Don't Outsource -

Three Reasons Payers Shouldn’t Outsource Their Network Build

Network building is hard. That is why so many payers outsource the whole process to groups like American Speciality Health or Tivity. At some level, it is a straightforward equation: payers tell a PPO what they need and where and then pay, usually on a per member/per month basis, for access to a network. What is the problem with this program, you may ask? There are three: quality, control, and data. Let’s break them down.

Data: Many payers fully outsource the network build and management process, including claims. They just pay a single (usually high) fee via a capitated model and allow the PPO to serve as a TPA, as well. The challenge with this model is that the payer doesn’t ever see the data around utilization, so they never have any idea how many of their members are accessing the network, what services they are receiving, or how much the provider is being paid to provide care. This model is broken because payers need access to data to know whether the benefit is an actual value-add to their members or just a nice-to-have that members aren’t using. This black box is ideal for the TPA/PPO because they get paid regardless of whether a member uses the network. In fact, in a brilliant irony and potential conflict of interest, the fewer members access the network, the greater the profitability for the TPA. And without the claims and utilization data, the payer has no idea if 80% or 15% of their members are utilizing the benefit and the network. (The truth is probably much closer to 15%).

Control: We all want to control essential elements of our business. Control often means cost-containment and better management of resources. The same is true for networks. When payers outsource networks to PPOs, they surrender control of that asset to a third party. By outsourcing with a PPO, the payer will have to abide by certain contractual exclusions and limitations, one of which is a non-solicitation and contracting clause that makes it hard (if not impossible) for a payer to end the contract with the PPO without significant disruption. Essentially, if the PPO owns the network, they control the providers on it. If the payer wants to terminate the contract, they may be incapable of contracting with the providers that their members have been seeing. This creates issues around the continuity of care and provides the PPO with a pair of velvet handcuffs to hold the network hostage.

Quality: Every PPO will tell you that they have rigorous quality checks and measures in the recruitment and management of their networks. And many do. Others occasionally do, and depending on the need for size and the speed required to deliver a network, sometimes these quality measures can be skipped altogether, usually with a promise of re-instating them at re-credentialing. So the problem is that the payer never really knows the quality of the network that their members are accessing. The payer may audit the credentialing process, but that is only to make sure that the PPO properly credentialed and contracted the provider. However, because the payer outsourced the network, there is still no visibility into the actual quality of the providers themselves.

The value of outsourcing is simple: if you have a trusted partner that you can trust and that you know is only contracting with verifiably high-quality providers, and you can have full access to the claims and utilization data, then it works perfectly. The challenge is always that when the payers do not have direct oversight of the network, they lose their ability to maintain control, evaluate data, and measure quality.

Zula Health is approaching this differently. By embracing ‘in-sourcing’, we are designing and building networks for payers so that they have the quality controls, provider relationships, and claims data they need to ensure the best possible care for their members. We will discuss ‘In-Sourcing’ in our next article.

Learn more about how Zula Health can help build a specialty network just for you.