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Making Sense of Provider Networks

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The first step is deciding whether to join a provider network is to understand what they are and what they do.
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Whether you are starting or running a medical practice, one of the questions that always comes up is should you get individual contracts with each insurance company or join a provider network. But even trying to answer that question, we need to understand the types of provider networks. Admittedly, it’s very easy to be confused by the alphabet soup of provider networks—Accountable Care Organizations (ACOs), Independent Practice Associations (IPAs), Clinically Integrated Networks (CINs) and Physician Hospital Organizations (PHOs). However, the reality is that there’s little difference between these networks because they all have the same basic purpose. 


Understanding the Terminology

To start with, let’s go over the most common terms:

  • Independent Practice Association (IPA)
    • Can consist of physicians only or physicians plus hospitals and other providers
  • Physician Hospital Organization (PHO)
    • Includes both hospitals and physicians—and possibly other types of providers
  • Clinically Integrated Network (CIN)
    • Almost identical to a PHO
  • Accountable Care Organization (ACO)
    • Originally designed by CMS and still most often mentioned  within the context of the Medicare A and B programs
      • For Medicare patients, the ACO shares the risk to deliver coordinated quality care
      • “When an ACO succeeds both in delivering high-quality care and spending health care dollars more wisely, the ACO will share in the savings it achieves for the Medicare program.”
      • “Direct” ACO or other network entity contracts directly with CMS or the state Medicaid program. There is no health plan involved as the “middleman.”
  • “Indirect” ACOs contract with health plans that serve as intermediaries between the entity and CMS, the state Medicaid agency and/or employers.
  • ACOs now exist for third party payors where the ACO shares the risk and can participate in cost savings

Different pieces of legislation and regulations, both on the state and federal level, may use different terminology. In addition, there are regional variations in terms of which term is used. The lack of consistency in terms of what something is called only adds to the confusion associated with trying to understand the differences between provider networks.

The Purpose of Provider Networks

Regardless of the name, each of the provider networks have the same basic purposes:

  • Create an entity that assembles a network of healthcare providers
  • Enhance quality for the benefit of patients
  • Attempt to increase efficiency and reduce costs
  • Act as a “middleman” between payers and providers

Don’t Confuse Provider Network and Payment Terms 

The blurring of the definitions between the type of provider network and the payment system complicates only complicates the situation further. That said, the key thing to know is that the two are completely separate. The type of payment is not defined by the type of network.  Medicare and the third party payors are moving towards a value-based payment (VBP) system. VBP moves away from the purely fee-for-service claims payment and adds features related to quality metrics, shared savings and losses and capitation. The VBP system can be implemented by any type of provider network.

The Takeaway Message

A provider network—independent of which acronym it goes by—brings together participating providers. In turn, the network negotiates, and enters into, a master contract, on behalf of the provider network with a payer, such as CMS or a health plan. In short, the network entity is typically the intermediary contracting entity between the participating providers and the payers.

The first steps in deciding whether to sign up for a provider network is to understand the underlying organizational structure and the payment system being employed and how it impacts your bottom line.

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