L.E.K.

Executive
Consulting
Insights
HEALTHCARE SPOTLIGHT

Operational Readiness for Narrow Networks

The implementation of narrow network products came with
some hard lessons for many of our health plan clients. Gaps in
prior authorization processes, benefit design, network access
(not just adequacy) and claims logic were brought into focus by
unexpected out-of-network (OON) utilization in some narrow
network product lines. As the 2016 benefit period looms
ahead, we recommend that health plans introducing narrow
network products make their list and check it twice to ensure
tight management of OON utilization in the new year.
Preparing for the 2016 Benefit Year
Are you operationally ready for your narrow network products?
Even when primary care physicians (PCPs) refer patients to in-
network (INN) specialists, those specialists could in turn refer
procedures and downstream services to OON facilities and
providers. It is critical to establish the appropriate review and
approval processes for downstream procedures and referrals to
ensure that the entire episode of care remains INN.

Are your in-network physicians a source of leakage to out-of-network facilities?

$2K / episode Prof. Services related to procedures:

INN Orthopedist INN Facility
80% INN $5K / episode
10% Member
Member evaluated by
undergoes
INN specialist during 95%
related
an episode of care
INN procedure
Referral
20% OON $7K / episode
$28K / episode $5K total average
$1K / episode cost per INN
90% OON Facility orthopedist referral

60% INN $5K / episode

5%
Member does not
undergo related
PCP referral procedure
40% OON $9K / episode
$30K / episode

On average,
each redirection
of OON
orthopedist
referrals would
save an
expected $8K

$3K / episode Prof. Services related to procedures:

OON Orthopedist INN Facility
45% INN $5K / episode
Member evaluated by 30% Member
OON specialist undergoes
90%
during an episode related
OON of care procedure
Referral
55% OON $6K / episode
$30K / episode
$13K total average
$2K / episode cost per OON
70% OON Facility orthopedist referral
25% INN $5K / episode
10%
Member does not
undergo related
procedure
75% OON $7K / episode
$35K / episode
Source: L.E.K. analysis

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Start 2016 By Managing
Out-of-Network Utilization Tightly
As health plans kick off the 2016 benefit year, ensuring that
operational procedures and processes support, enforce and
adhere to narrow network designs will be important. Here are
the key things to watch:
• In January, health plans should be hyper-vigilant about
setting precedent for the benefit period:
• Watch your OON authorizations — approvals for medical
necessity and exceptions in January set the precedent
for subsequent months; clinical decisions related to OON
requests early on may limit your options for the remainder
of the year
• Track OON claims tightly — consider analyses or flags
to detect any and all OON claims in the early weeks
of the year. If any OON claims logic or processes
are “broken”(i.e., OON claims come in without any
authorization request or approval), January is the time to
catch them, deny the claims and correct the gaps
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L.E.K. Consulting / Spotlight on Healthcare
HEALTHCARE SPOTLIGHT
• Early in the year, watch for OON referrals driven by
member and provider behavior:
• Identify and intervene with members who utilize OON
services and educate them
• Make the cost implications for OON services clear to
members; communicate and recommunicate them,
particularly to members who incur OON claims (even if you
deny them)
• Identify INN providers who refer to OON procedures and
facilities; re-educate them on the network and identify
additional providers that you may want to bring in-
network
Contact
Please contact healthcare@lek.com for more information.
About L.E.K.
L.E.K. Consulting is a management consulting
firm that provides the strategy and insight
to solve executives’ most critical business
challenges, improve business performance and
create greater shareholder returns. With more
than 1,000 professionals worldwide, L.E.K.
advises companies that are leaders in their
industries – including the largest private and
public sector organizations, private equity firms
and emerging entrepreneurial businesses. To
learn more, visit LEK.com.
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INSIGHTS @ WORK ®
INSIGHTS @ WORK ®
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