PPN- Preferred Provider Network of Insurers

PPN- PREFERRED PROVIDER NETWORK

MOVING TO EPISODE BASED PAYMENT SYSTEM.

Episode-based payment, is a model that recognizes bundled cost to reimburse  health care providers (such as hospitals and physicians) on the basis of expected costs for clinically-defined episodes of care in which health care providers are paid a "lump sum" per patient regardless of how many services the patient receives. Evidence-informed bundled rates for various conditions that are adjusted for severity and complexity of a patient's illness are pre-negotiated amongst the insurance companies, health care providers and third party administrators. Unlike fee-for-service, bundled payment discourages unnecessary care & diagnostics, encourages coordination across providers, and potentially improves quality. It removes inefficiency and redundancy from patient-care protocols. Bundled payments improves footfalls and  provides economies of scale thus making reduced rates feasible for providers  for expected volumes of patients who intend to take care where cashless facility is available. Package pricing thus holds the promise of aligning payment with optimal care. 

Indian health care providers have relatively limited experience with episode-of-care payment that bundles multiple care services together i.e. the cost of the surgery, the hospital stay, the anesthesiologist and other related therapy or care into one price for selected medical conditions and surgical procedures. The experience that now exists mainly in major cities has its focused on surgery. This is presumably because both surgeons and hospitals are already paid case rates, so the transition to a single, bundled episode-of-care payment is simpler than for medical conditions, where the physicians are paid on a fee-for-service basis. Wherever this model has been practiced health care providers have identified ways to reduce length-of-stay and unnecessary hospital costs as they gain footfalls for such arrangements and in turn it has helped insurance companies to reduce their claim cost. Insured have also been benefited in getting quality care even with lesser sum insured and by saving premium cost for their health insurance plan. It is a win-win situation for patients, payers and providers.

As a strategy to reduce health care costs burden bundled payments for illness episodes, mainly the surgical procedures, began as early as 2010 when the Public Sector General Insurance Companies (PSGICs) recognized its need and pre-negotiated 40 odd surgical procedures with health care providers who joined the Preferred Provider Network of these insurance companies initially in 4 metros. Insurers over a period of time have now extended it to more than 100 pre-negotiated surgical procedures and the network has also been extended to 12 important cities where the health care is skewed.

Preferred Provider Network is a network of hospitals which have agreed to a cashless packaged pricing for certain procedures for the insured person. A tripartite agreement is inked normally amongst the Insurers, TPAs (Third Party Administrators) and Health Care Providers, often including pre-arranged packaged prices for pre-defined surgical procedures and for other surgical procedures and medical management cases some discount in total hospital bill is agreed upon. The claimant’s participation in the PPN doesnot necessarily result from an insurer’s referral but in most instances, the treatment provided by a PPN is pre-authorized by the insurer to enable a cashless treatment to insured patient.

Current healthcare pricing cannot be understood by a human being with average intelligence or limited patience. Further there is no Regulator to categorize the hospitals and to fix prices, nominal or otherwise, for providing health care. Insurers, who operate in regulated environment, have a challenge to find some clinical protocol & standardization in price of health care. The rates of two almost similar hospitals in same geographical area are also not similar. The rates may differ from one hospital to another based on facilities and the recognition treating surgeons have in the field of their specialty and also on the business objectives of the health care institution. The PSU insurers in absence of grading of hospitals try to categorize hospitals under four categories -- primary, secondary, tertiary and tertiary plus based on infrastructure and care facility available with the hospital as well as how it is recognized in the area evaluated by footfalls of the patients observed for inpatient care. This categorization is only a price related function and has nothing to do with any certification of quality or infrastructure. By packaging rates and freezing SOCs (Schedule of Charges) over a period of one to two years the insurers expect to cut expenses in a world of care where medical inflation is much more than ordinary inflation rates. It promotes in a way some standardization in protocol and in the cost of treatment. More hospitals are now getting into the Preferred Provider Network (PPN) as the advantages of the programme are felt by them.

Transition from fee-based care system to episode based payment has some inherent issues and arguments are given against this model and on fixing one price for one procedure in advance for there can be cases which cannot be treated within expected number of days for complication or for co-morbidity reasons. Insurers however recognize these needs and deal such complications and co-morbidity issues on merits. Another issue that is confronted is the cost of implants and discounts on medicines.

Health insurance is growing at rapid rate in India. The size of health insurance market is now more than Rs 25000 crore and Public Sector Companies hold more than 60% of market share. Looking to new pattern of diseases and recognized need of cashless treatment expected at hospitals the Health Care Providers argue why insurers do not recognize all hospitals into their network. The plea is simple, as given by insures, that if everybody is taken on network how come preferred tag be attached to them. The network is for those care providers who anticipate volumes and provide sufficient discount against medical or surgical care cost, like in any other business model.

 (The views expressed in the Article are in personal capacity of the writer.)