Washington state health plan starts tiered network for physicians

Premera Blue Cross says it groups doctors based on "cost efficiency." Some physicians like the idea, but others are skeptical.

By Robert Kazel, amednews staff. March 24/31, 2003.

Health plans' tiering of networks based on cost is moving beyond hospitals and into physician practices.

Premera Blue Cross in Washington state is rolling out a managed care network that uses cost measurements to assign physicians to tiers, deciding where to place large physician groups according to how well they score on cost efficiency. The doctors considered most efficient are in the lower-cost tier. Measurements are adjusted for case mix and severity to prevent groups with many patients with more costly cases from being penalized.

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But Jeffrey Collins, MD, an internist and president-elect of the Washington State Medical Assn., said a tiered approach using cost data alone seemed "hazardous." He is not convinced that the network can truly take severity into account, nor does profiling for tiering make sense without quality outcomes measurement.

"I know the health plan thinks it can figure it out with a data system," he said. "But if you have someone who is really ill, there may be no relationship between the cost of the care and the quality of the care."

The plan, called Dimensions, is profiling costs at large clinics across the state, representing about 15% of all physicians in the Premera system. So far, the company said, about 160,000 patients are in Dimensions, out of the company's total patient base of 1.2 million in Washington. Large physician groups are being cost-profiled as a whole, rather than looking at individual doctors.

Clinics that do not want to be a part of the Dimensions network can still be part of the Premera PPO. Depending on their coverage, some patients can see doctors only in Dimensions, and others can choose among the other tiers by paying higher co-pays.

160,000 of the plan's 1.2 million patients are part of the Dimensions plan.

The groups receive reports breaking down costs using ETGs, proprietary software developed by Symmetry Health Data Systems of Phoenix, which charts the course of treatment for a given condition and can include data for inpatient care, outpatient care or both, said Richard Maturi, vice president of health care services for Premera. ETGs take into account patients' comorbidities, complicating conditions, previous major surgeries and age differences.

Although the less-expensive tier is home to large medical groups deemed to be most cost-effective, it is not really an exclusive club. Thousands of Washington physicians in solo practices and smaller medical groups, which are not being cost-profiled by Premera, also have been granted passage to the tier with the best patient benefits, called Foundation. As a result, most doctors in Premera -- about eight of 10 -- are in Foundation. Some larger practices also may be included to ensure that certain communities have access to sufficient doctors, even if their cost efficiency is subpar.

Last year Premera met with the executives of the medical groups to discuss the results of preliminary cost analyses and give them the chance to dispute them before the actual tier assignments were made. The tiered network was begun on a pilot basis last June, and the plan hopes to eventually roll it out to all customers in Washington. The initial network was created using up to five years of Premera's PPO medical claims data; review of each practice's efficiency is ongoing, and its place among the tiers is subject to change.

Unlike many past managed care programs using cost profiling, doctors in medical groups in Dimensions don't get incentive pay if scores are efficient or face penalties if scores are inefficient, Maturi said.

Al Fisk, MD, medical director of the Everett Clinic in Everett, Wash., said he finds cost reports from Premera to be "moderately useful" but that profiling probably will lead to better use of resources by participating practices.

"Physicians and medical organizations do have an obligation to society to be wise in their use of resources and to be cost-effective," he said.

Still, Dr. Fisk said he defines value for patients not by cost efficiency alone but by "service and quality." Any analysis of a medical practice focusing on cost comparisons alone is "an incomplete snapshot," he said.

Quality counts, too

Premera executives said they recognize that quality measures also are vital in evaluating doctors, and they are taking early steps in that direction with the cooperation of about a dozen physician groups. Those practices recently have begun receiving quality data report cards from Premera, though at present assignment to Dimension network tiers has nothing to do with quality scores.

Brian Klepper, PhD, a Jacksonville, Fla., health care consultant and executive director of the Center for Practical Healthcare Reform, said he thought tiered networks using cost data would produce insurance products that could help cash-strapped companies afford insurance for workers. Patients can save between 2% and 10% by choosing medical care from Foundation physician groups.

Patients can save 2% to 10% by choosing doctors from tiered groups.

Physicians also could benefit from tiered networks, he said, because their implementation might mean an elimination of utilization management, a practice doctors long have resented as onerous.

Paul Ginsberg, director of the Center for Studying Health System Change in Washington, D.C., sees "only positives" for physicians if managed care networks take cost efficiency into account in designing such tiers. In addition to lowering premium costs for many patients now excluded from insurance, cost profiling can achieve even more savings by spurring group managers to guide doctors in ways to save money.

"If the groups that did poorly [in the profiling] look at why and try to change it, that would have a much greater impact on costs," he said.