The Effects of Narrow Physician Networks: Evidence from CalPERS Plans
Discussant: Rebecca McKibbin
We observe significant take-up of the NetValue plan among enrollees whose previously-chosen PCPs were included in the narrow network. However, changes in medical utilization and overall spending were small for these enrollees. The primary spending effects of the plan's introduction can instead be attributed to steering: enrollees who switched PCPs in order to qualify for the narrow network plan generally moved to lower utilization/lower-priced providers. That is, lower spending was primarily driven by lower capitation rates paid to NetValue physician groups relative to other providers. There is also an economically significant but noisy effect on spending attributable to use of cheaper hospital facilities, which may be due to lower-priced provider groups having affiliations with lower-priced hospitals. The lower capitation payment rates offered by physician groups in the narrow network seem to be partly due to lower utilization. We find mixed evidence regarding cross-provider differences in the quality metrics collected by the state. There is substantial heterogeneity in all of these effects across markets.
In addition to these static differences across providers, we find some evidence that the exclusion of higher priced providers led to lower growth in capitation rates for providers included in the narrow network. However, these effects are small, perhaps due to the fact that relatively few enrollees actively switched providers in order to obtain the premium savings. Finally, a back-of-the-envelope calculation suggests that the premium savings due to enrollment in the NetValue plan are comparable in magnitude to the savings due to steering toward cheaper providers, suggesting that CalPERS enrollees are the primary beneficiaries of spending reductions.
