It’s happening. Actually, it has been happening for years, albeit not very often. Frustrated with increasing premiums and no real solutions from the health insurance industry, large employers are investing in direct contracts with health care providers to deliver health care services to their employees and their dependents.
The practice got its start before WWI, when lumber mills in Tacoma Washington contracted with the Western Clinic to provide health care services for their employees. Leland Kaiser built health care facilities and hired staff to provide services to workers on the Grand Coulee Dam in the nineteen-thirties, a project that was the beginning of today’s Kaiser Permanente.
While there are no statistics on the number of lives covered under direct-contract arrangements, the total number is probably tiny. Unless there is a “magic” combination of a large employer and a dominant health care provider group with extensive facilities in a relatively small geographical area, direct contracting will just be too complicated and difficult to pull off.
But when those conditions do exist, expect more employers to seriously consider the move. Employers that are likely to consider direct contracts include large municipalities, school boards, manufacturing concerns, transportation hubs and entertainment companies.
What does this mean for you?
A business opportunity for providers, another challenge for health plans, and another way to tackle the problem of access and cost.
Aug
29
A local hospital here in Tampa just set up their own network for their employees. They have acute care hospitals and lots of physicians they were already credentialing (for staff privledges). Their TPA negotiates the recruits and contracts with the doctors and the hospital’s HR VP oversees everything. The only pitfall they may have is if they try to keep a high utilizer out of the network their employees access. (Hospitals generally like physicians that keep patients in the hospital for long stays, and of course, managed care philosophy is just the opposiste).
I’ve been “direct contracting for years. I have direct contracts with all three of our local hospitals and with a handful of ancillary providers. For various reasons, I’ve preferred NOT to contract directly with physicians–but that may be changing.
My experience is that most providers PREFER directly contracting with local employer/payers rather than with HMOs, PPOs, etc. This may be because they think they’ll get a better deal although that certainly doesn’t apply to my contracts. Remember, the key is not how many TOTAL lives you have–but how many lives you have that are likely to end up in the OR’s and waiting rooms of the providers. Blue Cross may have jillions of members–but in my town, I’ve got more private pay patients than they do.
Direct contracting is THE solution to optimizing a reduction from any provider’s “prevailing charges” IF the “quo” of the “quid pro” is an economic gain for the provider as well! What might that be? Steerage of patients, streamlined verification of coverage and eligibility prior to the rendition of medical treatment, quick but inexpensive exchange of medical bills with the payer, and most prompt payment of the compensable or eligible medical bill. Can’t say that those who advocate, or contract directly, strive to accomplish those goals, but at the lowest levels it beats anything that any PPO can provide to a payer that truly wants to reduce the health care costs of its Group Medical Plan or Workers’ Compensation program. Try it! It works.
Is there a specific number of lives where direct contracting makes the most sense? I am an employee benefits broker trying to reduce the risk of premium increases for employer groups from 150 lives to 500 lives. Also, are there any good third party vendors with expertise in making this happen? Does this only make sense for a self insured employer or also for one that is purchasing stop loss insurance?