesses, preventive care and post-acute services are becoming increasingly common to control total cost of care. Uptake of risk-based models depends on payers providing robust population health data, analytical support and shared risk arrangements agreeable to providers. Advanced alternative payment models also accelerate adoption of health IT, care coordination capabilities and move providers toward more integrated practice models.

Negotiations require collaboration, change management support and transparent benchmarking to reassure providers. Participating in network design allows providers inputs which fosters long term partnerships aligned around common goals of affordability and quality.

Managing Provider Relationships

While assessment and contracting are important, success ultimately depends on effective ongoing relationship management. Dedicated account teams interface regularly with network providers to address issues, share performance feedback, participate in quality improvement activities and plan strategic initiatives together.

Close coordination is particularly important with large institutional providers that contribute significantly to health spending. Accountable care arrangements with integrated delivery systems align incentives and allow for population health management at scale. Payers provide data-driven analytics, best practice recommendations, and where needed care management support staff or telehealth resources to aid provider transformation.

Regular provider seminars, newsletters and online portals disseminate updates on priority topics like adherence to treatment guidelines, reduction of unwarranted practice variations or non-medical spending. Transparency on network designation criteria and contracts across payers also helps physicians optimize networks participation and business operations. Technical assistance programs further support small and rural practices struggling with cost burdens and quality reporting requirements.

Overall, value-focused provider relationships supported by an engaged on-boarding and relationship management function form the heart of successful payer-led healthcare network management. When done collaboratively with providers, such tailored strategies show promise in bending the cost curve while improving outcomes. This holds the key to sustainable and affordable access to care for patients over the long run.

In conclusion, healthcare payers recognize robust network management driven by data, value-based partnerships and a collaborative approach as critical levers to address cost and quality challenges facing the system. While still evolving, best practices demonstrate the potential of high performing networks designed for different market needs, enabled by performance-based contracting, and supported by ongoing relationships and multi-pronged provider interventions. With patients and public payers demanding more affordability and value, strategic network optimization will remain a priority for healthcare payers globally going forward.

1. Source: Coherent Market Insights, Public sources, Desk research
2. We have leveraged AI tools to mine information and compile it