Payers are constantly looking to improve member outcomes while lowering costs. Optimizing provider networks is the number one way to do so. 

Provider networks are the primary tool for health plans to attract and retain new members while optimizing returns. Members often compare networks when choosing a Medicare Advantage or employer-sponsored health plan to see how much it will cost them in premiums, which physicians and specialists are in-network, and if there are any add-on benefits. This makes network design a key factor in any member retention strategy.

When evaluating network performance, health plans tend to use provider benchmarks that equate low cost with high performance. But, as the industry embraces the power of big data, health plans must re-evaluate their benchmarking methodologies for provider contracting, network design, and performance management. 

It takes the right data — and the tools to analyze it — to advance to a new level of intelligent network design. Here are our top three provider network optimization strategies for health plans seeking to gain market share and manage claims spend in 2023 and beyond.

Use healthcare provider data to boost network performance

Assessing provider performance is one of the key challenges of network design and optimization. In a value-based world, network design teams must assess provider quality, efficiency, and referral patterns to build an optimized network.

Referral pattern tracking is one of the lowest-hanging fruits when it comes to optimizing healthcare networks. Specialty physicians drive up to a quarter of healthcare spending, so it’s important to capture, understand, and attempt to influence the referral patterns of in-network providers.

Network strategy teams should analyze trends in specialist referrals to ensure they are not only high-quality and cost-effective but also appropriate. Primary care providers may be over-referring, sending patients to costly specialists for conditions that could have been handled in the primary care clinic. Studies suggest inappropriate referrals occur across all conditions anywhere from 12.4% to 30% of the time. 

Health plans need to know where their members are being referred to by their primary care physicians. But they can take it one step further and actually incentivize in-network physicians to make referrals to high-value specialists and sites of care. 

“If you want to get the behaviors, the engagement, from providers … you have to be able to talk to them about the clinical performance and quality performance measures that are really driving their outcomes. And if you can frame it that way, and you can frame it against what is also going to drive cost, then you get real behavior change,” said Keith Florance, general manager and senior vice president, payer, for Clarify Health.

Equipping physicians with data-driven insights and giving them periodic nudges can inform and influence their referral habits. One such program led to an 18% improvement in high-value referrals by primary care practices.

Network strategy teams can’t rely solely on referral pattern data when looking to optimize provider network performance. They must also examine healthcare facilities and physicians using precise, case-mix adjusted quality performance benchmarks.

However, doing so properly is time-consuming. Aggregating, cleaning, and normalizing provider performance and claims data is a manual process that can take hundreds, if not thousands, of hours. Another challenge is that health plans tend to have limited access to data on new markets they’re looking to enter. After initial entry, it can take over two years for them to get enough claims data to even begin to evaluate the network’s performance.

One national health plan overcame these challenges using Clarify Networks. The software allowed them to design and launch high-performing Medicare Advantage (MA) networks in 12 new markets in three months, eight times faster than their typical time to market.

Create high-performing networks with competitive intelligence and price transparency data

Data in healthcare is notoriously siloed. However, due to recent leaps in interoperability standards and changing federal rules and regulations around transparency in the industry, healthcare data is more usable than ever.

For instance, the Transparency in Coverage Rule required insurers offering individual and group health plans to publish their in-network negotiated prices and out-of-network rates online by July 1, 2022. Compliance has been high among insurers — and this means health plans should be able to see what competitors are paying for services in existing or expansion markets. 

Savvy health plans will take advantage of this newfound transparency and put it to work in their healthcare network design strategies. Harnessing the available data can help health plans set competitive rates in new markets and see how their current rates compare in the markets they currently operate in. This can lead to opportunities to increase margins and reduce MLR. 

While healthcare rates are now public, health plan leadership should go beyond price comparison when optimizing or building networks in new geographies to include quality and member satisfaction. “Analyzing existing high-performing networks or those with high Star ratings can give you good indicators of which providers to target to enhance the value of your own plans,” said Ashley Tidd, senior customer success manager, in a recent master class video for health plan executives.

Knowing which providers are in competitors’ high-performing networks gives plans a leg-up when choosing who to include in their own networks. It can also allow members who want to join a new health plan to retain their care team even as they switch insurance providers, leading to happier members.

One national health plan looking to expand its MA business into new markets leveraged Clarify Health’s competitive intelligence to gain visibility into its geographic area targets. Using these insights, the plan achieved 70% competitive overlap across more than 900 MA networks. 

Predict real-world network performance with healthcare analytics data

Sophisticated network design teams want to move quickly and efficiently toward the most optimized networks possible. For them, 2+ years is too long to wait when evaluating network performance — but that’s sadly the reality for many leaders today. 

Fortunately, predictive modeling software can use the plethora of available healthcare data to forecast the effect of network changes before they’re made in the real world. It can show health plans what happens to network performance if a provider group is added or a hospital is excluded, for instance. This also allows plans to address the adequacy of the network earlier in the design phase to ensure it meets CMS requirements.

Predictive analytics can also make it quicker and easier for health plans to enter new markets confidently. 

“To accelerate speed to market, take a dynamic modeling approach that predicts essentially the real-world impact of network changes on cost, quality, and referral patterns,” said Tidd. “With this approach, high-performance networks can be designed in days versus, say, months, even years.”

That’s the approach a health plan benefits administrator took when they wanted to revamp their Centers of Excellence (COE) strategy. They wanted to include the highest-rated sites of care and clinicians in the country in the COE — and do so quickly. By using Clarify’s on-demand provider performance benchmarks, they evaluated more than 550 organizations and surgeons two times faster while reducing evaluation costs. The COE team saved more than 8,000 hours in analyst time using Clarify’s software. 

Build and maintain high-performing provider networks 

An optimized, high-performing provider network is one of the most valuable assets a health plan has to lower costs while improving member outcomes and experience. Move away from manual, time-consuming processes and toward a more holistic, data-driven approach to building and growing high-performing networks. With the right networks in place, health plans can drive down claims cost, increase quality, and grow market share.

Download our latest Networks Playbook for a deeper dive into the three plays health plans can run to build and optimize their provider networks in 2023 and beyond.