Savings Associated With Tiered Hospital Networks

The use of a tiered network was associated with the increased use of hospitals on the preferred and middle tiers for planned hospital admissions compared with the nonpreferred tier, according to a paper in Health Services Research.

Tiered network health plans are being used to steer employees to lower-priced, higher-quality care providers. For members in these plans, their cost-sharing is lowest when they choose providers from the preferred tier, and increases if they use the middle or nonpreferred tiers.

“Tiered hospital networks could potentially offer great savings for employers, given the high costs and price variation associated with hospital services,” according to the Commonwealth Fund, which funded the Harvard University investigators.

The researchers, including Michael E. Chernew, PhD, co-editor-in-chief of The American Journal of Managed Care, evaluated the effect of a tiered network on hospital choice for scheduled admissions by analyzing 2009-2012 patient-level claims data from Blue Cross Blue Shield of Massachusetts (BCBSMA).

The average cost-sharing for each hospital admission at nonpreferred hospitals was $1070 compared with $360 for hospitals in the middle tier and $170 for hospitals for preferred hospitals.

Over the course of the study period, nearly half (44%) of hospitals changed tiers, mostly from middle to preferred, based on changes in cost of quality performance and nearly all because the hospitals had decreased their prices.

The researchers found that members in tiered networks were more likely than those in nontiered plans to receive care at preferred or middle-tier hospitals. Furthermore, they reported that if all members were in a tiered-network plan that planned hospital admissions to hospitals in a nonpreferred tier would drop 7.6 percentage points. Conversely, admissions to hospitals in the middle and preferred tier hospitals would increase by 0.9 and 6.6 percentage points, respectively.

However, the authors still warned that there are drawbacks to tiered networks, such as transferring risk to patients in the form of higher out-of-pocket payments for lower-tiered providers.