Planning for data-driven preferred provider networks

It’s been very encouraging to assess a number of PPN offerings using transactional-level data in recent months because it reflects how far plan sponsors have come in developing PPN offerings that provide tangible value to the plan, its members, and the plan’s chosen partners. Before looking at how leading plans of varying sizes, industries and geographies are using data to build and manage PPN offerings to create a win for all stakeholders in the loop, let’s consider a few examples of where we have seen poorly designed PPN arrangements result in a financial liability to the plan sponsor:

• One plan in Ontario assumed it has established a “PPN deal” with a large chain based on a dispensing fee limit, and that all was well. Despite the very basic fee cap PPN model (which is the equivalent of a 56K modem in a high-speed internet era), nobody bothered to assess what was happening. The result: after less than a year of following the plan’s established fee cap, it magically stopped happening. It was as though somebody turned the switch off and it wasn’t noticed for well over a year.
• In another example of a PPN arrangement gone sour, a plan sponsor with operations in two provinces saw its PPN partner provide the most cost-effective service in one province and yet in the other, inexplicably, the PPN partner was the highest cost provider. How does that happen if the PPN is designed properly? Why did it take more than two years for the plan sponsor to realize what was happening?
• In one of my favourite examples, a plan sponsor has pharmacies operating within a number of its physical premises and figured it had a win-win PPN established. Stunningly, the in-house pharmacies were the most expensive (on average, they were submitting mark-ups that were more than double the average of all other pharmacies) and submitting an average days’ supply for chronic medications that was 10% lower than all other pharmacy providers combined.
• An example from the “we don’t have a plan design that supports a PPN” file: a plan had instituted a PPN a few years earlier and in its most recent benefits year, four claims had gone through the PPN provider. Four. A wasted opportunity for the plan, its members and the provider.

So it’s clear that establishing a PPN, and ensuring its success is a bit more involved than suggesting a fee cap or hoping for the best.

In direct contrast to the examples above, we are seeing plan sponsors establishing a level of sophistication in their PPNs that’s truly inspiring and that will undoubtedly form best practices in this area moving forward. The most successful PPN structures we’ve seen to date have the following characteristics:

• A focus on preserving the current level of benefits for members and ensuring the plan’s ability in the long term to afford both the run-of-the-mill traditional therapies and innovative products (including expensive specialty products).
• A desire to positively impact member health and ensure the plan sees the greatest return on its investment in the health of its members.
• To provide added value to members and not simply be seen as a punitive cost-containment tool.
• To truly develop partnerships where everyone wins: the plan, the member and the preferred provider.

Here is where claims data is being used to develop plan designs and PPN structures that will ensure long-term success of the PPN and the ability to achieve the above goals:

• Plans are using data to build a business case for moving away from a flat level of reimbursement for all eligible benefits at all eligible providers. A flat reimbursement structure for everything and/or at every provider doesn’t allow for the development of an effective PPN.
• Plans are using experience data to determine appropriate goals for therapeutic mix within the plan, average days’ supply of chronic medications and claim pricing structure. The plan experience is being reviewed quarterly, semi-annually or annually to measure and monitor what’s happening.
• Plans are using their claims experience to determine health and disease state measures such as adherence rates, appropriateness of therapy and total cost to treat to establish goals and bonus compensation structures for preferred providers to ensure everyone’s interests are aligned.
• Plans are using specially designed PINs to allow preferred providers to bill for cognitive and clinical services that render value to the member and the plan and that can be measured to validate the value.

For the pace of responsible and mutually beneficial PPNs to continue to increase and for the results to be successful, the key stakeholders have to consider the following:

• Plan members—Not every provider is created equally and not every provider adds the same value to the plan. In order for the plan to remain sustainable and ensure it’s getting full value for the money invested in health benefits (and for coverage levels to be maintained without additional cost shifting to members), there needs to be a realization that a PPN, if designed properly, can be a vital component to a plan’s long-term viability.
• Plan sponsors—You can get as creative as you want in developing a PPN, provided you keep the core characteristics outlined above in mind. Find out where your needs are and start building from there. PPNs are not one size fits all. At the end of the day, you can measure every element to see what’s working and what needs tweaking.
• Pharmacy providers—Don’t ever forget that a plan sponsor has the ability to measure everything that’s happening in their plan because they have access to every claim in the experience. If you commit to a partnership that you feel is balanced and fair, you will be held accountable.

What’s the best part about all of this? It’s all happening today and as each month goes by, there are more and more meaningful PPNs being developed that are driving value for all stakeholders.