My mother is a zebra.
The regional teaching hospital loves her because she has presented several one in a million conditions over the past decade. None of them serious, but all of them weird. She knows that when she goes to that hospital, there is a note in her chart to assemble the interns for a teaching moment. She is still working. Her health insurance is a narrow network home host EPO. The network is anchored by a chain of community hospitals owned by the entity that she works for.
What did that gibberish mean?
Her insurance is set up so that she pays a low deductible and has high actuarial value coverage when she sees a doctor or goes to a facility owned by her employer. This works fine for routine care and common acute conditions. If she had pneumonia, her network would be fine. If she had breast cancer, her network would be fine. If she broke her hip, her network would be fine. Her network is fine when her allergies act up, her network is fine to identify the current zebra problem as “something really odd” (the exact diagnosis the doc told my mom). It is completely incapable of treating the zebra condition.
Insurers are required to pay for medically neccessary care. How does that happen when the network is incapable of providing that level of care for a patient?
There are two major ways this is done.
The first is for zebra care, the “routine” odd ball cases.
My mother falls into this category. This is fairly common even for larger regional networks as there is almost always someone with an odd condition. Insurers with only narrow networks will have carve out/direct contracts with high end specialty hospitals where the truly unusual cases are pre-authorized to go to the hospital or provider group for medically appropriate care. The specialty hospital will charge higher than typical commercial rates for these carved out services.
Claims will be routed through the normal payment system and held for manual review and approval. The patient with the limited authorization will pay in-network cost-sharing and deductibles for the services that directly relate to the unique condition. For instance if my mother’s issue is with a core organ and the regional academic medical center also treats her knee, she will pay regular cost sharing for the core organ issue and out of network cost sharing for the knee issue. Narrow network insurers don’t advertise these relationships because they don’t want to be the heartless evil bastards that deny authorizations to high cost specialty hospitals for “routine” care.
High cost specialty hospitals don’t advertise these relationships as they want to be considered the go to center for both the unique and common care.
We saw this in 2014 with the Washington State exchange networks as Seattle Childrens’ was dropped from most networks:
there is a significant amount of research that shows more expensive flagship hospitals aren’t significantly better on routine care. Instead, they specialize in one-off and low probability cases that require very high end care, and use the lower intensity patients as a means to cover the capital and open the door costs required by the highest end care.
For instance, when I got my vascectomy, I chose a regional academic medical center because it was on my bus line, not for quality. That decision cost the insurance company several hundred additional dollars than if I had gotten snipped at either a community hospital or an outpatient ambulatory surgical center. Some of that cost increase was due to cross-subsidization of medical provider training, but a significant portion of the increase was the academic medical center could charge more because there was significant demand for the perceived quality bonus that it had compared to community hospitals. That perceived bonus is directly built from the regional medical center’s world class reputation for a certain class of transplants and another class of highly complex surgeries. But statistically, the high reputation and high costs hospitals don’t have a particular quality differential for routine care….
Ideally, the insurance companies that want to minimize their claims pay-outs want to have Seattle Children’s or any other high cost specialty hospital in network for a la carte services such as organ transplant and regional trauma centers of excellence, but out of network for pneumonia or routine elective surgery or setting broken ankles. Most of the specialty hospitals don’t want to go to a la carte contracting as that cuts the cross subsidization that they need to cover fixed costs.
Routine oddball cases are managed this way for narrow networks. For insurers that offer both a narrow and broad network, the contracting situation is usually just an internal claims adjustment. Insurers offering only narrow networks will need a special carve out contract with a set of specialty hospitals and provider groups. But this is straightforward.
Now the other case is a bit more complex where truly unique care and equipment is needed. Ebola would be a good example. There are fifty five hospitals capable of safely caring for an individual with Ebola. My employer would probably ship covered individuals to Chicago or Denver as our first choice. In this case, there usually are no long standing relationships built up between insurers with reasonably broad but not amazingly deep networks and the very few truly specialized hospitals capable of taking on these cases. So instead the patients are shipped out as quickly as possible and the billing is handled in one of two ways.
The first is that the insurer has some type of wrap-around national network built up. The Blues can use another Blue’s local contracts as their wrap-around national network. Non-Blues and non-Aetna/Cigna/UHC carriers often have contracts with network management companies that will contract with out of area hospitals. These rates will be very high, often two or three times standard in-network rates but it beats the alternative. The alternative is that the insurer pays the Usual and Customary charges which are basically whatever the provider has the gall to ask for.
So that is how zebras get paid for in narrow networks. All of these work-arounds have the patient paying as if they are receiving care at an in-network facility by in-network doctors. The insurers will often have very tight authorization requirements and they will do their best to move people from the out of network/high cost facility to an in-network facility and to the care of an in-network doctor as soon as possible but until the unique work is done, they pay for out of network charges.