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The American Journal of Managed Care October 2009
Bending the Curve: Effective Steps to Address Long-Term Healthcare Spending Growth
Joseph Antos, PhD; John Bertko; Michael Chernew, PhD; David Cutler, PhD; Dana Goldman, PhD; Mark McClellan, MD, PhD; Elizabeth McGlynn, PhD; Mark Pauly, PhD; Leonard Schaeffer; and Stephen Shortell, PhD
Statin Adherence and Mortality in Patients Enrolled in a Secondary Prevention Program
Brandy D. McGinnis, PharmD; Kari L. Olson, PharmD; Thomas M. A. Delate, PhD; and Ryan S. Stolcpart, PharmD
Impact of Compliance With Proton Pump Inhibitors on NSAID Treatment
Mei Sheng Duh, MPH, ScD; Antoine Gosselin, MA; Roger Luo, PhD; Herve Lohoues, PhD; Barbara E. Lewis, PhD; and Joseph A. Crawley, MS
Delivering Vaccines: A Case Study of the Distribution System of Vaccines for Children
Jason T. Shafrin, PhD; and John M. Fontanesi, PhD
Office Manager and Nurse Perspectives on Facilitators of Adult Immunization
Mary Patricia Nowalk, PhD, RD; Melissa Tabbarah, PhD, MPH; Jonathan A. Hart, MS; Dwight E. Fox, DMD; Mahlon Raymund, PhD; Stephen A. Wilson, MD, MPH; and Richard K. Zimmerman, MD, MPH; for the FM-PittNet Practice Based Research Network
VA Pharmacy Users: How They Differ From Other Veterans
Sherrie L. Aspinall, PharmD, MSc; Jessica S. Banthin, PhD; Chester B. Good, MD, MPH; G. Edward Miller, PhD; and Francesca E. Cunningham, PharmD
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Do Patients Continue to See Physicians Who Are Removed From a PPO Network?
Meredith B. Rosenthal, PhD; Zhonghe Li, MS; and Arnold Milstein, MD, MPH
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Fred J. Hellinger, PhD
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Andrew B. Bindman, MD; Anders Chen, MD; Jean S. Fraser, JD; Hal F. Yee Jr, MD, PhD; and David Ofman, MD, MA
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Jay M. Margolis, PharmD; Stephen S. Johnston, MA; Bong-Chul Chu, PhD; Eberechukwu Onukwugha, PhD; Kyle Hvidsten, MPH; Jose Alvir, DrPH; Joseph G. Rossi, PharmD; and C. Daniel Mullins, PhD
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Do Patients Continue to See Physicians Who Are Removed From a PPO Network?

Meredith B. Rosenthal, PhD; Zhonghe Li, MS; and Arnold Milstein, MD, MPH

We examined patient response to a narrowing of a preferred provider organization network that effectively raised the out-of-pocket price for a few physicians.

Objectives: To assess the extent to which excluding physicians from a preferred provider organization (PPO) network causes patients to discontinue using their services and whether the associated changes will result in greater demand for emergency department or inpatient care.


Study Design: Analysis of a natural experiment involving the narrowing of a PPO network operated by the Taft-Hartley Fund. The panel data analysis compared rates of patient discontinuation for excluded physicians before and after the change. The pre–post analysis used matched comparison groups for office visits, emergency department visits, inpatient admissions, and spending for affected patients.


Methods: Claims data analysis used generalized estimating equations and controlled for patient age, sex, health status, and hourly wage. Models examining utilization and spending for 6187 patients who remained with excluded physicians also used a propensity score–matched comparison group identified from among patients who had never seen an excluded physician. Differential response to physician exclusion according to age, health status, and hourly wage was also examined through interaction terms.


Results: The network narrowing reduced the odds of continuing to see an excluded physician (odds ratio, 0.18; P <.001). Patients who continued to see excluded physicians reduced their office visits by a mean of 0.9 visits per year, 0.8 visits more than comparison patients (P <.001). There were no significant changes in emergency department visits or admissions for patients of excluded physicians compared with a matched cohort.


Conclusions: Substantial copayment differentials may be an effective means of encouraging patients to change physicians. Where they are based on reliable information about provider quality and cost, tiered networks may improve value.


(Am J Manag Care. 2009;15(10):713-719)

We examined the effect of a network change by the Culinary Health Fund in the Las Vegas, Nevada, metropolitan area that effectively raised the out-of-pocket price to their predominantly low-wage enrollees for a few physicians.


  • Most patients who had previously seen a physician who was later excluded did not continue seeing that physician, although the degree of responsiveness varied by age and hourly wage.
  • Patients who continued using excluded physicians cut back on services.
  • There was no evidence of a compensating increase in emergency department use or hospitalization.


In recent years, many employers have varied patient cost sharing at the point of service as a means of altering enrollee choices of treatment and provider to supplement or supplant supply-side controls such as precertification of services or bundled provider payment.1 An example of this approach used widely by national insurers and some regional insurers is the tiered provider network, which differentiates cost sharing based on the consumer’s choice of a specific physician or hospital.2,3 Tiered networks provide financial incentives to consumers to select providers who rank higher, typically based on comparisons of case mix–adjusted total cost per episode of care (rather than cost per unit of service) or quality measurements. Some payers have narrowed their preferred provider organization (PPO) or health maintenance organization (HMO) networks based on a “high-performance” network.3

According to recent data from the Kaiser Family Foundation and Health Research and Education Trust,4 15% of employers offered a tiered or high-performance network in their largest health plan. These networks have received attention largely for the methods used to stratify providers into tiers and for the transparency of that process.5 Whether tiered and high-performance networks are a useful policy tool will depend not only on how the tiers are designed but also on the effectiveness of differential cost sharing as a mechanism for channeling patients to specific providers.

Because tiered and narrow networks are a recent development in benefit design, there are no published studies to date of their effects on consumer behavior or other outcomes. However, insurers have priced them at a discount to traditional networks. For example, the chief medical officer of PacifiCare Health Systems, Inc6 testified at a congressional hearing that their narrow network Medicare Advantage plan in southern California reduced total healthcare spending by more than 10%.

Despite the fact that differential cost sharing based on network participation is also a feature of standard HMO and PPO model managed care plans, the price responsiveness of patient choice of physician has not been documented in the peer-reviewed literature to date. In related research, consumers have demonstrated a willingness to switch health systems (ie, a group of physicians and affiliated hospitals) when faced with quality information andwith differential premiums.7,8 Such findings support the potential for tiering to alter care-seeking patterns.

In this study, we examined the effect of narrowing a physician network operated in the Las Vegas, Nevada, metropolitan area by the Culinary Health Fund (a Taft-Hartley Fund that administers benefits for union members). This narrowing resulted in a change in the point-of-service price to patients for a subset of physicians in the network. Our analyses examine whether patients who had a prior-year contact with the excluded physicians eliminated or reduced visits to these physicians after the “price change.” We also examine the consequences of the network narrowing for utilization of outpatient services and possible substitution of emergency department and inpatient care.


Study Setting

We examined a change in network scope in the Culinary Health Fund–administered PPO that insures union members in the Las Vegas metropolitan area. The Culinary Health Fund covers approximately 56,000 primary subscribers and their dependents (a total of roughly 135,000 lives). Members of the Culinary Health Fund are all enrolled in a single benefit plan. The individuals enrolled in the Culinary Health Fund, who are generally employed in the food service and hospitality industries, are 40% Hispanic and have disproportionately low incomes.

In the spring of 2003, members and physicians were informed of the Culinary Health Fund’s intent to narrow its network. Cost and quality data were reviewed for each participating physician in the network using industry-standard measures and claims-based algorithms. After conducting an analysis to ensure adequate geographic and linguistic access to all members, 48 (of 1800) physicians were removed from the network effective December 2003. Excluded physicians included primary care physicians and specialists. The communication to members about the change indicated that a set of physicians was no longer participating in the network and that patients could expect to pay more out of pocket to see these physicians. Patients were also instructed to contact the Culinary Health Fund for assistance in identifying a new physician. The Culinary Health Fund pays 60% of its discounted fee toward out-of-network care, which may also be billed at a higher rate than the discounted fee schedule accepted by participating physicians. For a simple office visit, out-of-network physicians would be associated with an out-of-pocket price of at least $50 to $60 compared with $15 for in-network physicians, and this price differential would be even greater for visits that involved ancillary services or procedures.

Data and Sources

Our study relied on administrative data from the Culinary Health Fund to examine patterns of physician selection and service use for patients who saw excluded physicians in the year before their exclusion relative to comparison patients. We obtained deidentified claims and eligibility data from the Culinary Health Fund for 2002-2004. Claims data record in-network and out-of-network care reimbursed by the Culinary Health Fund. Claims and eligibility data included patient demographic information (age and sex), diagnoses, procedures, physician specialty, date of service, place of service, and the US dollar amounts billed to and paid by the Culinary Health Fund. We also obtained a list of the provider identifiers for the physicians excluded from the network in December 2003. Finally, for a subset of our sample, we obtained information on hourly wage that could be linked by unique identifier to the health plan data.


Using the economic theory of demand as our point of departure, we designed our analyses to test a series of hypotheses about the effect of the network narrowing. If patients view physicians as readily substitutable for one another and the price differences are large enough, economic theory would predict that patients who previously saw the physicians who were excluded from the network would switch to an in-network physician. If patients do not switch physicians, then theory and well-accepted empirical evidence suggest that they will cut back on their use of services in the face of an effective price increase.9 Cutting back on higher-priced services might take the form of reducing visits to the excluded physicians or reducing the costliness of a visit (eg, by refusing ancillary tests and procedures). In addition, to the extent that some emergency department visits substitute for office visits, these might increase for patients who continued to see higher-priced (excluded) physicians as the price of emergency department visits falls relative to office visits. Finally, the increase in the effective price of outpatient visits for these patients might affect inpatient use, possibly by increasing hospitalizations that are sensitive to ambulatory care (eg, certain diabetes admissions).10 However, there is also some evidence that office visits and inpatient admissions are complementary, which would suggest that the network change might reduce inpatient use for patients who continue to see excluded physicians but cut back on outpatient care.9

While it is well known that the demand for healthcare overall is sensitive to price changes (although inelastic), patients report that they place a high premium on their relationships with their individual physicians.11 Such loyalty, we anticipated, would be greater for patients who were sicker or older, both of which are proxies for having a more established physicianpatient relationship.12 Therefore, we tested the hypothesis that sicker and older patients would be less likely to discontinue use of an excluded physician than healthier and younger patients.

Analytic Approach

All of our analyses were conducted on continuously enrolled Culinary Health Fund members. Although some of the excluded physicians were specialists, they accounted for few visits (26%). Because of concerns that patient responses might differ for specialists compared with primary care physicians, we restricted our analysis to patient use of excluded primary care physicians (defined as internists, family physicians, general practitioners, and pediatricians [n = 37]). Our results were not sensitive to this exclusion.

We first identified the study cohort of Culinary Health Fund members who saw at least 1 excluded physician on at least 1 occasion in 2003 and compared their characteristics with those of all other Culinary Health Fund members with at least 1 office visit. We also ran our analyses using the following 2 alternative ways of identifying the study cohort: (1) the subsample of patients who had seen a specific excluded physician for most of their office visits (as a way of focusing on patients for whom the excluded physician was their primary physician) and (2) patients who had at least 2 visits to the excluded physician (as a way of identifying patients who had returned to the excluded physician at least once in the past). These alternative thresholds were defined identically for the study and comparison groups. In both cases, we found no qualitative difference and little quantitative difference in our results. Details are available from the author. Patient characteristics that we examined in our models were age, sex, and the index of comorbidities by Elixhauser et al.13 Statistical significance of differences between the 2 groups was examined using 2-tailed t tests for continuous variables and χ2 tests for dichotomous variables.

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