This post was originally published on 3/5/2013

Insurance companies are offering discounts to employers and asking health care systems to be part of a narrow network for discounted reimbursement in exchange for being “on the list.”

Here’s the theory. There is a wide range of cost and quality in the health care world. If an insurer selectively includes the highest quality, lowest cost providers, it can significantly reduce its actual medical costs while simultaneously providing its members with the best care. Published data shows that costs can vary tremendously even within the same community for the same services. So, clearly, there is a business argument for choosing lower cost if the quality is the same, and even more so if quality is better.

The conundrum is how to balance cost and quality. Easy if the quality is the same and costs are different, but what if the quality is slightly better but the cost is doubled for the higher quality provider? Are we always willing to pay the premium for the best quality? Any shopper knows the answer. It depends. Some items are more expensive because they are higher quality, while others are more expensive because they sport a brand name or advertise more, but may actually be inferior. Medical care is no different. The stakes are just higher.

Quality is difficult to measure, especially in health care, especially at the provider level because the volume of cases for any single provider in any set of diseases in which quality is defined may be so low that statistical validity is difficult to establish. A “bad” case or two can throw off your numbers, even when all case-mix adjustments are made. Complicate that by the difficulty of measuring adherence (how well your patients follow your instructions), which providers say varies by the demographics of your practice.

We are left with measuring for statistical significance at the group or cluster level, which is one major reason why hospitals are gleefully buying practices. This challenges the clinical group to establish a mean level of quality and price that is better than other groups. But it possibly leaves out the best (and also the worst) small providers. Is that a good trade, especially if you are a great provider, but not a part of a large group? It’s another reason why some physicians move to concierge style practices.

For physicians who are employed, the challenge is to practice great care in the constraints of a system that often rewards you heavily for volume rather than quality. For a small practice physician, the challenge is to stay relevant to insurers that want to measure quality, but can’t do good data at your level. For employers buying the narrower network and cheaper plan, the challenges are: making sure the criteria used by the insurer for selection of a narrow network are legitimate; and not leaving out the “best docs in town” because they don’t belong to one of the big groups.

Let’s not forget the consumer. You’re trying to select from a dizzying array of plans at varying costs and co-pays, finding a plan that allows you to decide who YOU think is high quality. At the end of the day, you’re the consumer who benefits (or doesn’t) from the insurance and care you select.

I’m looking for some feedback.

Have you been left off a list of providers? If so, what reason was given? Or have you done a good job of convincing insurers you’re a high-quality provider?

Does your group, hospital, or health system struggle to collect data and prove quality? If so, why? What can we do as a profession to turn the corner from volume-based to quality-based reimbursement?

Comments, please!