• The Momentum of Direct Contracting
• A Shift in Approach
• Key Considerations for Providers
• Next Steps to Direct Contracting for Healthcare Providers

In the evolving healthcare landscape, mid-size to large employers increasingly turn to self-insured health plans to provide health benefits for their workforce. As outlined in a recent article from Stevens & Lee, a leading law firm, titled “Key Issues in Direct Health Care Contracting with Employers,” this shift is accompanied by a growing incentive for employers to actively manage healthcare costs while ensuring the delivery of high-quality care for their employees.

Here, we’ll explore the key issues surrounding direct healthcare contracting with employers, drawing insights from Stevens & Lee, and explore the implications and considerations for both parties involved.

Statistics reveal that the momentum of direct contracting between employers and healthcare providers is rising. According to a study by the National Business Group on Health, more than 40% of large employers are exploring or implementing direct contracting arrangements with healthcare providers to control costs and improve care quality, indicating a significant shift in how employers strategize their healthcare benefits.

Historically, self-insured employer health plans utilized the services of commercial insurance companies or third-party administrators (TPAs) to oversee multiple facets of the health plan, encompassing elements such as provider network access and negotiated reimbursement rates. However, a new approach has emerged, wherein employers take a more hands-on role in negotiating and contracting directly with healthcare providers. This approach, known as direct-to-employer (DTE) contracting, aims to improve care quality, enhance patient engagement, control costs, and secure favorable financial arrangements.

Jennifer Thompson, President & CEO at Insight Healthcare Group, emphasizes the significance of this shift, stating, “The direct contracting model empowers employers to forge relationships that align more closely with their unique healthcare needs and cost-saving goals. It’s a transformative step that enables healthcare providers to play a more active role in delivering value-driven care.”

For healthcare providers, engaging in direct contracting with employer plans brings forth a host of considerations. Some of these high-level questions include:

Scope of Services: Providers must clarify whether the arrangement covers specific services and treatments or broadly applies to healthcare needs.

Reimbursement Model: The proposed reimbursement model should be clearly defined, whether fee-for-service, capitation, value-based, bundled payments, or risk-sharing.

Financial Impact: Providers need to evaluate the financial implications of the arrangement, weighing potential reimbursement increases against any additional costs associated with the partnership.

Clinical Coordination: Providers must demonstrate their clinical coordination capabilities to meet financial and quality objectives if value-based or risk-based payments are involved.

Operational Changes: Providers should assess whether the arrangement necessitates hiring additional personnel or establishing new facilities, potentially requiring on-site presence for certain services.

Employer Size and Utilization: Understanding the size of the employer’s workforce and the current utilization rates is crucial to tailor the contract effectively.

Claims Processing: Providers must elucidate the party responsible for managing and remunerating claims – the employer, the TPA, or an alternative entity.

Contract Duration and Flexibility: Terms of the contract, including termination options and provisions for changes in reimbursement rates, need careful consideration.

Employee Awareness: Providers should collaborate with employers on publicizing the arrangement to employees, offering lower co-pays or preferred access.

Exclusivity: The extent of exclusivity, wherein the provider becomes the sole preferred provider, should be addressed.

Managed Care Functions: Providers must assess whether they will assume supplementary responsibilities related to managed care, encompassing tasks like claims processing, utilization management, and prior authorizations.

Regulatory Compliance: Both parties must ensure the arrangement aligns with regulatory compliance, covering patient data privacy, insurance regulations, employee plan regulations, and antitrust laws.

Direct healthcare contracting between self-insured employer health plans and healthcare providers allows both parties to achieve mutually beneficial outcomes. Improved quality of care, increased access, and cost-efficiency are achievable if the arrangement aligns with the incentives and objectives of both sides. However, healthcare providers must thoroughly assess financial, clinical, legal, and operational implications before entering such arrangements.

The shift towards direct contracting marks a dynamic evolution in healthcare strategy, paving the way for innovative collaborations that have the potential to reshape the healthcare landscape for employers and providers alike.

Direct healthcare contracting between self-insured employer health plans and healthcare providers allows both parties to achieve mutually beneficial outcomes. Improved quality of care, increased access, and cost-efficiency are achievable if the arrangement aligns with the incentives and objectives of both sides. However, healthcare providers must thoroughly assess financial, clinical, legal, and operational implications before entering such arrangements.

As the healthcare landscape continues to transform, the importance of having a well-defined strategy for reaching employers through direct contracting and other means cannot be overstated. With employers increasingly seeking innovative ways to control costs while ensuring top-tier care for their employees, healthcare providers stand to thrive by positioning themselves as valuable partners in this dynamic shift. A carefully crafted strategy will enable providers to navigate the intricacies of these arrangements effectively and contribute to shaping the future of healthcare delivery for generations to come.

If you’re a healthcare provider looking to discuss a direct employer strategy, please book a discovery call with Insight Healthcare Group.