High-performance health networks: A methodical approach creates a right to win

Published: July 15, 2015

Executive summary

Narrow networks are becoming more prevalent in healthcare, and with good reason: They help payors reduce costs and increase the quality of care. However, the approach for designing and implementing such networks is still evolving. Many current offerings have fallen short of the expectations of both patients and regulators, leading to increased scrutiny, new regulations, and even lawsuits. Payors can avoid such problems and give themselves a clear competitive advantage by designing high-performing health networks using three criteria:

  • Total cost of care, which considers costs for an entire healthcare episode from the member’s perspective, rather than the traditional approach of looking at per-visit or per-procedure costs
  • Quality of care, which entails new metrics to assess whether healthcare is safe, effective, patient-centered, timely, efficient, and equitable
  • Consumer preference, which factors in patients’ willingness to pay for choices in primary care providers, specialists, and specific health systems

In addition, payors must be able to design and implement networks in a scalable and repeatable way — and to learn quickly from past experience (including missteps). That requires collaboration among internal functions and management of all external stakeholders: consumers, providers, and regulators.

By applying this three-lens approach and improving the way they implement new networks, payors can capitalize on the promise of such arrangements. They can create provider networks that are so well tuned to the needs of specific patients that consumers and regulators alike view them as high-performance — rather than narrow. In this way, network design can help payors achieve the three-part agenda of improved outcomes, a better patient experience, and reduced costs.

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The next-generation opportunity

In summary, payors — given their potential to access detailed cost, quality, and outcome information across patient populations, in different settings, and over time — are best positioned to determine the reasonableness of total and line-item costs, quality, value, and overall performance for facilities and physicians. For example, payors can drill down and look for organizations that take advantage of the care setting to optimize revenue (e.g., by pushing observation cases to inpatient visits or physician procedures to outpatient settings). Taking such an approach for the conditions and care bundles that are most prevalent or expensive will address the problem at its core.

Payors can create near-term market advantage by applying the three-lens framework to network design and striving for better coordination and alignment internally. These steps are necessary — but not sufficient for a sustainable differentiating advantage. Having a high-performing network in a fee-for-service chassis is challenging due to lack of provider incentives to make it happen.

In the near future, these capabilities will have become table stakes for payors. To stand out at that point, payors will need comprehensive healthcare programs designed to “hold patients’ hands” and help them navigate through the care landscape. Those programs, replete with easy-to-use consumer-facing tools, will be particularly important during transition periods between products. Otherwise, provider, regulatory, and consumer backlash against these products will continue.

In the future, payors have the opportunity to build provider networks that are thoughtfully conceived and implemented, as described in this report. These future networks will be so well tuned to what consumers need that consumers truly view them as high-performance rather than narrow, and regulators will see these networks as actively furthering the triple-aim agenda of improved outcomes, a better patient experience, and reduced costs. This is an exciting next-generation opportunity for high-performance networks.

Payors will need comprehensive programs designed to “hold patients’ hands.


High-performance health networks: A methodical approach creates a right to win