The idea of narrow provider networks has a negative connotation, but here's how to turn it into a positive.
One way health plans and employers are trying to hold down costs is through narrow networks.
By guaranteeing interaction and revenue opportunities from a patient population, the idea is that health systems will provide greater discounts for their services, and patients and employers will save on premium spend.
So why aren't narrow networks more popular?
Narrow networks have been successful in holding down costs, but for many patients, a narrow network has a negative association with limiting their choice.
But what if the idea of the narrow network, especially one that covers a variety of sites of care—from primary care to home health to hospice—is promoted as a positive?
The Amazon Effect
Business people like to use Amazon as an example of a bogeyman that can put them out of business. Indeed, Amazon has done that to a variety of businesses in bookselling and general retail, and now it's set its sights on healthcare, perhaps starting with drugstore chains.
But the leaders running Amazon don't view choice, which narrow networks limit, the same way health leaders do.
Amazon knows that their customers have a choice, but they want to make it more difficult for customers to choose their competitors by offering them everything they can at a competitive price, with easy delivery options.
Healthcare is more complex, and more variables enter into the decision of where to seek care, but strategically, health systems should do the same as Amazon by building out their ecosystem, thus making it preferable for patients to stay in it, says Rod Hochman, MD, president and CEO of Providence St. Joseph Health, a seven-state, 50-hospital health system based in Renton, Washington.
In his view, his competition is no longer other hospitals, doctors, nurses, and clinics, as it has been in the recent past.
Instead, other huge players, such as drugstore chains, insurers, and even tech companies such as Amazon are becoming direct competitors. Insurers are adding provider services to their portfolios.
UnitedHealth Group is one example of an insurer becoming a healthcare provider through its Optum subsidiary, which has bought physician groups that will compete head-to-head with traditional health systems like Providence St. Joseph.
By providing multiple, easy access options for patients to stay within the system for their healthcare, Providence St. Joseph hopes to increase patients' loyalty so that they won't mind, and may even prefer, staying within a narrow network.
"Competition has become more asymmetric," says Hochman. "It used to be that you knew who your competitors were in the local market. We fought over patients and shook hands at the end of the day. It's not that way anymore. The typical boundaries that we used to see in the past are no longer there."
To anticipate and counter these threats and make narrow networks more attractive to patients, Hochman says Providence St. Joseph and other health systems should:
- Strengthen what you do well traditionally: that's your hospitals, physician practices, and high-end care in general. Ensure that quality, ease of access, and primary and follow-up care are available within the network.
- Ingrain your system as a trusted partner: This means establishing a reputation in quality, customer service, and in a variety of care settings outside the acute space as a trusted manager of a patient's care—from birth to death. At Providence St. Joseph, whose own health plan has a million members, that means managing care for most of the local population in all its markets by providing a guiding hand to patients in part through technology and geographical coverage.
- Build and utilize an internal transformation group: Exceptional patient care is only part of the equation. Service and guidance to help patients navigate a confusing healthcare system—and this includes the financial element—is paramount. Providence St. Joseph's transformation group focuses on digital service elements such as direct-to-patient portals and electronic health record management.
Steal Strategy From the Competition
Providence St. Joseph's transformation group is focusing on becoming an internal service company.
Hochman compares the effort to "creating our own Optum at Providence Health. Fundamentally, [UnitedHealth Group] made a decision that staying exclusively in the insurance business is not sustainable. We've made a similar decision that staying only as a provider is not sustainable."
To that end, Providence St. Joseph is further extending its reach and scale by focusing on clinical research initiatives as well as funding and nurturing the startup companies that can sometimes result from that research.
Another way to leverage Providence St. Joseph's scale is by tackling cost and affordability on a coalition basis. Hochman anticipates building a coalition of hospitals, pharmacy providers, and independent providers to agree on ways to make healthcare more affordable.
"Just last year we saved $110 million in costs over what Providence and St. Joe's would have had as separate organizations, and much of that savings came from services, supply chain, clinical excellence, and IT," he says.
All of this work serves to build a healthcare ecosystem that patients hopefully won't want to leave.
Philip Betbeze is the senior leadership editor at HealthLeaders.