Centers of excellence and network adequacy

David Cutler at JAMA Forum lays out four fairly technocratic changes to the US healthcare system to make it better.  I want to engage on one of them as there is a significant implementation challenge in the form of network adequacy regulation.  It is fixable but it needs to be addressed.

First, systems can encourage their clinicians to specialize in particular types of patients or procedures. It has long been known that volume matters for outcomes—for example, a surgeon who does 100 operations a year typically has better outcomes than one who does 20. In addition, a recent study found that specialization matters.  For several common procedures, including coronary artery bypass graft surgery and valve replacement, physicians in the top quartile of specializing in a given procedure have mortality rates that are 15% to 46% lower than those in the lowest quartile of physicians specializing in that procedure.

The evidence is strong that volume matters. Insurers that have a long shadow of the future should want to send as many of their covered lives to hospitals and doctors that do a lot of a particular procedure.  This is probably easier to do in urban areas rather than rural areas for two reasons.  First, urban areas have far more people within a given radius who need a particular service.  Secondly, urban areas are more likely to have multiple hospitals or doctors so specialization is far easier to support economically.   A clinical oncologist at Duke University Hospital can specialize in lower GI tract cancers while a clinical oncologist on the Outer Banks treats everything from skin cancer to pancreatic cancer to brain cancers on any given afternoon.

An insurance company constructing networks that prioritize high volume and specialization runs into a major regulatory challenge; network adequacy regulations are means of state regulators and private accreditation agencies to determine if a network is good enough.    Most of these regulations are based on either a specific percentage of the covered population has to be within a particular distance to a particular type of provider or there must be one provider of a given type for every so many thousand people.

The underlying assumption behind either a radius method or a ratio method of network adequacy is that any provider in a particular specialty is close enough to identical to another provider.  These methods are quality agnostic.

This is problematic is an insurer thinks that it can build a high quality network based on centers of excellence and a few specialists who do a lot of repeated procedures in order to maximize their learning by doing as well as maximizing the division of very skilled and expensive labor.  Such a network could have a large, dense and widespread network of primary care physicians and first line specialists.  However it would be a network that routinely has patients driving past half a dozen hospitals to get to a local center of excellence.  Or it would be a network that has patients flying halfway across the country for a back surgery consult.

These types of network designs happen in self-insured corporate plans.  Walmart will only pay for spine surgery at a small number of specialty hospitals across the country nowThese are high end hospitals like Mayo Clinic and Geissenger.  The idea is to minimize variation in treatment and seek out the best care possible.  The cost savings comes from reducing re-treatment and properly steering people who don’t need surgery out of the surgical pathway.

Self-insured plans are very loosely regulated.  A center of excellence model can easily pass regulatory muster there.  However fully insured plans where the insurance company has the full risk of an OMG claim, or government plans tend to have ratio or radii network adequacy rules.  These rules make a center of excellence model far harder to implement.  There could be value in short term waivers to pilot demonstration models that exempt some plans from network adequacy requirements on a few deferrable services and specialties to see if there is a way to hold cost constant and improve quality or decrease costs while holding quality constant.




6 replies
  1. 1
    Another Scott says:

    Doesn’t this type of model naturally lead to a reduction in the number of payers as well? BC-BS has their CoE, Humana has their CoE, Kaiser has their CoE. That would be a bad outcome, for the reasons you outline, unless the CoE was the same for each of them. And if the insurance companies were all agreeing on that, then why would there need to be 3 (or more) separate payers? Presumably it would be difficult for them to justify different pay rates and premium costs and thus be difficult for them to distinguish themselves in the marketplace.

    Long story short, wouldn’t a sensible CoE model naturally be a step toward a M4A or Single Payer system?

    CoE makes sense from an efficiency standpoint, but how do you prevent it from being demagogued as Socialized Medicine and Death Panels and all the rest? “They won’t let me go to the hospital that I want to go to!!11”



  2. 2
    Cheryl from Maryland says:

    Until the tax code changed, we followed the COE model because we were lucky to have paid sick leave and were able to deduct travel expenses, hotel, etc. With our mortgage paid off and the new regulations, we shall have to see if we can still afford travel expenses without a tax benefit. Good for Walmart for including the full cost of travel expenses as part of their COE package, but I don’t see that attitude becoming a norm.

  3. 3
    dnfree says:

    It is a relief to see a post today that focuses on sanity, facts, and analysis and doesn’t mention the people who are dominating the news.

  4. 4
    Sister Machine Gun of Quiet Harmony says:

    Isn’t this something that could be implemented at least partially through telemedicine in rural hospitals?

  5. 5
    Robert says:

    A piece of this problem is that quality of care is ill-measured and the data one would need to determine continuity of care runs into patient privacy issues. The latter might be lessened a bit if appropriate ways to link care across providers were agreed upon.

  6. 6
    StringOnAStick says:

    I did my research before my knee replacement because I want to go back to the sports I enjoy once I’m fully healed, so I chose the one in my state that handles Olympic athletes and is known as a CoE for joint replacement. The insurance plan we had 3 years ago didn’t include this group which is one of the reasons I kept putting the surgery off. Fortunately our current insurance covers this group, and I’m currently contemplating getting the other one replaced in June because (1) if my husband’s company decides to change insurance companies it will be at the end of the year, and (2) we’ve made our annual deductible so it would save us $4,000 to do it this year instead of next like I’d originally planned. I’ve found the most efficient, organized and competent orthopedic group I’ve ever encountered, and my non-replaced knee is is rough shape too, just not as bad as the one I just replaced was. Talk about your perverse incentives though; get surgery before your insurance changes and because of the annual deductible shouldn’t be on top of the pile, but there it is.

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