American College of Physicians: Internal Medicine — Doctors for Adults ®


Tiered physician networks spark controversy

Doctors worry that plans may use too little data to determine who's in and who's out

From the September ACP Observer, copyright 2004 by the American College of Physicians.

By Bonnie Darves

Under pressure to rein in rising costs, a growing number of insurers are turning to a new type of provider network that restricts itself to physicians who practice cost-effective medicine. But because these "tiered networks" tend to use data that physicians say is shaky in deciding who can join, the model is generating resistance from some physicians across the country.

By creating tiered networks of providers who meet certain standards of utilization and quality, health insurers hope to create panels of physicians who can help them control costs. Patients who see physicians on those panels are rewarded with lower out-of-pocket expenses, while individuals who go to providers outside the network pay more in the form of coinsurance, co-payments or deductibles.

Insurers say they are merely responding to growing pressure from employers who want to control rising health care costs. But physicians say the data insurers are using to create these networks may be flawed. Most insurers are using claims data to determine which physicians are practicing cost-effective medicine.

Even more frustrating, physicians who haven't made the highest tier say they receive no explanation of what they did "wrong" and what they could do differently to be included.

Flawed data?

Tiered networks were first introduced after the cost-cutting success of tiered pharmacy plans and formularies. While the idea of tiered networks has made more inroads in hospitals, the concept is slowly but steadily making its way into the physician sector.

A report issued in late 2003 by the Washington-based Center for Studying Health System Change (HSC), for example, found that nearly two dozen health plans in 12 different markets had either launched or were planning to launch tiered provider networks. Several of those were moving forward on or experimenting with physician tiering, mostly at the physician group level.

In the West, PacifiCare and some Blue Cross Blue Shield plans in California and Washington have introduced tiered networks that rank hospitals and physician groups according to cost and utilization measures.

And Aetna recently rolled out its own tiered network—dubbed Aexcel—in nine different markets, effective in 2005. (The company launched the network in three urban markets this year.) The insurer is seeking regulatory approval to make Aexcel—now available only to large employers that self-insure their benefit programs—available in Aetna's fully insured plans as well.

While health plans have successfully used tiering to reduce costs in hospitals, some are finding that the concept doesn't easily translate to the outpatient setting.

Insurers typically decide which community-based physicians can join their narrower, tiered network by looking at how physicians treat certain conditions. In some cases, health plans analyze all the care physicians provide for a given condition to create what is called "episode treatment groups" or "episodes of care."

But insurers are quickly learning that the outpatient data they can collect are very different—and often less reliable—than data from the hospital setting.

According to Glen Mays, PhD, one of the authors of the HSC report, tiering works better in the hospital setting because the volume and quality of inpatient data allow plans to make more accurate assessments about the quality and efficiency of care.

When they try to replicate that model at the level of individual physicians, however, health plans must deal with data on many fewer patients. "Most of the current designs out there are running into some pretty substantial implementation or operational challenges, in terms of the quality of the data and the criteria being used to tier," said Dr. Mays, who teaches in the health policy and management department of the University of Arkansas for Medical Sciences in Little Rock.

Ranking physicians

Aetna, for example, decides who can participate in its Aexcel network by measuring physician groups who care for a minimum of 10 "episodes of care" over a two-year period. The tiered network includes physicians from 12 different specialties including cardiology and gastroenterology.

Analysts question whether examining that small amount of data can provide a fair assessment of a physician's performance. Lawrence Casalino, MD, PhD, assistant professor of health studies at the University of Chicago, said that Aetna's ranking system may not provide enough data to distinguish among providers, particularly if the data aren't accurately risk-adjusted.

"There are a lot of technical problems with doing quality or cost scores on individual physicians," Dr. Casalino said. "I would question whether 10 episodes would be enough, even assuming insurers can really score each episode well."

It is possible to reliably measure performance for individual physicians such as cardiac surgeons, who perform the same service frequently, he explained. "But there is pretty good research that indicates that most physicians don't have enough patients in a particular category for you to measure their performance," Dr. Casalino said. "I don't think you can say with confidence that someone who does well on, say, eight episodes of care is better than someone who does well on five. With much larger numbers of episodes of care, your confidence would increase."

Black box process

Donald Liss, ACP Member, Aetna's senior medical director, said the insurer's selection process, along with the methodology and data that underpin it, are sound and represent the state of the art in measurement. Physician or group selection is based on four factors: volume, clinical performance, cost efficiency and network adequacy. For calculation purposes, an episode of care includes all care provided from initial hospitalization through post-operative follow-up (or readmission, if applicable).

"Our clinical performance measures are adjusted for severity, so the clinical integrity of those is, we think, as good as anybody in the industry is doing," Dr. Liss said. He added that Aetna uses quality measures that are consistent with guidelines published by organizations like the American College of Cardiology. (See "Mining performance data to gauge patient care")

To date, the Aexcel networks include between 40% and 70% of the physicians in Aetna's existing specialist network in a given region, Dr. Liss added, with that percentage evolving "both by design and empiric result."

But for many physicians, being selected for or excluded from a network is a black box process they don't understand. When Bonnie Floyd, MD, an interventional cardiologist in Dallas, for instance, was accepted into Aetna's network, the notification she received about her inclusion stated that she was an Aexcel-designated physician, but it didn't provide details.

"The communication was sparse," she recalled. "The standards and outcomes data they reviewed are not known to me."

Dr. Floyd said she has no objection to the concept of insurers creating provider networks based on bona fide clinical performance measures, provided the data used are accurate and reliable. "I'm not opposed to insurance companies developing centers of excellence," she said. "But if they're doing it only on an economic basis"—which Aetna officials insist they are not—"that's wrong."

Dr. Floyd also said that she believes claims data are insufficient to make determinations about a physician's performance. Most insurers, she pointed out, allow only four or five codes per claim, which may not adequately describe a patient with multiple comorbidities. Even modifiers often don't allow physicians to accurately represent the severity of a patient's condition, she noted, particularly when treating conditions like heart failure.

And coding has become so complicated that it's difficult to gauge just how ill a patient is, she added. A low-volume cardiac surgeon who tackles a few cases involving very high-risk patients might have skewed outcomes—and be dropped from a network.

Dr. Casalino pointed out that the task of rating physicians is especially tough when trying to perform true risk adjustment at the patient level.

"Unless risk adjustment is done very well—and doctors have good reason to believe that it hasn't been done well in the past—it's not really fair," he explained. Important factors such as socioeconomic status, which affect adherence to care, are usually not included in the mix.

"Who will comply better with getting Pap smears," he asked, "an upper middle-class woman or a homeless woman ... without insurance?" He added that he does not oppose tiering or the use of narrow networks—but does think such practices are "very problematic" when implemented at the individual physician level.

According to Aetna's Dr. Liss, "Aetna appreciates that measurement tools for evaluating clinical quality at the physician level are not perfect." He said the insurer is committed to improving both its measures and sample sizes through collaborations with large employer coalitions, health services research organizations and professional societies.

Aetna also reviews, Dr. Liss added, the measures used with specialists who have questions or concerns.

The Boston market

Thomas Lee, ACP Member, network president at Partners Healthcare System in Boston, has been vocal in his opposition to the use of claims data to create provider networks. Along with other critics, he claims the data are often inaccurate when used as the primary source of information in deciding which hospitals or physicians make the preferred tier.

In an editorial in the June 3, 2004, New England Journal of Medicine, Dr. Lee and co-authors tackled the topic: "If claims data are often inaccurate ... analyses based on them are biased toward the null hypothesis—which would tend to make excellent providers and sub-par providers drift into the middle of the pack."

The concept of provider tiering is just beginning to take hold in Massachusetts, where insurer Tufts Health Plan has marketed a hospital-tiered product, Dr. Lee said. Other insurers are moving forward with tiered designs that would impose substantial cost differentials for patients who choose non-network facilities—which include some of the state's teaching hospitals, a fact that has ruffled some professional feathers.

"It's creating a fair amount of angst among providers, to put it mildly," Dr. Lee explained. "What's not known is the extent to which consumers are ready to sign up." The Partners system includes three hospitals and approximately 4,500 physicians.

Some evidence suggests that health plans and payers in Massachusetts are taking the concerns of Dr. Lee and others to heart. Insurer Harvard Pilgrim Health Care, for example, recently postponed its planned January 2005 launch of physician tiering, in part because of physician resistance to the proposed design.

Dale Magee, MD, chair of the Massachusetts Medical Society's committee on the quality of medical practice and medical director of the Central Massachusetts IPA, said that as the concept was described before it was postponed, physician networks would be categorized as "inexpensive," "average" or "expensive." Employers would charge employees more to see primary care physicians in the "expensive" category—where physicians would end up in part, Dr. Magee said, because of the costs of specialists to whom patients would be referred.

The problem, he explained, is that primary care providers wouldn't receive enough data to make an informed judgment on the cost efficiency of the specialists they use. Being economically linked to specialists without that information is unfair.

"That's what physicians are concerned about, that the data on the cost of health care basically reside with the insurance companies," said Dr. Magee, a gynecologist. "Physicians don't know how much it costs when they refer to Dr. X or Dr. Y. In a sense, we're getting a speeding ticket when we're being asked to drive a car with no speedometer."

Industry reaction

According to Dr. Magee, insurers will try to address physicians' concerns before finalizing any new tiered networks. "I'm not sure these tiered networks are ready for prime time," he explained, "but my guess is that the insurance companies have heard enough objections that they'll have to be fair in the end."

And despite physicians' concerns, the cost-cutting strategy isn't likely to go away. Employers are pressuring health plans to cut costs and give them a way to recognize and steer members toward cost-efficient providers.

"Purchasers see tiering as a mechanism for recognizing high-value providers, whether we're talking about hospitals, physician groups or individual physicians," said David Hopkins, PhD, director of quality measurement and improvement for the Pacific Business Group on Health, a large San Francisco-based employer-purchaser coalition. "The argument will be about whether claims data are good enough to give us insight on who is a high-value provider. We happen to think that data are good enough, and claims data are what we have right now."

Bonnie Darves is a freelance writer in Lake Oswego, Ore.


Physician backlash puts the brakes on one insurer's rush to tier

Health plans trying to move forward with tiered physician networks are hitting their share of hurdles. But those designing models based solely on cost are encountering serious physician backlash.

Blue Cross Blue Shield of Texas is a case in point. When the insurer unveiled a new network last spring called BlueChoice Solutions, it planned to select member physicians purely on the basis of how much physicians' treatments cost. (The insurer claimed it was acting at the request of a large employer.)

While the purchaser later rescinded its request and the Blues backed down, physicians hit the roof, according to Shellie Pruden, director of medical practice relations for the Dallas County Medical Society.

"It was purely economic credentialing," Ms. Pruden said, "and the ruckus came from the physicians who were excluded." The situation was made worse by the fact that excluded physicians didn't receive any detailed information about why they didn't make the cut.

David Rogers, MD, a member of the Texas Medical Association's socioeconomics committee and a practicing gynecologist in Frisco, received a letter last March telling him he wasn't part of the new network. "It was upsetting, a personal and professional insult," he explained. "They said I didn't make the grade for their economic measures, but those were vague and weren't explained very well."

While Dr. Rogers thinks he was dinged for ordering too many tests for older patients, he isn't sure. What he does know is that he wasn't given an opportunity to refute or remedy the decision, which has him reconsidering "whether I want to be involved in any Blue Cross product."

Paul Handel, MD, Blue Cross Blue Shield's chief medical officer, said the insurer still intends to move forward with a tiered network, but he acknowledged that the plan has gone back to the drawing board.

"We're putting quality and utilization pieces into place that will give us what the doctors want and need: a broad guideline on where they ought to be, compared with their peers, in providing cost-effective care," he said. "We're redesigning it to include those indicators."


Mining performance data to gauge patient care

Aetna's Aexcel network, a tiered physician network being rolled out in self-insured plans in several markets across the country, decides if a cardiologist will be included in the network based on total care costs and performance measures for 10 patients within a defined episode of care over a two-year period.

In the case of diagnosed heart disease or myocardial infarction, for instance, Aetna would evaluate cost-efficiency measures as well as the following inpatient and outpatient performance indicators:

  • Prescribing cholesterol-lowering medications;
  • Use of beta-blockers;
  • Use of ACE inhibitors or angiotensin II receptor blockers for patients with congestive heart failure;
  • Readmissions or other adverse outcomes deemed preventable.


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