The Villain in the U.S. Healthcare Crisis? Broad-Panel PPOs.

A man in an old-fashioned black suit, a billowing cloak and a top hat rubs his hands together and cackles.  He twirls his long, curling mustache and looks gleefully at his helpless victim tied to the railroad tracks.  And the two of them wait for the train to come.

This is the image of a villain that we all recognize from old black and white movies.  But a villain that we in the healthcare industry are much slower to recognize is the broad-panel PPO health plan. Seemingly innocuous—after all, these plans give consumers a lot of choice—this villain has been a major contributor to the United States’ healthcare crisis. 

 

We all know that healthcare in the U.S. is too expensive and is getting more expensive year by year. In fact, 17 cents of every U.S. dollar is spent on healthcare. That figure is twice as much as the average healthcare spending in most developed nations in the world. Although some claim that America’s healthcare spend produces better outcomes, the evidence shows otherwise: The United States ranks 27 out of 34 in life expectancy at birth among the 34 countries participating in the Organization for Economic Cooperation and Development (OECD). 

 

Of course, the structure of the healthcare reimbursement system in the U.S., which pays providers for quantity rather than the quality of care they deliver, is largely to blame for this cost and quality problem. However, also to blame (and much less recognized), is the predominate type of health plan—broad-panel PPO networks that put a premium on access without regard to the quality of care offered by providers in the network. 

 

These PPO networks became the norm in the wake of the backlash against HMOs in the 1990s. In the face of employee dissatisfaction with HMOs, employers decided that giving them access to a broad range of providers was critical. As a result, maximizing the number of providers in the network became the focus of health insurance carriers. Each carrier raced to include the largest possible number of physicians and hospitals in its PPO networks.

 

Unfortunately, such a system perpetuates poor quality and high costs. The premium on access means carriers have limited negotiating leverage with providers; they can’t afford to lose them from the network. In fact, carriers must be extraordinarily careful not to isolate providers. If they do, the health system or provider group may choose not to accept the carrier’s coverage, thus limiting its network and making it less attractive as a health plan.

 

Employers and their employees—who bear the burden of healthcare costs—have become the unwitting victims of this system. But self-insured employers don’t have to sit by helplessly while the train of insupportable costs bears down on them. They can instead become the heroes by channeling their collective negotiating power to drive volume where it should be: to providers who exhibit sustained clinical excellence. At Imagine Health, we’re here to help them do this. Starting today, employers can demand better.