Intermediaries have a variety of tools they can use to influence healthcare use and spending. Let's take a look at one here, management of provider availability and networks. The key question here is working out which providers the intermediary is going to work with. How much effort goes into this can depend a bit on where you are. In some places, large intermediaries or other government entities already exert influence on the provider space. How many doctors and hospitals will there be, with what kinds of specialties and facilities, and where will they be located? Large public intermediaries and those places may find it natural to work with all or nearly all providers. And there can be other customs or practices and other cases that make the set of providers and intermediary will work with pretty well defined. So there isn't always a lot of picking and choosing going on. In other cases, though, like in the US, things are not as well defined. And there's more space for picking and choosing. Here there are many private insurance companies and lots of providers. There's relatively little intermediary or government led guidance and planning of the delivery system, and providers are more free to set themselves up where they want if they think they can make a go of a business providing some service in some area, they can go set up a hospital open a physician practice. in this situation, the mix of doctors and hospitals and other providers in an area may be different than what any given intermediary thinks is optimal for them. So they may not want to work with all of them. They may want to choose some. Insurers can then decide which ones to use depending on a range of interests they may have. And it's pretty common for this to happen. Some terminology, we often say that intermediaries are forming a network of providers. But we also sometimes say they're forming a panel, which just to be clear in this context is different from a panel for capitation payment. There, a panel is the patient's of practices responsible for. Here, it's the providers in the plan network. And we sometimes say that what the plans are doing is selective contracting. The intermediaries are selectively contracting with a subset of the potential providers that they could work with. Why and how do plans do this? From the plans perspective, they're trying to keep their buyers, their patients, even the providers happy trying to get the balance right. You can think about plans doing this along a couple dimensions. One is their strategy for picking. They may focus on finding providers that they think are going to provide the highest quality. They may emphasize finding providers who look like they're efficient and don't overuse questionable treatments. They probably think about how much the plan is going to have to pay to get that provider to agree to participate in the network. Somebody is going to demand a high payment rate, but another nearby provider might be willing for less. That could be a factor. Maybe they want providers in a particular geographic area, perhaps often some combination of these with some trade-offs. In addition to the criteria they use, plans vary in their strategy about how big their network should be. Some plans adopt a strategy of having many providers in their network. Their members have lots of choices, but the plan gets to be less selective. Other plans go narrower picking and choosing more, which gives them more influence, but also means their members will have fewer choices which can be a drawback. And ultimately, this is a bit of a dance. Since the providers are also looking to figure out which plan networks it makes sense for them to be in both sides are looking to make arrangements that work for them. And one final related thing, along with identifying and network goes a decision by the plan about the rules they'll make for their members with respect to choices of providers. Some intermediaries choose to be what we call closed panel. Closed panel means a requirement that enrollees see only providers in the panel, or else the intermediary won't contribute to the cost of the care. If you the patient, don't use a provider and my panel says the plan, then you're on your own to pay for your care closed panel. On the other side, a plan could go open panel. Here, the intermediary allows its members to go to pretty much any provider that they want out there. In essence, they wouldn't even really need to set up a panel or network. They might just decide to take any provider who wants to participate maybe with some minimal participation requirements, and then allow their members to pick the ones they want. In between, we might say a plan has a semi-open, or we might say semi-closed panel, where they set up a network and then incentivize enrollees to use providers in the network with maybe favorable cost sharing, but not require it in the sense that maybe the plan will still pay something and help cover the cost if the patient decides to go out of the network. So network formation and selected contracting one tool that plans can use to shape healthcare delivery and try to achieve their goals.
