Return of the narrow network

July 1, 2012

Narrow, high performance networks are making a comeback.

The movement by health plans and employers to shift to narrow networks seems to have hit take-off velocity. Such "high-performance networks" are based on cost and quality criteria.

A 2011 survey of employers by the benefits consulting firm Mercer found that 14% of large employers were using high-performance networks. Plans and employers say the narrow-network products already are producing annual cost savings of as much as 10% to 25%. They also hope the trend will have broader effects, prompting providers currently outside the narrow networks to improve their performance in order to qualify in the future.

Among the narrow-network leaders:

In some ways, the networks represent a return to the tighter HMO and exclusive-provider model of the 1980s and 1990s, which consumers rejected at least partly because it limited their provider choices too much. But experts say employers and consumers are more accepting of restrictive provider panels now because of the weak economy and desperation to curb costs. Another difference is that health plans have more sophisticated data tools to identify high-performing providers than previously.

"The stars are aligned now because everyone realizes we have a totally unaffordable, dysfunctional health system, and we have to control costs," says Helen Darling, CEO of the National Business Group on Health. "So plans are delivering the kind of value services they haven't in the past."

There's also growing recognition that the best hope for controlling costs lies in collaborations between employers, health plans and selected provider groups in redesigning care delivery processes to produce better outcomes. Some of the new narrow-network products feature such performance-improvement collaborations, which tie into the parallel movement toward accountable care organizations.

"The real money is improving coordination of care and making sure that patient population that consumes the most resources gets the right care, at the right time, in the right way," says Darryl Cardoza, CEO of Hill Physicians Medical Group, a large multispecialty group based in San Ramon, Calif. His group is participating in narrow-network products with Health Net and Blue Shield of California involving collaborative improvement initiatives.