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ABSTRACT Employers and health plans are increasingly using tiered provider networks in their benefit designs to steer patients to higher quality and more efficient providers in an effort to increase value in the health care system.We evaluated the impact of a tiered-network health plan on total health care spending and on inpatient, outpatient, and outpatient radiology spending for nonelderly enrollees in a commercial health plan in 2008-12. The tiered network was associated with $43.36 lower total adjusted medical spending per member per quarter ($830.07 versus $873.43), which represented about a 5 percent decrease in spending, relative to enrollees in similar plans without a tiered network. Similar levels of spending reductions were found for outpatient (4.6 percent) and outpatient radiology spending (6.5 percent). These findings suggest that health plans with tiered provider networks have the potential to reduce aggregate health care spending.
In response to wide variation in health care prices within geographic areas, often without meaningful differences in quality, there have been increasing calls to improve the value of US health care.1,2 Health insurance benefit design can steer patients to high-value providers-those who are both high-quality and efficient-by altering patient incentives.Onesuch benefit design is tiered provider networks.
In a tiered provider network, a health plan sorts providers into tiers based on their cost and, often, quality relative to other similar providers who treat comparable patients. Providers with higher quality and lower cost are typically given the most preferred tier rankings. Providers with lower quality performance or higher cost are typically given nonpreferred rankings.
Not only does a tier ranking give patients information about a provider's value relative to other providers in the network (if methods of tiering accurately capture cost and quality), but tiered network designs also include financial incentives to encourage patients to seek care from preferred providers. Specifically, patients pay lower cost sharing for ambulatory care or most hospital care if they choose a provider with a preferred tier ranking. Hospital care resulting from admission through the emergency department (ED) is exempt from tiered cost sharing, so patients pay the same amount if they choose an ED at a preferred or nonpreferred hospital.
The aim of tiered networks is thus to channel patients, through information about value, the financial incentive, or both,...