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We all know how it works. Any insurer that wants to compete in the HMO or PPO marketplace needs to have access to a network of providers offering significant discounts on their rates. The discounts are supposedly offered in exchange for a higher volume of patient traffic. However, almost all providers are in multiple networks with a number of different rate structures.

Developing a network with top tier discounts is difficult and extremely expensive. A few carriers are large enough to develop their own highly competitive network of providers (locally and/or nationally) or have a status that ensures their discounts are among the best (e.g., some state laws mandate most favorable discounts for Blues plans). The remaining insurers (most small to mid-size insurers) usually rent a secondary network for a fee and do not typically get pricing parity with the best discounts offered by the top tier networks. The result of this discount disparity is that small to medium-sized insurers have difficult effectively competing with larger insurers on cost of services or breadth of physician choice in a given marketplace.

One of the key tenets of virtually all health care reform proposals is to keep a strong level of competition among providers, vendors and insurers. Competition is the cornerstone of a free economy and usually promotes the highest quality of services for the lowest prices by providing incentives for efficiency. But does the current system for network discounts really bring about more efficient use of resources or is it just a mechanism to stifle competition among insurers? Does the current system minimize administrative overhead or increase it? What is gained in efficiency or quality by having some insurers pay significantly higher prices for provider services than other insurers? Do the network physicians provide higher quality care? Do they provide services in a more efficient manner? No – in offering a deeper discount to the large insurers they either have to make up for it by performing more services or by charging higher (and often MUCH higher) rates for uninsured patients and secondary network insurers.

What if networks based on differing discounts and pricing were not allowed and all providers had to charge the same price for each service regardless of the payer (including the uninsured individual)? In that case, all carriers, regardless of size or presence in a marketplace could have a chance to compete on an equal footing. Competition under this scenario would then be driven by administrative efficiencies, quality of care and efficiency of health care delivery. This would not necessarily mean the end of PPOs and HMOs. Provider networks could be formed based on adherence to practice guidelines, quality scores, outcomes measures, etc. that translate to cost savings based on optimizing medical practices rather than optimizing billing.

The implementation of a set fee schedule for each provider would also allow for greater transparency as we try to foster consumer awareness in the health care marketplace. Have you ever tried to comparison shop a medical procedure today? Most providers cannot give you a simple answer on how much they would charge for a procedure. With single schedule pricing consumers would truly be empowered to maximize their consumer driven health plans and be able to make the kind of price vs. quality trade-offs on their medical care that they do in so many other aspects of life.

Although the idea of fixing a provider’s fee schedule for all payers may seem like a radical idea and could cause some upheaval in the insurance industry, maybe it’s time to begin considering it as health care reform is being discussed.

We’d like to know what you think!

Author: Ben Brandon
Source: ezinearticles.com