I kicked off this series by detailing my argument for why physician quality is the single most important aspect of a claim — efficient and effective care is far more impactful than discounted care. Now, I want to expand on this idea by delving further into the relationship between the Preferred Provider Network (PPO) and the Exclusive Provider Network (EPO).
Read the first article in the series:
First, let’s understand what is meant by EPO. The narrow definition of the term is a network that is the exclusive option for providers. In workers’ compensation, it most accurately describes programs like the MPN in California, the HCN in Texas or the PPP in Illinois. These are all examples of models where the insurer or employer can define an exclusive list of providers from which an injured worker must choose their doctors. In a broader sense, I think of the EPO as the listing of doctors and ancillary providers that are going to be included in elite programs. This includes the list of doctors you would want to use every time you create a workplace poster or the list of doctors used in any channeling program like initial triage. Think of it as the doctors you want to use anytime you have the opportunity to either direct, contain or influence selection of a provider. Ideally, the goal of an EPO should be selecting the best available providers to drive improvements in outcomes.
And improved outcomes should be at the heart of the relationship between PPO and EPO. Over the past decade, outcomes-based networks have become a well-adopted and proven model for dramatically improving a claim population’s overall costs, lost-time and litigation, but many organizations struggle with the roll of PPOs in this model. They are also curious as to how to leverage the best of both worlds — PPO and EPO — to drive better outcomes and better pricing moving forward.
Separating “Who” and “How”
The idea of utilizing both PPOs and EPOs to improve outcomes has been somewhat confounding to date. As discussed in part one of this series, the primary goal of the PPO is to contract with as many providers as possible to drive the best purchase prices for medical and ancillary services. In the absence of any controls over care, the PPO serves its customers best by including poor outcomes-performing doctors, courtesy of more available discounts. With controls (and strategies to leverage those controls) for outcomes in place, however, the game changes, and the roll of the PPO needs to be reconsidered.
In this environment, PPOs and EPOs coexist in an important balance. The EPO needs to determine “who” to work with, and the PPO provides the mechanism for “how” you work with them.
Consider the following table:
|Cost Reduction Strategy||Quality Controls||Size Goals|
|PPO||Fee-based discounts||Credentialing providersAccurate listings||Every possible doctor that could ever treat a patient|
|EPO||Improve care, making it more efficient and effective||Outcomes-based measuresUtilization and disability measures||Only the best and only as many as needed to adequately cover need|
Hopefully, it quickly becomes clear that the “Best of Both Worlds” model is not only achievable but also makes things like vendor selection and program management easier.
Under this framework, the value proposition and role of the PPO is clarified: The PPO is the source of doctors who have been properly vetted through credentialing practices and contracted to provide care, typically at a favorable price point. This function could be offloaded to your bill review vendor if they are positioned to resell networks, or you can take on the task of deciding which combination of PPOs gives you the best bench to select doctors from in each jurisdiction. On a case by case basis, you may find barriers with a certain jurisdiction or PPO vendor, so some research may be necessary to determine how to manage selecting a subset of providers from a list of preferred providers.
Once you’ve built your bench of “available” doctors, the next step is to select the doctors that are going to be invited into the elite program or EPO. The most effective method for selecting doctors for an EPO is an outcomes-based model. Depending on the program, it may be necessary to have processes and documentation for decisions related to the inclusion or removal of doctors from your elite programs. This is more important in situations where the decision to exclude a provider will prevent them from being able to treat your injured workers. Think MPN exclusion. It’s not really an issue when you are just selecting three doctors to be on a workplace poster.
The core message is: Think differently about the purpose of your PPOs; they have a specific value proposition when you are working with an EPO strategy. Use the PPO to build your bench of available doctors, and use your EPO to decide which doctors are the ones you want your injured workers to use.
The age of accountable care is upon us — in both comp and group health. Data science and access to big data has enabled a level of accountability that did not exist a decade ago. If you do not have a strategy for using quality as a primary factor in determining who should be seeing your injured workers, you are missing the boat. Having a framework for how to separate who you work with (EPO) from how you work with them (PPO) helps get you started on the path to an outcomes program or provides an easier perspective for how you manage and improve an existing program over time.
Once you have your framework in place, you need to determine the right balance of quality and quantity. To do this, quantify the difference between good and bad doctors. There are a lot of tools available to help you do this. Then, determine how many doctors you need of each type in a given geography to fully service workers. Next, eliminate those doctors whose outcomes don’t make the cut from your network. As long as you have enough good quality doctors available who can also provide a discount, there is zero benefit to having a deep bench. Once you make smart cuts, emphasizing quality over quantity, watch your savings and worker satisfaction with their care dramatically improve.
Next up: outcomes strategies for each type of jurisdiction. In part three of this series, I will dive into three types of jurisdictional models and look at the differences between states. Stay tuned!