Narrow network rule may aid providers

A new federal regulatory proposal to ensure adequate insurance networks could help not-for-profit hospitals, Moody's said in a briefing released this week.

After concerns in some states over providers being left out of plans available in new insurance exchanges – in New Hampshire, for instance, the lone exchange carrier included only 16 of the state’s 26 hospitals – the Centers for Medicare & Medicaid Services is proposing a new set of network adequacy standards for 2015.

That proposal, if finalized, could help some not-for-profit hospitals regain market share and increase revenue, wrote Moody’s senior vice president Lisa Martin and public finance managing director Kendra Smith in the briefing.

In CMS’ proposal, federal regulators would ask insurers selling qualified health plans for lists of all in-network and out-of-network hospitals, primary care, mental health and oncology providers to measure whether they offer patients “reasonable access” in their service areas. For essential community providers, CMS regulators are proposing extending the percentage required in a service area from 20 percent to 30 percent, with limited exceptions.

“If CMS determines that an issuer’s network is inadequate under the reasonable access review standard, CMS will notify the issuer of the identified problem area(s) and will consider the issuer’s response in assessing whether the issuer has met the regulatory requirement and prior to making the certification or recertification determination,” regulators wrote in a proposed rule.

If CMS’ proposal is enacted, hospitals with a large number of low-income patients would benefit the most, Moody’s Martin and Smith wrote, because the proposal “… mandates the inclusion of certain essential providers that otherwise may have been excluded because of their higher cost structure.”

Without federal changes to exchange networks, larger high-acuity essential community providers are “at greater risk of exclusion from narrow networks,” including some academic medical centers and children’s hospitals that tend to need higher commercial reimbursement to offset Medicaid payments or support teaching and research.

Among those essential providers with significant Medicaid revenue are several with varying credit ratings that could get a boost from expanded network requirements, such as Children’s Hospital Los Angeles, Albert Einstein Healthcare Network and Loma Linda University Medical Center.

Martin and Smith, however, offer the caveat that mandating networks too broadly could discourage insurers from selling in public insurance exchanges.

“Long term, this proposal could threaten the ACA’s goal of providing affordable, lower cost healthcare through public exchanges,” they wrote.