The New Network – Hello, Carol!

28 Jan The New Network – Hello, Carol!

1. A group of health care providers who have organized themselves to provide care
2. Provider organizations who voluntarily group together and are utilized by insurance companies to seek discounted pricing in exchange for additional volume of patients for the provider.

I am pleased to comment on the “grand opening” of Carol – “The (first ever) Health Care Market Place.” As I have commented before here and here, Carol represents a major innovation within healthcare at several levels:

• First, Carol is truly creating a centralized health care market place for consumers within a given regional community. A market place as defined by a centralized place where by consumers can shop, compare, and purchase health care services in an open, transparent way.
• Second, Carol has organized the payment for these services into discrete “bundles of care” known as care packages. The creation of these care packages is a delicate dance, depending on the services encompassed within the care package, to align different providers to delivery their services in a coordinated, cost-effective way.
• Third, the natural result of purchasing or paying for health services via care packages (episodes of care) is that the actual delivery of care is also modified. Physician providers now have a reason to coordinate care, to organize themselves, adn to deliver the very best result within the “microcapitation” of the care package. When the price of the care package gets associated with the outcomes, then the value of purchasing and delivering care in this manner will be become self evident.
• Fourth, by creating a marketplace for health service transactions to occur, I believe that Carol now becomes a new style of provider network. As a consumer, Carol becomes my new provider network of preferred practitioners who are willing to bundle their services, display relevant differentiating aspects of how these bundled services are delivered, and transparently post their prices. Why would I ever purchase health care from any one else?

Point 3 above will be an increasing important reimbursement reform concept. People have been talking about the absolute requirement to move toward an epidose of care financing system to improve both the cost and quality of care for a while. Some recent commentary, much of initiated by Karen Davis PhD of the Commonwealth Fund) includes:

• “Paying for Care Episodes and Care Coordination” – New England Journal of Medicine, March 2007
• “Better Way to Pay Providers” – Managed Care Magazine, July 2007
• “Rewarding Excellence and Efficiency in Medicare” – Milbank Quarterly, September 2007

The best working models of this can be found on PrometheusPayment which includes the working group attempting to create appropriate episodes of care, financial modeling, and politico-legal support for this concept. Much more on this topic later.

The Fourth point above is also worth some time. I have long been a believe that the traditional concept of a proprietary provider network as a differentiator is going away. Think about it, large insurance companies like United, Humana, Aetna and others create networks of providers in a geographic region. They lure providers into the network by promising them large volume of patients, and in exchange, extract a draconian discount to deliver services. Physicians often will take these discounts to be included in the network, but have no guarantee that agreeing to the discount will bring them any additional patients.

Furthermore, the general price extracted by the carrier is a very closely guarded secret and the insurer my contract at multiple different rates with multiple different providers. Because of the proprietary nature of the pricing agreement, the true cost is not really known, even by the physician who has negotiated with 15-20 different insurers for the same service. This, of course, leads to the incredible frustrating experience for savvy consumers trying to get prospective pricing in order to make a purchasing decision. When the front office staff tells you they have no idea how much something costs, they are usually telling the truth.

Enter transparency. When providers, or more appropriately insurers, are required to post their pricing on line in a true market setting, the game begins to change. Slowly at first because the insurers only put up their retail pricing without the specific discount. Smart consumers have circumvented this with services like MedBillManager and others wherein consumers voluntarily post their true costs in order to help each other out (great example of the network effect). However, the transparency initiatives wil show an incredible disparity in pricing which the market will correct in an accelerated way due to Carol. For example, local clinics are already adjusted their price of $150 sinusitis evaluation to meet the $49 charge for the same service provided by MinuteClinic.

So as more providers become savvy to this new Network, the pricing will become more favorable, more consistent, and more appropriate. As the market matures, pricing becomes less of a factor and other issues like convenience, access, quality, and other intangibles valued by consumers begin to take their appropriate place in the hierarchy of consumer decision making. As Carol matures, I am sure that outcomes information will be associated with the packages, as well as providers who different themselves on the intangibles. They will soon discover that patients will reward (pay) them variable rates for differentiated services, and remove the stigma of medical commoditization as seen in our current reimbursement system.

One more additional twist (there are actually several more but I am time impaired to expound now), the Carol Network is not regional. As you recall, the internet and virtual markets, make time and geography irrelevant. Not only do patients have 24×7 access to shopping on the Carol Network, but they will ultimately have access to the best providers in the nation who will vie for tenant space. How long before the Cleveland Clinic, Sloan Kettering, Boston Children’s or other name brands leverage their unique skills, efficiencies, and best practices to create care packages for Carol? As predicted in the Integrated Practice Unit concept, these centers of excellence have achieved levels of efficiency and outcomes that are far less expensive even when you add in the cost and inconvenience of travel. DNA Direct, a provider of high-tech and high-touch genetic counseling, is one of the first national providers to offer services at Carol. Not too difficult to follow the logic regarding the possibility for others to jump in.

Goodbye, legacy provider network, and . . . . Hello, Carol!