Chartis Top Reads – Week of October 31 - November 6, 2021

Chartis Top Reads

Breaking down this week’s top healthcare news

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Chartis Top Reads

Breaking down this week’s top healthcare news

< back to insights

Chartis Top Reads – Week of October 31 - November 6, 2021

Our research team breaks down this week’s top healthcare news.


Top Reads Overview

In an age of unprecedented change, staying current has never been more important. Our team at Chartis is curating news most relevant to the healthcare industry and tracking the topics that are trending on seven key issues: high reliability care, digital and advanced technology, financial sustainability, health disparities, the health ecosystem of the future, partnerships, and the provider enterprise. Each week, we break down what’s happening and why it matters.

This Week's Topics

Financial Sustainability

Financial Sustainability

The Buzz This Week

New York State’s largest private employer Northwell Health (Northwell) recently announced it no longer will be contracting with traditional commercial insurance carriers to provide healthcare benefits to its 75,000 employees and assume risk for healthcare claims. Instead, Northwell will be shifting to a direct-to-employer model using Northwell Direct, a for-profit entity owned by Northwell that connects employers to more than 20,000 healthcare providers in its network, eliminating the need to engage with a traditional insurance company. Northwell Direct also offers select care management programs to navigate healthcare needs and prevent gaps in care. Northwell Direct was founded in 2020 and includes Whole Foods and JetBlue as clients in the New York City Metro area.

Direct-to-employer models are not novel but have gained renewed interest recently as some employers seek to circumvent traditional arrangements with commercial insurance plans and shift to alternative models — with more control over network quality, increased provider accountability, and ideally cost savings. A host of well-promoted start-up entities, independent as well as for-profit affiliates of health systems like Northwell Direct, are seeking to enter this space, direct care, and capture some of the healthcare dollar. This may be contributing to the current renewed interest.

Direct-to-employer contracts are theoretically one-to-one relationships between an employer and a health system or organized network of providers who will be the employer’s preferred point(s) of service. The employer is self-insured, assuming financial risk and responsibility for paying its employees’ medical claims. As implied above, there are often third-party entities involved to help connect the employer to a provider network and/or handle administrative functions (e.g., serving as a third-party administrator), making the arrangement not entirely “direct” but potentially less distant (and less costly) than traditional health benefits plans administered by commercial insurance companies.

There are variations in direct-to-employer models present in the market, including:

  • Capitated or total cost of care (TCOC) models: In this model, an employer pays a capitated dollar amount per employee to a health system or organized group of providers, with or without a third party involved. The provider is responsible for supplying most or all healthcare services to the employer’s workers, and usually must meet cost, quality, and utilization benchmarks. If healthcare expenditures for all employees are below the capitated limit for the year, the provider can share the savings; if costs are above the limit, the provider has to cover the difference. General Motors (GM) and Intel are two examples of companies that have utilized this type of model, often shifting from a “narrow network” model with a third-party commercial payor to a direct-to-employer contract (also a form of narrow network) at a discount. GM has quoted a 10 percent reduction in healthcare costs through its contract with Henry Ford Health System. Intel has reported a 17 percent reduction in healthcare costs through its direct contracts.
  • Episodic bundling: In this model, used primarily by large national corporations, an employer contracts with a renowned healthcare provider for high acuity services or procedures such as heart transplant or cardiac surgery. Walmart employs this model with Cleveland Clinic and other “Centers of Excellence” across the U.S.
  • Access to primary care, disease management, and wellness programs: In this arrangement, an employer contracts with a health system or network of providers to supply its employees with services for primary care, behavioral health, disease management, or other wellness programs (e.g., smoking cessation support, diabetes management). Health systems can provide only these services or can bundle with other services under a broader direct-to-employer contract, as is the case with Northwell/Northwell Direct.

Why It Matters

As direct-to-employer models garner renewed interest from employers, there is an opportunity for health systems and provider networks to grow their patient bases, gain experience under value-based models and benefit financially through these contracts.

Before engaging in a direct-to-employer contract, a health system or group of providers must be sure it can successfully deliver the services promised through the contract and perform well under the terms. For example, the contract between Henry Ford Health System and GM includes an upside/downside shared-savings model, as described in an American Medical Association case study. Henry Ford can share in any savings if costs are kept below an annual limit, but it is responsible for covering costs that exceed the limit. The health system also has to meet 19 metrics on quality, cost, and utilization, and it must ensure same-day primary care appointments for GM employees and access to specialists within 10 days of an appointment request.

Factors that will help a health system or network of providers perform well in a direct contracting model include:

  • A cadre of engaged and aligned physicians who are incented to perform well under the terms of the contract (e.g., to manage utilization/cost, ensure appointment availability, and achieve quality targets and service excellence).
  • A collaborative culture in which patients come first, and in which transparency and accountability are valued.
  • High-performing health system operations including centralized scheduling and/or patient self-scheduling, care coordination processes across sites and providers, and patient care management/care navigation services.
  • Data-sharing capabilities across the health system or network, typically enabled through a consistent electronic health record system.
  • Advanced data analytics capabilities to understand drivers of cost, identify risk, and track quality and other performance indicators.
  • Claims analytics and TPA capabilities to reduce the need for a third-party, particularly if episodic bundling is a preferred model, as many payors and TPAs cannot carve out episodes of care to pay for them differently.
  • Thorough understanding of local employers’ needs, existing insurance models, and market pricing.
  • Experience with population health management and value-based care models, such as the Medicare Shared Savings Program (MSSP), or bundled payment models.

Contributors

Roger A Ray, MD
Chief Physician Executive
[email protected]

Alexandra Schumm
Principal, Vice President of Research
[email protected]

Abigail Arnold
Senior Research Manager
[email protected]


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