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The Perks of Asking Hospital Physicians to Go In-Network


A southern California health system asked its in-hospital physician groups to contract with its insurance carriers. Here’s what happened.

Pushpins and string forming a network

Over a decade ago, MemorialCare, a southern California health system based in Fountain Valley with four hospitals and more than 200 care locations in Orange and Los Angeles counties, asked its in-hospital physician groups to contract with its insurance carriers.

“It’s not a formal policy, but rather a desired provision that we negotiate with our hospital-based physicians,” says John Cascell, senior vice president of managed care. It includes anesthesiology, pathology, radiology, and emergency department physicians.

“We wanted to ensure that patients who use our hospitals are cared for by physicians who have contracts with their insurers,” Cascell says. For example, patients don’t typically have the ability to choose their hospital-based radiologist. “We don’t want them to be surprised by an out-of-network bill.”

Cascell says the health system has been working collaboratively with physician groups for many years. “They understand the need to be aligned with who the hospitals contract with, and know it isn’t right for patients to have higher out-of-pocket costs if non-network physicians are used,” he says.

Upon reflecting on how the policy has worked over the years, Cascell says, “It has kept us aligned with physicians while keeping patient issues to a minimum. We support our physicians when an insurer is not dealing with them in a fair and reasonable fashion.”

Furthermore, the strategy has worked well for its hospitals because the health system can minimize patient complaints due to non-network physician bills. “It allows us to work more closely with our hospital-based physicians and develop strategies together that will both improve patient care and grow market share,” Cascell says. “Insurers benefit by having our hospital-based physicians contracted. This approach ensures that this will occur as long as both sides act in good faith.”

“Patients obviously benefit by not receiving out-of-network bills from physicians when they use our hospitals,” Cascell says. “Patients typically don’t have a choice in which hospital-based physician takes care of them, and they just assume that whoever sees them is contracted with the hospital.”

Thoughts on the provision

In weighing in on the measure, Courtney Stubblefield, a national healthcare delivery practice leader at Willis Towers Watson, a global advisory, brokering, and solutions company, says that while in-hospital physician groups may be expected to provide unit cost or pricing concessions by contracting, such provisions can also benefit these physicians because they can eliminate costly and time-consuming balance billing efforts, reduce the costs of collections, bad debt, and write-offs, and redeploy time and energy saved to provide patient care and other critical operations.

Related: How Three Hospitals Use Predictive Analytics to Reduce Readmissions

Such provisions can also facilitate health system efforts to build new commercial health plans either independently or with insurance carriers. “Hospitals are not only protecting insured patients from unexpected and unpreventable balance billing, but they also strengthen their contracting position with insurance carriers, which in turn can benefit employer-sponsored health plans,” Stubblefield says.

Christopher J. Kutner, JD, a partner in the law firm Rivkin Radler LLP, says if all hospital providers were in-network, patients could purchase a policy that only includes network providers and their premiums would likely be less because the health insurer would better be able to predict and control costs.

Such a provision would also arguably benefit the health system as it and all system providers would be linked to the insurance carrier with regard to referral and authorization requirements. “Conceivably, patient health records could be centralized and accessible to all providers,” Kutner says. “Efficiencies could be achieved through information systems available to all stakeholders.”

Having the health system’s providers working from a common platform and following the same set of protocols would likely improve the quality of patient care, Kutner continues. It might also result in efficiencies in diagnostic testing, because all providers would have access to patients’ medical charts and they could avoid duplicating recent tests unless absolutely necessary.

A piece of advice

Health systems wishing to employ MemorialCare’s provision should choose hospital-based groups that share their vision and values, Cascell says.

Also, “make sure you clearly articulate the reasons behind why hospitals and physicians need to be aligned from a contractual perspective. Make sure both sides are required to behave in good faith. Our provisions don’t require physicians to enter into contracts at any price. The agreement has to be fair and equitable.”

Karen Appold is a medical writer in Lehigh Valley, Pennsylvania.

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