How to Build an Outcome-based Network

Medical networks under scrutiny
Medical networks in Workers’ Compensation have come under scrutiny of late. Their effectiveness as a centerpiece of Workers’ Comp managed care is being questioned. For most networks, the most obvious problem is that their business model has not changed in twenty-five years while medical costs have continued to rise.

Medical networks in Workers’ Comp, whether they are PPO (Preferred Provider Organization), MCO (Managed Care Organization), HCO (Health Care Organization), MPN (Medical Provider Network) or the latest, EPO (Employer Provider Organization), are under the microscope. Employers and payers now realize that contracting with every provider and applying arbitrary discounts on units of medical services tend to inflate the frequency, duration, and cost of medical care. Rather than saving money for medical services, this practice may actually add to the cost.

Do discount networks work?
In reality, whether discounting units of medical service adds to, or curbs medical costs under the network discount method is unknown because networks have not provided information in that regard. Proof of actual performance does not exist. “Savings” reports supplied by the networks simply tally the discounts with no attention paid to total claim cost or outcome.

Instead, the strategy of discount networks is to contract with as many providers as possible, then measure success based on network utilization, penetration, and total discounts. More network utilization produces more discounts and reported “savings”. Moreover, the discount network strategy relies on the presumption of medical excellence and perfect moral integrity among providers, along with knowledge of the unique characteristics of Workers’ Comp.

Everyone knows the huge networks contain bad apples, usually more than a few. So employers and payers now want to open the curtain to see the moving parts being engineered by the wizard. They want proof of performance.

What employers and payers want
Most employers want the best physicians treating their injured employees at the best possible price. They want quick, convenient access to excellent medical treatment and the earliest possible safe return to work for injured employees. What’s more, they want the most efficient and cost-effective Workers’ Comp claim process. Importantly, they also want evidence of quality care.

Proof of performance through analytics
The missing ingredient for most traditional, discount-based medical networks is documented performance in terms of outcome. The only way to gain such knowledge is through data analysis (analytics). How do the doctors perform in the context of Workers’ comp and what are their outcomes, both in cost and in human terms?

Measuring quality
A physician was once overheard saying, “You can’t really measure medical quality.” That is not true. Quality can be measured in terms of medical performance using multiple criteria, all analytically calculable. What is the mean frequency and duration of medical care for treating certain injuries by an individual physician compared to others of the same specialty treating the same injuries? Other quality factors are equally measureable, such as return to work or sustained return to work. Actually, another way to define quality is best outcome of the claim and for the claimant.

Measuring outcome
In many ways, outcome and quality are the same things in Workers’ Comp. Frequency and duration of medical treatment are easily inflated by providers in networks where discounts are applied to units of service. If providers must discount services, the best way to recover those lost fees is to expand and extend services. Direct medical costs are key to measuring performance, but outcome (quality) is also definable in terms of lost time, return to work, and disability rating at claim closure, along with many other factors. All are influenced by the treating providers and all are measureable.

The new outcome-based networks
Medical provider networks are evolving to the new outcome-based model where providers are contracted based on actual performance derived from the analyzed data. Outcome-based networks offer transparency rather discounts. Some have also created new revenue structures that reward positive outcomes. These new networks carve out the best in class providers evidenced by the data. They provide a new and different business model and an objective basis for selecting network doctors.

An evolving industry
The industry is evolving to new outcome-based networks guided by the analytics of provider performance. Frankly, the Workers’ Comp industry has lagged behind other industries in leveraging their data to enlighten decisions. The new outcome-based networks change that. When the best in class make up a network, logic says outcomes improve.

Read more regarding Workers’ Comp medical provider networks and the analytics of medical provider and network performance.