What Is the Difference Between Open PPN and Closed PPN?

According to a 2024 analysis by the Ontario College of Pharmacists, closed Preferred Provider Networks (PPNs) have the potential to cause greater harm to patients by limiting choice and access. Understanding the specific difference between open PPN and closed PPN is crucial for navigating healthcare decisions and managing your prescription costs effectively.

Quick Summary

An open Preferred Provider Network offers broad, transparent eligibility for pharmacies, contrasting with a closed PPN, which restricts participation to a limited, non-transparent group. This directly impacts patient access, costs, and provider options.

Key Points

• Network Transparency: Open PPNs have broad, transparent eligibility, while closed PPNs have limited, non-transparent contracts with specific providers.

• Provider Access: Open PPNs include a large number of providers, giving patients extensive choice, whereas closed PPNs severely restrict options.

• Cost Implications: Both PPN types offer lower costs for in-network providers, but closed PPNs may impose significantly higher costs for out-of-network services.

• Patient Autonomy: Closed PPNs can limit patient choice and disrupt continuity of care, a concern raised by regulators like the OCP.

• Payer Motivation: Payers use closed PPNs to negotiate deeper discounts, while open PPNs prioritize patient choice and broader network access.

Understanding Preferred Provider Networks (PPNs)

A Preferred Provider Network (PPN) is a contractual arrangement between a payer, such as a health insurance provider or employer, and a group of healthcare providers, most often pharmacies. Under these arrangements, the providers agree to offer their services at reduced rates or with specific terms to the payer's insured members. In return, the providers gain access to a larger pool of patients. For patients, using a provider within the network typically means lower out-of-pocket costs, such as reduced co-pays or deductibles. However, the structure and rules of these networks can vary significantly, leading to the important distinction between open and closed PPNs.

Open PPN vs. Closed PPN: A Detailed Comparison

Open PPN: Features and Operations

An open PPN is characterized by its broad and transparent nature. In this model, any pharmacy that is willing to accept and abide by the terms and conditions set by the payer can join the network. This creates a more accessible and inclusive network for both providers and patients. Key characteristics include:

• Broad Eligibility: The invitation to join the network is extended to all providers who meet the set criteria, which are usually made public.
• Transparent Conditions: The terms and conditions of participation are not hidden, allowing potential providers to evaluate the arrangement fairly.
• Extensive Network: The network typically includes a large number of pharmacies, offering patients a wider range of choices regarding where they can fill prescriptions.
• Increased Patient Autonomy: Patients have more options and can generally select a nearby or preferred pharmacy with the assurance that it is likely to be in-network, or they can choose an out-of-network provider for a higher cost.

Closed PPN: Features and Operations

A closed PPN operates on a more restrictive and less transparent basis. In this model, the payer negotiates and sets exclusive terms with a limited, and often pre-selected, group of pharmacies. Participation is not open to all, and the criteria for selection are typically not transparent to the public or even to other providers. Key characteristics include:

• Limited Provider Group: Only a select number of pharmacies are included in the network, severely restricting the options available to patients.
• Non-Transparent Agreements: The specific contractual agreements are not made public, making it difficult for other providers to understand why they were not included or to negotiate similar terms.
• Reduced Patient Choice: Patients have a limited list of pharmacies they can use to receive the best coverage. Choosing a pharmacy outside this network often results in significantly higher out-of-pocket expenses, potentially making it financially unfeasible for some.
• Potential Risk to Patient Care: Regulatory bodies, such as the OCP, have expressed concerns that closed PPNs can negatively impact patient autonomy, lead to inequities, and disrupt continuity of care.

Comparison Table: Open PPN vs. Closed PPN

Feature	Open PPN	Closed PPN
Network Size	Broad, includes many participating providers.	Limited to a select, pre-negotiated group of providers.
Transparency	Eligibility criteria and conditions are transparent.	Contractual agreements are often non-transparent and private.
Provider Choice	Patients have a wide selection of in-network pharmacies.	Patient choice is significantly restricted to a specific list.
Patient Cost	Lower co-pays at a wide range of in-network providers.	Lower co-pays only at specific, limited network providers.
Patient Autonomy	Higher degree of patient freedom and control.	Restricted patient freedom, potentially forcing changes in provider.
Competition	Fosters broader competition among pharmacies.	Limits competition, giving leverage to the payer.

The Advantages and Disadvantages

Benefits and Drawbacks of Open PPNs

Advantages:

• Patient Choice: Greater freedom for patients to use their preferred or local pharmacy, which supports existing patient-provider relationships.
• Accessibility: A wider network ensures better geographical access for patients, especially in rural or underserved areas.
• Competition: The transparent and open nature fosters healthy competition among providers, potentially driving down costs and improving service quality.

Disadvantages:

• Administrative Overhead: For the payer, managing a larger network of providers can be more complex.
• Cost Control: With more participants, negotiating deeply discounted rates can be more challenging for the payer.

Benefits and Drawbacks of Closed PPNs

Advantages:

• Cost Savings for Payers: By leveraging exclusive contracts, payers can negotiate maximum discounts from a limited number of providers.
• Simplified Administration: With fewer, long-term contracts, managing the network can be simpler for the payer.

Disadvantages:

• Limited Patient Access: Restricts patient ability to choose their provider, which can lead to service disruptions and inconvenience.
• Reduced Continuity of Care: Forcing patients to switch pharmacies can break long-standing relationships with pharmacists who manage their care.
• Risk to Patient Safety: Concerns have been raised by regulators that limiting choice could compromise patient safety.
• Potential for Inequity: It may create inequities for patients who don't have easy access to the limited number of network pharmacies.

What This Means for Your Healthcare Choices

Ultimately, the structure of your PPN has a direct impact on your experience as a patient. With a closed PPN, you may be able to secure a lower co-pay on certain prescriptions, but at the potential cost of convenience and the freedom to choose your provider. With an open PPN, you'll likely have a broader selection of providers, which supports continuity of care and autonomy, though the specific financial benefits might be less aggressive than in a closed network.

Here are a few steps you can take to make an informed decision:

1. Review your plan's details: Before enrolling in an insurance plan, carefully read the summary of benefits to determine if it uses a PPN and whether it is open or closed.
2. Check the provider list: If a closed PPN is used, review the list of included providers. Confirm that a convenient and trustworthy provider, like your current pharmacy, is on the list.
3. Evaluate the trade-offs: Weigh the financial savings of a closed PPN against the potential inconveniences and restrictions on your choice.
4. Communicate with your provider: Ask your pharmacist if they are part of a specific PPN. This is a critical step, especially if your health plan is changing.

Conclusion: The Path to Informed Decisions

The fundamental difference between an open PPN and closed PPN lies in network transparency and provider access, which has significant ripple effects on patient choice and costs. While a closed PPN can offer deeper discounts for payers, it risks limiting patient autonomy and continuity of care. An open PPN provides greater flexibility and choice but may not offer the same aggressive cost controls for the insurer. Making the right decision for your health and budget requires a careful evaluation of your personal healthcare needs and a clear understanding of your insurance plan's specific network structure.

For more information on the impact of PPNs on patient care, you can read more from sources like the Ontario College of Pharmacists.

Frequently Asked Questions

What is a PPN in the context of healthcare?

A PPN, or Preferred Provider Network, is a contractual agreement between a payer (like an insurance company) and a group of healthcare providers (like pharmacies) where providers offer services at special rates to the payer's members.

How does an open PPN work?

In an open PPN, any provider willing to accept the payer's transparent terms can join. This results in a large network of participating providers and gives patients extensive choice.

How does a closed PPN work?

A closed PPN limits participation to a small, pre-selected group of providers with non-transparent contracts. Patients must use one of these specific providers for the best coverage.

Does my choice of pharmacy matter with a PPN?

Yes. With a PPN, your choice of pharmacy determines your out-of-pocket costs. Staying within the network ensures the lowest costs, while going out-of-network means higher co-pays or deductibles.

Which type of PPN is better for patient choice?

An open PPN is definitively better for patient choice as it includes a larger, more accessible pool of providers. A closed PPN severely restricts choice.

Are closed PPNs a risk to patient safety?

Regulatory bodies like the OCP have stated that closed PPNs can pose risks to patient safety and wellbeing by potentially disrupting continuity of care and limiting access to necessary services.

How can I find out if my insurance uses an open or closed PPN?

You can find this information in your insurance plan's summary of benefits or by contacting your insurance provider directly. They can provide a list of participating providers for your plan.

What are the benefits of an open PPN for patients?

Key benefits include greater choice of providers, higher patient autonomy, and better geographical access to pharmacies, potentially strengthening long-term patient-pharmacist relationships.

How do closed PPNs affect patient costs?

While in-network costs are low, closed PPNs can result in much higher costs for patients who use out-of-network providers, potentially pricing them out of accessing their preferred pharmacy.