Healthcare systems broker agreements not only for themselves, but also for other employers looking for direct contractual benefits.
A growing number of providers are disintermediating the area of payers through direct contracts with employers.
In search of significant savings and a strategic turnaround, hospitals and healthcare systems broker agreements not only for themselves but also for other employers looking for direct contract gains. New York-based Northwell Health is one such scheme, putting all of its 75,000+ employees under coverage managed by its contracts arm, Northwell Direct, and benefits administrator, Brighton Health Plan Solutions.
A few months after implementation, HealthLeaders spoke to executives from both companies – Nick Stefanizzi, VP and CEO of Northwell Direct, and Michelle Zettergren, director of labor and chief sales and marketing officer at Brighton Health Plan Solutions – about their partnership and its broader industry impact and implications.
HealthLeaders: Describe the decision-making and implementation processes that led to your new model.
Nick Stefanizzi: We made the decision last year to continue with Northwell Direct Network, a separate but affiliated company whose services are managed by Brighton. We have a close partnership and this has allowed us to move forward quickly in just a few months. Frequent communication across multiple channels is key. We were willing to work with collaborators, uncover issues, recruit vendors – anything that needed to be done. And we believe in this model; It’s the way of the future.
HealthLeaders: How does direct procurement differ from what self-insured (SV) employers already do in the trades? Provider network and membership programs?
Stefanizzi: Direct contracts put the patient-provider relationship at the heart of organizing care, making decisions and focusing solely on best outcomes – not shareholder returns. The fact that there is no intermediary allows us to curate programs and interventions that drive savings and engagement. Another difference is that employer-provider contracting usually revolves around a center of excellence based on certain conditions. Our approach includes a robust clinical network that is local, capable of delivering all care and meeting staff where they are.
Michelle Zettergren: Some large SI employers have been doing this for some time – Boeing, General Motors – but smaller SI employers have not been able to engage in things like directly setting rates and experimenting with reference-based pricing.
HealthLeaders: Can you talk more about the price and value aspects?
Zettergren: Employers have historically opted for the traditional insurance model by default. But the price for this status quo is unsustainable. According to the Kaiser Family Foundation’s annual survey, the average family insurance premium has increased 22% over the past five years and 55% over the past 10 years.
Contracting directly with a healthcare system – with no intermediary – is a viable alternative, in part because of the value-integrated supply networks [IDN] bring to market: patient care coordination, collaborative EMR, health and wellness engagement strategies based on real-time data, and provider collaboration on patient outcomes.
Employers are increasingly interested in getting value for the money they spend on employee health care, just as they analyze value for any other contractual relationship. Because direct contracts are a partnership between a healthcare system and an employer where they agree on costs, transparency, data sharing, and ways to share savings, the potential for both parties to benefit is significant. For example in Northwell Health’s new direct contract offering, Northwell Direct, where Brighton serves as the TPA [third-party administrator] Partner rates are up to 20% lower than the best traditional rates.
HealthLeaders: What are your plans to involve other employers in this model?
Stefanizzi: We talk to employers all day, every day. We tell the story of how this represents value and savings for us based on repricing analysis and breaks in the adequacy analysis. There are also clinical and quality opportunities to deliver programs that are different and better. Whenever we can, we bring data to the table and emphasize that building relationships between organizations is key.
Zettergren: There is also a measure of credibility when a provider makes this choice for themselves, their employees, and their loved ones. It speaks volumes.
HealthLeaders: What are the key market drivers, including IDN selection, where direct contracts will emerge??
Stefanizzi: Even a strong IDN may not be enough to meet all needs without turning to others to fill gaps. Specifically for Northwell serving New York, our network needs to span New Jersey, Connecticut and the Hudson Valley.
Zettergren: We’ve seen a lot of vendor M&A activity over the past decade. Today, only a few community hospitals remain — 67% are now part of a healthcare system, according to the American Hospital Association. We will see direct contracts emerging across the country but first in markets where there has been a lot of consolidation and where there is a TPA partner like Brighton to facilitate the partnership.
HealthLeaders: How IDN-affiliated providers see the move to direct contracts?
Stefanizzi: In general, physicians and service providers see relationships directly with the employer positively… The administrative burden for physicians is generally less because they work cooperatively and directly with the network, unlike a traditional carrier… The scope, frequency and denials are also greatly reduced these direct relationships with Employers, resulting in greater physician satisfaction.
HealthLeaders: What impact, if any, is the pandemic having on direct procurement?
Zettergren: Employers across the country have proactively reached out to their local health systems for assistance with COVID-19 safety protocols, on-site testing and on-site immunizations. We have observed that pandemics and workforce changes have been drivers and accelerated interest in partnerships between employers and healthcare systems.
Laura Beerman is a writer for HealthLeaders.