The introduction of hospital networks into the private medical insurance (PMI) market has been one o...
The introduction of hospital networks into the private medical insurance (PMI) market has been one of the most significant initiatives undertaken by health insurers this decade, yet they have received an unjustified level of challenge. Since the first network scheme was introduced in 1993, critics have argued that they are simply a cost containment measure for the insurer and produce no benefit for the customer.
On 5 November the Office of Fair Trading (OFT) published conclusions resulting from its extensive inquiry into the competitiveness of PMI1 and effectively silenced the critics of hospital networks.
The OFT concluded that "hospital networks have been successful in encouraging hospitals to compete on price and quality and.... that customers are benefiting from these improved efficiencies through a wider choice of lower cost PMI." So how do network PMI schemes benefit the customer and how can those who offer these schemes address some of the criticisms that have been made about them?
Network schemes are better for the customer because:
l The partnership between insurers and providers can help to improve the level of customer service.
l They enable insurers to reduce costs and pass this saving on to the customer.
l They help insurers raise the standards of care for patients.
In recent years some insurers have devoted enormous effort and energy to creating partnership networks with others in the healthcare industry for these very reasons. Of course, critics believe they have gone to this effort because they want to limit choice, widen margins and interfere with the patient/doctor relationship. This, however, is a misinterpretation. While insurers want to grow the PMI market and grow their share of it, they can only do this by delivering what customers want, and networks form a key part of this.
Better customer service
Networks help insurers provide better customer service as a result of the partnerships they build with doctors and hospitals. Things have improved considerably since the early 1990s. In those days customers handled all the paperwork, got the consultant to sign them and then sent the claim form to the PMI company. Sadly, sometimes at this point the customer would be told that the claim could not be met in full because the consultant or hospital had charged more than the benefit limits, or maybe treatment was not covered or not eligible due to pre-existing conditions. Customers worried about getting nasty surprises when the claims were processed.
Now most network members only need to make one phone call to their insurer in advance of their treatment. The days of the claim forms are disappearing. Insurers are able to remove bureaucracy and cost and instead add value. In the last year alone the number of customers talking to their clinical teams seeking advice, guidance and reassurance on the telephone has tripled.
Partnerships between insurers, providers and clinicians work because, by agreeing to work within a pricing structure, insurers are able to reassure the patient that there will be no 'extras' on the bill - no nasty surprises. Use of an electronic data interchange (EDI) system also means billing transactions can be dealt with speedily and accurately. The businesses benefit of course, but, more importantly, the patient gets effective, smart service.
Cutting costs
Critics of hospital networks also claim that insurers are simply using network schemes to cut costs, using their bargaining power to extract more profit. It is true that network providers do want to cut costs. In an industry where price rises outstrip inflation, it would be grossly irresponsible not to, and customers demand that providers do this wherever they can. Rather than slashing benefits and reducing cover, providers of networks have introduced them as a method of containing the costs for their customers.
Around 36% of our new PMI policyholders are currently using network schemes and over 50% of all new sales are for network schemes. The numbers speak for themselves - customers recognise the value that network schemes offer them. Critics of network schemes also claim they allow insurers to interfere with the patient/doctor relationship. This is simply not the case. In fact, providers of network schemes negotiate with hospitals to raise standards and set appropriate clinical protocols to ensure that customers get the highest quality service. In the healthcare arena quality protocols that benefit and protect customers must be based on partnership. By working with hospitals and doctors, networks can build on the best standards in the industry.
By negotiating with hospitals, network scheme providers can reduce the number of occasions when their members would themselves have to make up shortfalls between what consultants charged and what the networks were prepared to pay. They also allow the provider to work more closely with clinicians on evaluating and developing the most effective treatments. Closer links with consultants mean providers can launch quality initiatives, ones that get to the core of customers' needs.
People in the healthcare sector need to work together - the doctor, the hospital and the insurer - for the good of customers and patients. Networks are an important part of that co-operation. The schemes help insurers keep costs down for the customer, raise the quality of care and generally improve standards. They are the clearest evidence that insurers desire to put the patient first.
Alison Platt is deputy managing director at BUPA Membership
(1) OFT enquiry into the Private Medical Insurance (PMI) and Private Medical Services (PMS). Published 5 November 1999.
