Our research team breaks down this week’s top healthcare news.
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.
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:
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:
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Non-traditional entities are capturing the value void through innovative models, partnering with funding entities to receive compensation for addressing needs. What activities and strategies should health systems consider?
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The symphony of forces acting on patients, providers, health systems, and investors underscores the need for an urgent and thorough reevaluation of how care is financed and delivered. Fortunately, the ways to move forward don’t rely solely on a strong balance sheet.
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Closing gaps in digital equity will not happen organically. Healthcare technology leaders have an opportunity now to become a major force for positive change as they take the initiative to tackle these challenges and create a more equitable future for all.