Health systems find direct contracting with employers beneficial, yet difficult

erikjohnsonheadshotContracting directly with large employers to provide care for their employees is an increasing trend among health systems. Successful direct contracting programs address employers’ frustrations with skyrocketing costs by proving value, according to a Hospitals & Health Networks article reprinted in the Spring/Summer edition of Optum RISKMATTERS.

One health system that is proving value, Aurora Health Care in southeastern Wisconsin, works with payers to sell accountable care organization products to employers. Aurora has engaged about 275 employers, representing approximately 22,000 lives, with the opportunity to reduce costs by 10 percent in the first year. Another organization, the Pacific Business Group on Health, offers 1.5 million employees and their dependents access to lower-cost knee- and hip-replacement surgeries. Travel and lodging costs are covered by the employer, and employees don’t have to pay a deductible or co-insurance — investments the employer recoups through discounted, fixed rates for every surgery.

One provider group that participates in the program — Swedish-Providence Health Alliance, who contracts directly with Boeing — recommends six steps health systems can take when directly contracting with large employers:

1. Engage early – Listen to each group’s wants and needs, and find individuals in your network who’ve done this before.
2. Identify data needs – Determine security clearances and software needs; proactively hire data managers and analysts.
3. Staff up – Hire people who are dedicated to the work and motivated to drive it forward.
4. Be patient – Build a foundation that includes processes, infrastructure, employee engagement and care delivery systems.
5. Start soon – Don’t wait to engage in direct contracting discussions; sales cycles can be long and you may have to deal with additional stakeholders, including unions.
6. Just go – Don’t wait for the perfect customer or for every piece of the puzzle to fall into place. View where you want to go, then move.

To learn more about direct contracting and how health systems are engaging employers in these arrangements, download the latest edition of RISKMATTERS here.


About the Author:

Erik Johnson, MBA

VP for Health Management Consulting

Erik is a VP for Health Management Consulting. He has broad experience in designing population health strategies for a broad array of providers. He was most recently Senior Vice President at Avalere Health, where he ran its Healthcare Networks consulting practice and oversaw new product development. Erik assisted healthcare systems in determining how to adopt and assess accountable care and bundled payment models, and guiding overall strategy. Erik also worked with health IT companies in responding to emergent issues around EHRs and data exchange.

Erik has an BA with honors and distinction from Stanford University and an MBA from the Stanford Graduate School of Business.

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