Posted: 19 Feb. 2019 5 min. read

Physician networks—one piece of the puzzle for improving performance

By Sarah Thomas, managing director, Deloitte Center for Health Solutions, Deloitte Services LP

I’m someone who likes finding patterns in seemingly complex or hard-to-understand data. My family understands that if they want to keep me out of their hair, they should give me a puzzle (over the holidays I finished a 3,000-piece jigsaw puzzle). I’m equally happy with crosswords, sudoku, and acrostics. I love learning languages, and I enjoy following instructions for knitting, Legos, or even building IKEA furniture. There was a time when I would get lost writing programing code…

My Deloitte colleagues have found order in analyzing the seeming chaos of physician networks—mapping and analyzing patterns of relationships. In this research, instead of trying to complete a puzzle, they set out to learn whether there is a secret ingredient for understanding which relationships led to lower costs. Most physicians belong to formal and informal networks in which they share patients, information, and clinical decisions. Mapping out networks of shared patients using Medicare claims data reveals what at first blush looks like abstract art.

Our researchers found that when physician relationships are tight, health spending is lower. The key to understanding this puzzle is the ability to measure physician centrality. The measure, from network science, captures the degree of coordination between various components of the network. Researchers found that tighter relationships among physicians within a provider network is associated with:

  • A 15 percent ($2,000) lower average episode-of-care cost for hip fractures
  • A 26 percent ($1,050) lower average episode-of-care cost for coronary artery disease

We also found that network concentration is especially important in larger networks, where having central physicians to help coordinate the flow of information and care is strongly associated with lower costs.

Creating better value is one piece of the puzzle

Closer care coordination might be a key factor in value-based care and alternative payment models. As most everyone in our industry knows, commercial and government payers are ramping up pressure on health systems, physicians, and other clinicians to not only improve quality, but also to save money. The US Centers for Medicare and Medicaid (CMS), for example, is pushing Medicare Shared Savings Program (MSSP) accountable care organizations (ACOs) to take on more financial risk. Some commercial health plans have announced major initiatives with health systems in their states. Even physicians who have tried to stay on the sidelines of alternative payment models (APMs) will have more of their Medicare payments at risk. In 2019, cost measures will make up 15 percent of the total score used by Medicare to determine payment to physicians, under the Merit-based Incentive Payment System (MIPS).

With those cost measures, the challenge is performance—not reporting—because CMS bases the calculation on claims data. Clinicians and health systems will be paid more if they reduce costs while maintaining a high level of care quality. Understanding the care and utilization patterns of each clinician involved in a patient’s care can be essential for improving performance quality.

It makes sense that network dynamics influence health care costs (the closer the ties and communication among clinicians, the lower the costs). Longstanding research from Dartmouth physician John Wennberg, M.D. and his fellow researchers has shown that health care costs are highest in areas that have the largest supply of medical specialists.1 Moreover, an analysis of hospital-based professional networks found that physicians who have a greater number of connections have higher costs and more intensive care utilization. Even though this was not the focus of our study, other researchers have documented a correlation between better quality outcomes and closer coordination among physicians—particularly when primary care physicians have more central roles. But a specialist physician might be the right quarterback for a patient who has a particular condition. That specialist, however, should have the right communication tools and support system to effectively manage relationships and coordinate care.

What should health systems and health plans do with this information?

Health systems and health plans have opportunities to improve their performances by understanding and influencing care patterns, including referrals. Within each care network, a health system or a health plan can use claims data to identify high-performing and lower-performing networks (this includes all the physicians who are part of the networks). Maps, like the ones our researchers created, can help clinicians identify specialists whose costs are higher compared to other specialists in the same network. Health systems and health plans could share this information with physicians and patients/members to help improve care patterns and referral decisions.

From the health system perspective, this opportunity will likely depend on whether the organization is actively involved in new payment models. Health systems that continue to generate most of their revenue from fee-for-service will likely continue to focus on increasing market share through referrals and higher volume. Health systems that are entering into alternative payment contracts will likely want to consolidate services with the lower-cost physicians. They might also share cost information with other physicians to help them improve their performance. More efficient physicians are likely to use fewer facility services, so another goal for health systems could be to reduce per-member medical expenses and associate themselves with lower-premium insurance products. This strategy could help increase market share by filling excess facility capacity generated by more efficient physician performance.

From the health plan perspective, influencing referral patterns can help them meet their goals of reducing care costs. Tools available to health plans range from product design to patient incentives. And, if they own clinical practices, health plans can use network analysis in the same way that health systems use it. Health plans could use the data to target appropriate clinicians for high-performance networks and condition-specific bundled payment arrangements. They also could identify primary care and specialty physicians to target for high-priority conditions that have the most variation in care. Providing timely and actionable data to providers can help them reduce unwarranted variation. In other words…show physicians how they compare with the best-performers within the same network—the key influencers—and what they can do differently to optimize performance.

I encourage readers to take a look at the mapping of relationships—it might be a key piece to the puzzle of how to do well under new payment systems.

1. Annals of Internal Medicine, The Implications of Regional Variations in Medicare Spending. Part 1: The Content, Quality, and Accessibility of Care, February 18, 2003.


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