The Physician’s Role in Health Plan Networks: Can We Serve Two Masters? by Robert Nelson, MD

i-51b608f51abbcacdb24f53e612e59d77-Administration costsThe term “network” tends to conquer up positive connotations in our minds most of the time.  In fact, most networks tend to be good things.  But sometimes networks operate more like cartels that end up serving the interest of a narrow industry, rather than watching out for the consumers and alleged beneficiaries they purport to serve.

One such example where networks behave more like cartels are Health Plan Networks. This is not a conspiracy or anything illegal.  They are simply designed to behave like cartels.  Make no mistake,  health plan networks exist to control their own costs and insure profitability, not to provide “selection” and “quality” to the subscribers. I am not criticizing profit; that it is not the problem here.  Profit is essential to the viability of any business and is a proper reward for risk taking.

The subscriber members in a health plan network, for the most part, don’t decide what provider to see based on quality parameters, price, personality or treatment philosophy of the doctor.  First and foremost the decision hinges on IF the provider is in the network. Thus, doctors have essentially become subcontractors for the Health Plan network; in reality they work for the network, not the patient.

The provider has been relegated to be a list of “approved” shops similar to how you chose a repairs shop for your automobile. Doctors don’t bill the patient directly (except the horrid practice of balance billing brought to you by territorial and punitive practice of penalizing providers and patients for not staying in the network) nor do they have authority to negotiate directly with the patient on price, scope services or delivery portals.  This is very similar to the auto repair shop that accepts insurance payments directly. They simply submit the “work” they did on behalf of the subscriber to the Plan, who turns around and pays a contracted rate that is usually far less than the posted charge.

This revenue cycle, as it is called in the industry, adds considerable and unnecessary expense to routine health care, and takes away from patient care time.  And, it certainly doesn’t sound like the basis of a strong Doctor-Patient relationship to me.   It more closely resembles the relationship you might have a production home builder where the doctor plays the role of the subcontracted worker; the worker being essential to fulfill the contract, but easily replaceable.  See  the graphic titled “Exhibit 8” above.

For the patient-subscriber, they are obligated to pay the same co-pay regardless of the simplicity or complexity of the visit. While their experience and satisfaction may vary from provider to provider, the fees do not, regardless of real or perceived quality on the part of the patient and regardless of outcome. This is in addition to the fact that people’s premiums keep going up and up with no measurable improvement in health, access, service level or quality; and there is no incentive built into the rate structure even if one is frugal with utilization (in most instances).  I submit to you as an example of this, the narrower networks of many of the ACA public exchange plans that contain fewer choices, but higher out-of-pocket cost in many situations.  This is rationing by design, because it offers lots of “coverage”, but puts limits on who can provide the care due to very limited network participation. This is just one more example of the reality that the price we pay for healthcare in our current system is paid for in wait times and inconvenience, not just in dollars.

Another example of the perverse incentives and bureaucratic nonsense of policy makers that is inherent in our third-party network payment system is the “after-hours incentive” paid to providers for seeing Medicaid recipients after normal business hours, weekends and holidays.  But, here is the odd thing:  the patient is unaware that any of this is going on.  Because they are not in the loop, the incentive becomes nothing more than a moral hazard and a way to game the system, especially if the rendering facility or office has extended hours to begin with.  Thus, the Medicaid patient does not benefit one way or the other; nor are they penalized for going to the urgent care at 8 pm instead of waiting until morning to see their PCP.  So, the same case of strep throat costs Medicaid one rate during the day, but after 5:30 or weekends it costs more.  There is actually a billing code that the provider submits for this circumstance and Medicaid still pays facilities the premium even if they are normally open after normal hours, weekends and holidays anyway.  How crazy is that?

For private insured folks, there is really no incentive not to go to the doctor, other than the small co-pay.  Not that we should erect tough barriers to see the doctor, but let’s be real here.  Do we really want to be filing claims for work excuses for minor issues such as allergies, boo-boos and backaches from too much golf?   On average, out of every dollar spent on healthcare only about 11 cents comes directly from the patient; the remainder comes from a third-party.  In economic terms, this creates artificially high demand because they buyer is “insulated” from price signals, thus insensitive to price issues especially after deductibles are met or for items “covered” at 100%.  This disconnect causes the cost of the main financing vehicle (the health plan) to escalate because it is largely uncoupled from the modulating effect that demand has on prices as compared to the same services being purchased directly.

On the provider side, the incentive is to over-document, over-test and over-treat because doing so generates a higher level billing code.  Doctors also get pressure from third party payers to practice what is kindly called “evidence-based medicine”.  These often out-of-date, one size fits all disease management guidelines often fall short of what is best for the patient and subjects them to unnecessary (or unwanted) medications and ill-advised testing.

All the issues described above add a tremendous cost burden to healthcare with little or no benefit to outcomes or quality of life for patients. Axiom: The excessively high posted CPT charges (the charge master’s price) justify the premiums and the high premiums support the posted charge, thus the built-in profit for the health plan. The incentive for the provider is to see as many patients for billable encounters as possible and generate code-worthy “work”, thus more reimbursements. These perverse economic incentives are not lost on patients.  Healthcare is the only industry I can think of where we require the recipient of services to agree to pay before they know how much it will actually cost!

cartoon6264The economic distortions and nonsense described in the previous paragraphs would not occur if physician’s did not have contracts with third-party networks, which dictate the accepted portals of care, the coding requirements for billing and how much the doctor gets paid.

As physicians, how should we respond to the situation we find ourselves in when most doctors are so dependent on this business model for revenue? Indeed, the way we get paid and by whom affects the solidarity and therapeutic relationship that doctors have with their patients. Our individual and collective response(s) will have serious consequences as it relates to the sanctity of the doctor-patient relationship and for long-term autonomy of the medical profession.

With all we know about the perverse economic characteristics and consequences of the health plan-controlled billing cycle, including 40 years of an needlessly inflated healthcare costs which has led many patients into bankruptcy , do we really want to continue to perpetuate this legalized scam by acting as billing agents for health plan networks?

A gradual movement towards total non-participation in those networks that have for too long controlled the purse-strings on healthcare , purposefully shielding it from the discipline of the market, is the only force strong enough to bend the cost curve down in favor of our patients and restore professional autonomy to the practice of medicine.

I see the movement referred to as Direct Pay practice models as the single most viable free-market alternative to our current third-party controlled system  – which includes ObamaCare.  In reality, the PPACA just doubles down on a dysfunctional system that is highly inflationary, and one that is uncoupled from normal economic forces and one where the patient is not the central focus.  The main focus of the so-called Affordable Care Act was on coverage and perceived cost, without taking into consideration patient choice, wait times, delivery modality or the real aggregate price tag.  If we’ve learned anything from ObamaCare, it is that coverage does NOT equate to care.

So why did I pick on Health Plan networks? There are a lot of good doctors and health providers in these networks and patient depend on them, right?  I am focusing the light here because they are the back-bone of the entire third-party payment system and because their existence hinges on the contractual participation by doctors. So what about patient participation? Aren’t they important to hold a network together?  Not really.  IF doctors don’t participate, then the subscriber simply becomes a free-agent policy holder without the network constraints.  Without doctors, there are no networks.

DPC-Efficient-Direct-Primary-Care-Medical-HomesIf I could wave my Healthcare Reform magic wand (and scare away all the anti-trust lawyers) so that all network contracts with doctors were dissolved instantly, we would transform/restore outpatient medical care overnight. With doctors not submitting claims for patients and not accepting contractual assignment, we would automatically have a couple hundred million free-agent patients and several hundred thousand independent physicians seeking mutually beneficial professional relationships.  Price transparency would appear everywhere and doctors would again place service, trust and quality at the forefront.

middleman_cartoon_t600x427Direct Primary Care, and Direct Pay Medicine in general, is the singular most important force we have to actually bend the cost curve down in real dollars and at the same time preserving the doctor-patient relationship. There is more at stake here than having a manageable panel size and getting home on time.

Non-Participation in networks by providers en masse is one of the few cards we have left to play if we hope to save the private independent practice of medicine.  God help patients and doctors if we lose that.  To borrow a phrase from the Gospel according to Matthew (Matt 6:24) – We cannot serve two masters.





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