Can Star Hospitals Thrive in a World of Narrow Networks?

Published on
March 20, 2014

Over the past year there’s been much discussion on the topic of narrow provider networks, in which insurers limit the number of doctors and hospitals in a given plan as a way of curbing runaway premium hikes.

Everyone likes lower premiums, but no one likes being cut off from their favorite doctor or hospital. When that suddenly out-of-network hospital also happens to be one of the most well-regarded hospitals in the nation, well, you can practically hear the heart monitor accelerate.

Take the case of Cedars-Sinai Medical Center in Los Angeles. It’s among the most famous hospitals in the country, with a who’s-who history of celebrity patients to reinforce the widely held perception that the hospital delivers some of the best care available. And yet enrollees who select a Covered California plan may be outraged to find the hospital or its doctors isn’t on their provider list.

Does this mean that enrollees in the state health exchange plans no longer have access to first-rate care in Los Angeles?

Gerald Kominski, director of the UCLA Center for Health Policy Research, said recently at a forum that one of the questions he’s heard the most from journalists in the last three months is whether patients are worse-off when top-tier doctors and hospitals are squeezed out of narrowing provider networks.

“If Cedars is not in the networks, then are people in Covered California not getting access to the best care available in Los Angeles County?” Kominski asked. “My response is that Cedars is an excellent hospital, but when we look at the objective quality measures, they are not across-the-board more outstanding than any other hospital in this county.”

He went on to say that Cedars’ real advantage has more to do with customer service than medical service: “Apparently, they do a really good job of making you feel well-cared for while you’re in the hospital,” he said.

While Cedars may not be objectively better on quality measures, the hospital is objectively higher on costs. As the L.A. Times’ Chad Terhune reported last year, Cedars’ prices are routinely among the highest in the country:

When Medicare disclosed average charges from thousands of U.S. hospitals for 100 common procedures last week, only one hospital was near the top in every category: Cedars-Sinai Medical Center in Los Angeles.

Cedars defended the higher prices by pointing out that the hospital doesn’t actually get paid the same amounts it charges, and that the hospital’s role as a premier teaching and research institution delivers a public good that justifies the higher price of care.

But it’s not just that Cedars has higher list prices for common procedures. The hospital also practices care in a way that can lead to much higher charges.  When the Dartmouth Atlas of Health Care compared how end-of-life care was delivered among 23 of the nation’s top teaching hospitals, researchers found that Cedars led the pack in the average number of inpatient physician visits in the last six months of life – nearly 73. The hospital also scored the highest on an index that combined the number of days a patient spent in the hospital with the number of inpatient doctor visits in the last two years of life. Dartmouth compares these numbers to other hospitals:

Patients who received most of their care at Cedars-Sinai Medical Center in Los Angeles saw physicians almost four times as frequently in their last six months of life compared to those who received most of their care at Scott & White Memorial Hospital in Temple, Texas.

That abundance of care is likely one of the reasons why Cedars, as Kominski put it, scores so high on “making you feel well-cared for while you’re in the hospital.” But more care doesn’t necessarily entail better care, as Dartmouth Atlas author and professor Jonathan Skinner has pointed out elsewhere: “No matter which data you look at, spending and quality are barely correlated,” he writes.

That broader idea seems to be borne out at Cedars as well. “The objective data shows that Cedars is as good as a lot of other hospitals in the county,” Kominski said.

But those higher costs do make it hard for premium-conscious health plans to keep such hospitals in their network. And it’s not just Covered California plans that have balked at the cost. In 2012, Anthem Blue Cross eliminated both Cedars-Sinai and UCLA doctors from its health plan for employees of the city of Los Angeles as a way to save the city millions on premiums.

(For the record, a small number of patients can still access Cedars through a few select plans offered by Health Net on Covered California. But Health Net’s exchange plans have been found to offer less than a third of the number of doctors the same insurer offers on employer plans.)

What does all this portend for Cedars’ longer-term financial health?

“If you’re going to watch a sort of mini-vignette on this big drama, watch what happens with Cedars-Sinai over the next couple years,” said Dr. Robert Ross, CEO of the California Endowment, speaking to a room full of journalists.

According to Ross, Cedars makes a perfect test case to see whether or not top-tier hospitals can still thrive outside the increasingly narrow provider networks that have been embraced by both private employers and state health exchange plans.

Ross said he’s watching to see whether Cedars’ CEO Thomas Priselac still holds his position in a few years or whether new leadership pursues a new tack.

“[Priselac]’s betting the Cedars’ reputation in the community, particularly on the Westside – you know, the ‘hospital to the stars’ – is going to carry it through this rocky period, and that they can survive not being in these networks.”

Regardless of how Cedars fares, Kominski says that a narrower provider network isn’t necessarily an inferior network.

“The fact that (Cedars is) not in these narrow networks of Covered California is not an indication to me that people are getting lower quality care or are not getting access to the best quality care in Los Angeles County. But the question is on a lot of people’s minds.”

Image by Alo Lopez via Flickr