Does the Glass Slipper Fit? Cinderella and Narrowing Insurer Panels

Posted on in Diversify

By Mike Mallaro, CFO, VGM Group, Inc.

Cinderella – Disney’s re-make of its classic rags to riches story is among the top films of 2015. It is a wonderful movie with a great message. A key element of the story is the Prince seeking out the fair maiden whom the glass slipper fits. All the girls in the kingdom want to fit in the shoe and they are willing to do whatever it takes. In the end, only one lucky girl can be a perfect fit. Cinderella, of course.

Which leads us to another story of narrowing choices, the topic of narrowing insurer panels. One of the big, yet unrecognized threats to HME providers is consolidation of provider panels among insurers. Historically, the Blues set the precedents of open provider panels. Open panels are great for health care providers (and insureds) by essentially allowing any willing and qualified provider to serve patients in the insurer’s network. Ten years ago, the vast majority of insureds (patients) were served under a very broad, open network of providers. But as Bob Dylan warned us, the times they are a changin’.

Over the last several years we’ve seen significant narrowing of provider panels. This narrowing has been enabled by three key trends: consolidation, affordability and efficiency. First, there has been substantial consolidation among the payer community. A relative few insurers now control a majority of health care patients and dollars. Ten years ago, the nation’s seven largest health insurers controlled 46 percent of the U.S. market. Today they control 68 percent of the market. That’s a drastic shift in just 10 years. Looking at it another way, among our nation’s 300 largest cities (MSAs), in more than half of these, one health insurer dominates, controlling more than 50 percent of the market. In 30 of the 50 states, one insurer has greater than 50 percent market share in the state. In fact, only nine of the 300 largest cities and only two of the 50 states have health insurance markets with adequate enough competition to meet the government’s own definition of competitive markets.

This consolidation of the payer market has given the large insurers tremendous leverage over providers, and they are using that leverage to narrow panels and reduce rates. Affordability is a polite word for slashing reimbursements to health care providers. The reduction in competition brought on through consolidation has allowed payers to cut rates on a wide variety of health care goods and services, including HME. Leveraging their size to limit access of their insured base to a few providers is exacerbating the problem of declining reimbursements. Lastly, insurers today are attracted to having fewer, deeper alignments with providers. This desire results from their pursuit of efficiency and to meet the demands of health care reform. Deeper relationships allow greater “partnership,” better electronic connectivity, ability to measure outcomes, to measure quality and to standardize treatment protocols.

Narrowing provider panels helps insurers achieve these goals. Narrowing provider panels creates a similar effect as Medicare’s competitive bidding. It eliminates many HME suppliers from being able to serve a population of patients and it often goes hand in hand with significant reductions in reimbursement. It creates a challenging environment for HMEs. Unfortunately, the trend of narrowing panels will continue. What can you do about it? Well here is a short list of “glass slipper to-dos” to get you started:

  1. Recognize the issue of narrowing panels and address it in your business and strategic planning.
  2. Actively seek to build a personal relationship with a person or people at the key payers in your region. You need to know someone at that company on a personal level. Someone at the payer needs to know you, know about your business, where it is, what is special about it, how well it treats patients, etc.
  3. You need to solicit input from payers on what is important to them, what they are looking for, what concerns they have in the HME/DME arena. Make sure you respond to their feedback with relevant information that addresses their concerns. That may be in the form of commitments on levels of service, disease management protocols, key features of equipment as it relates to a disease state, outcomes data or something else.
  4. Stay connected to the payer market in your community. Be sure to keep up on changing requirements of payers, including the Blues and Medicaid, and connect to ancillary networks who serve as intermediaries to payers.
Just as Prince Charming’s panel of eligible fair maidens narrowed quickly to a single girl, so too are insurer panels narrowing. Make sure your business fits the glass slipper and stays in network.