Narrowing Networks: Positioning Dermatology Practices for Success

U.S. healthcare costs have skyrocketed. The Centers for Medicare and Medicaid Services (CMS) places the figure at $3.2 trillion for 2015. That equates to $9,990 per person. CMS also projects these costs will continue to grow at a rate of 5.6% annually between 2016 and 2025.

Twenty percent of the nation’s 2015 healthcare spend went to physician and clinical services. Based on CMS’ data, there was a 6% increase in spending for this category over the previous year. To rein in costs, many payors are narrowing their provider networks.

Source: CMS, 2015

Limiting Access Reduces Premiums

Various reports define a narrow network as one that includes only 10% – 30% of a market’s providers. According to a McKinsey report, more than half of the 2017 plans available on the insurance exchanges will be HMOs with limited networks. Many commercial insurance plans are also moving in this direction.

What’s more, some of these narrow networks exclude certain specialties, such as dermatology. Patients must either pay out-of-network fees to see a specific specialist or seek care from their primary care physicians.

Driving a larger patient population toward a smaller group of providers allows payors to negotiate lower reimbursement rates. A portion of these savings is then passed on to consumers through lower premiums. At least for now, consumers seem willing to sacrifice choice and access to keep cash in their pockets.

Leveraging Size and Quality

The risk of being eliminated from a payor’s network oftentimes depends on a practice’s size. Practices affiliated with a larger organization are much better positioned to remain in network. These practices also have greater leverage to negotiate better reimbursement rates. For example, the larger provider network of QualDerm-affiliated practices in North Carolina helped secure a 7% rate increase with the market’s largest payor.

The leverage gained by being part of a larger organization goes beyond the number affiliated physicians. Quality and cost data, as well as back-office sophistication, can be used as negotiation tools as well.

QualDerm’s IT team has worked with our affiliated practices to ensure they are on track to meet the MACRA reporting requirements. This quality and cost data can also be used during contract negotiations with commercial payors.  Additionally, QualDerm ensures each affiliated practice is set up to receive electronic funds transfers (EFTs) from every payor.

Being part of a larger, support-driven organization can position dermatology practices for long-term profitability. Contact us to learn more about QualDerm partnership opportunities or to discuss selling your practice.