The Impact of Physician Payment Transparency on Narrow Oncologist Networks in the Health Insurance Marketplaces

BACKGROUND: Previous studies have documented the association between narrow provider networks and lower premiums of marketplace plans; however, the underlying mechanism through which narrow networks contribute to low premiums is unclear. One mechanism for narrow networks to realize lower medical spending is through identifying and contracting exclusively with low-cost providers; however, empirical evidence is lacking. Forty-four states adopted the Physician Payment Sunshine Act in 2014, allowing us to identify the impact of physician payment transparency on insurer behavior. This study indicates that narrow networks can contain cost by identifying and excluding physicians with high industry payment after the adoption of 2014 Sunshine Act. We do not find any association between network breadth and physician industry payment before the Sunshine Act.

METHOD: We analyze the relationship between physician industry payment and changes in physician network breadth before and after the Sunshine Act. We employ a difference-in-difference method by comparing this relationship in the forty-four states which adopted the Sunshine Act in 2014 (i.e., treatment states), with that in the six states which implemented physician open payment policy in the 2000s (i.e., control states). Physician network breadth is defined as the number of physicians in the rating area participating in the network, divided by the total number of physicians eligible for that network in the rating area. We focused on the oncologist cohort because it is the most drug-intensive specialty,[1] and receives the highest industry payment on average.

RESULTS: We find that in the forty-four treatment states, narrow oncologist networks in 2016 systematically excluded those oncologists who have high industry payment, while there was no significant association between oncologist network breadth and physician industry payment in 2014. Overall, lower physician industry payment is associated with greater reduction in network breadth from 2014 to 2016. This effect becomes stronger after we adjust for the contemporaneous trends in the six control states.

CONCLUSION: We find that after the 2014 Sunshine Act, insurers are more likely to exclude high-industry payment oncologists in their narrow networks. Since high-industry payment physicians have been found to have greater Medicare Part D costs,[2] our findings indicate that the transparency of physician payment is important for the insurers to contain cost, by identifying and excluding high-industry payment physicians in their narrow networks.

[1] Desai, S., McWilliams, J. M. (2016). Subsidizing consolidation? Unintended consequences of a federal drug discount program (Job Market Paper). Retrieved from http://scholar.harvard.edu/files/desai/files/desai_jmp.pdf

[2] Perlis, Roy H., and Clifford S. Perlis. "Physician payments from industry are associated with greater Medicare Part D prescribing costs." PloS one 11.5 (2016): e0155474.