These results suggest that 3.5–11.7 percent of consumers would be influenced to choose a top-tiered physician at price differences of U.S.$10–U.S.$35. Although individuals with lower incomes and minorities were more likely to report that the copayment differential was very important to their selection of a physician, they were no more likely to choose a top-tiered physician. Moreover, while nearly 90 percent of consumers would select a Tier 1 physician in the base case, almost half would switch to a physician in a lower performing tier if he or she was recommended by a friend or family member, and two-thirds would switch if the recommendation was from another physician.11
Although the base case result indicates that respondents understood that despite being less expensive, Tier 1 includes higher performing physicians and that they value tiering to some degree, simulations based on these survey data suggest that much higher price levels, of U.S.$290 and U.S.$440, would be required to counteract recommendations for lower ranked physicians from friends/family and from physicians. Previous research finds that approximately half of consumers rely on a friend/family recommendation and between 12 and 22 percent consult with other doctors when choosing a physician (Hoerger and Howard 1995
; Harris 2003
These findings have important implications for the perception of a health plan's tiered provider network within the provider and general communities. Providers who view tier rankings as signals of the quality and efficiency of their peers and use them to guide their referrals can improve efficiency through their influence over consumers' visits with other physicians. Community members who incorporate tier information into physician recommendations for friends and family can likewise have the same effect. The flip side, however, is that physicians (or community members) whose perceptions of physician quality are in conflict with tiered network rankings, or with the performance metrics and reporting systems established by health plans more generally, may significantly limit the impact of health plan generated quality information on consumer behavior if they do not refer patients to higher performing physicians. It is unlikely that imposing copayment differentials across tiered networks on the order of U.S.$300, the level suggested here that would be necessary to influence patients to disregard recommendations for low-performing providers from trusted sources, would be feasible. Rather, health plans should engage in efforts to achieve physician and community buy-in of the quality and cost-efficiency metrics underlying tiered network designs.
The impact of tiered provider networks appears to vary by specialty of the physicians who are tiered. In comparison with those who chose a cardiologist because they were told they had a heart condition, respondents choosing dermatologists for a routine skin check were sensitive to the copayment differential across tiers. These results suggest that the financial incentive in tiered physician networks has a different effect on consumers depending on the type of physician who is tiered and/or the perceived severity of the condition for which they were seeking care. Further exploration of this finding, in particular teasing out whether consumers are more likely to view certain types of physicians as substitutes, or whether consumers searching for potentially “life-saving” medical care respond to cost and quality information differently than those who needed an appointment for a more minor concern, can improve the design of tiered physician networks in the future.
A hypothetical setting provides certainty that respondents were aware of the different options and cost differences across tiers; these results can help interpret a finding of weak consumer response in an observational setting. This experiment also used variation in copayment differentials to quantify the tradeoff consumers make between financial incentives and quality information from concentrated sources like family and friends. Of course, responses to hypothetical questions may be different than those observed in the real world. Hypothetical vignettes do not impose the full set of costs that influence actual consumer choice of physician, such as search costs, location, and capacity constraints. However, because this information is missing equally for physicians in both tiers, it should not systematically bias respondents' choice of physician from one tier over the other. Moreover, respondents to this survey who were more dissatisfied with their own medical care are less likely to rely on their physician's recommendation when choosing a physician, which is similar to patterns of consumer use of information related to choice of physician reported elsewhere (Harris 2003
). Nonetheless, these experimental findings should be considered in conjunction with studies of consumer response to tiered physician networks based on observational data, once these data are available.
Generalizability may be limited because the survey was conducted among employees who all live in and work for the state of Massachusetts. However, there is wide variety in the types of jobs held by state employees (e.g., managerial, administrative, janitorial) and the locations where people work (e.g., the capital city of Boston, rural Western Massachusetts). While much of what we have learned about employer-sponsored health insurance stems from studies conducted at one employer, caution should be taken when applying these findings to other populations.
This study estimates the likely impact of tiered provider networks on consumer behavior across two specialties and over a range of copayment differentials, and it provides estimates of how consumers respond to cost and quality information provided through these network designs both with and without a conflicting signal of physician quality from friends, family, or a referring physician. Future work should continue to explore the potential for tiered provider networks to influence individual choices as a means for improving the quality of health care and reducing its cost.