Health systems are brokering arrangements for not only themselves but other employers looking for direct contracting gains.
A growing number of providers are disintermediating the payer space through direct contracting with employers.
In a search for significant savings and a strategic game-change, hospitals and health systems are brokering arrangements for not only themselves but other employers looking for direct contracting gains. New York–based Northwell Health is one of those systems, moving all 75,000 plus of its employees to coverage managed by its contracting arm, Northwell Direct, and benefits administrator Brighton Health Plan Solutions.
A few months into implementation, HealthLeaders spoke with executives from both companies—Nick Stefanizzi, VP and CEO of Northwell Direct, and Michelle Zettergren, president of labor and chief sales and marketing officer at Brighton Health Plan Solutions—on their partnership and its broader industry impacts 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 move forward with Northwell Direct Network, a separate but affiliated company with benefits administered by Brighton. We have a tight partnership and that has allowed us to move quickly in a few short months. Frequent, multi-channel communication is key. We were willing to work with employees, surface issues, recruit providers—everything that needed to be done. And we believe in this model; it's the way of the future.
HealthLeaders: How does direct contracting differ from what self-insured (SI) employers already do to craft provider network and member programs?
Stefanizzi: Direct contracting puts the patient-provider relationship at the center of how care is organized, how decisions are made, and is focused 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 thing that's different is that employer/provider contracting normally revolves around a center of excellence based on specific conditions. Our approach involves a robust, clinical network that is local, can provide all care, and that meets employees where they are.
Michelle Zettergren: Some large SI employers have been doing this for a while—Boeing, General Motors—but smaller SI employers haven't been able to engage in things like direct rate setting and experimenting with reference-based pricing.
HealthLeaders: Can you talk more about the pricing and value aspects?
Zettergren: Employers have historically chosen the traditional insurance model by default. But the price for that status quo is unsustainable. The average premium for family coverage has increased 22% over the past five years and 55% over the past 10 years, according to the annual Kaiser Family Foundation survey.
Direct contracting with a health system—with no middleman—is a viable alternative in part because of the value integrated delivery networks [IDN] bring to the market: patient care coordination, shared EMR, health and wellness engagement strategies based on real-time data, and provider collaboration on patient outcomes.
Employers are increasingly interested in achieving value for the money they spend on employee health benefits in the same way they analyze value for any other contractual relationship. Because direct contracting is a partnership between a health system and an employer where they agree on costs, transparency, data sharing, and how to share savings, the potential for both parties to benefit is substantial. As an example, in Northwell Health's new direct contract offering, Northwell Direct, where Brighton serves as a TPA [third-party administrator] partner, rates are as much as 20% lower than the best traditional rates.
HealthLeaders: What is your plan for bringing other employers into this model?
Stefanizzi: We talk to employers all day every day. We tell the story of how this has been value-additive for us, and a savings opportunity based on repricing analytics and disruption in adequacy analysis. There are also clinical and quality opportunities to offer programs that are different and better. We bring data to the table whenever we can and stress that building relationships between organizations is the key.
Zettergren: There is also a level of credibility when a provider makes this choice for themselves, their employees, and their dependents. It speaks volumes.
HealthLeaders: What are the key market factors at play, including IDN selection, where direct contracting will emerge?
Stefanizzi: Even a strong IDN may not be enough to meet complete need without looking to others to fill gaps. For Northwell specifically, serving New York, our network has to stretch into New Jersey, Connecticut, and the Hudson Valley.
Zettergren: We've seen a lot of M&A activity in the provider space over the past decade. Today few community hospitals remain—67% are now part of a health system, according to the American Hospital Association. We'll see direct contracting emerge across the country but initially in markets where there has been a lot of consolidation and where there is a TPA partner like Brighton to enable the partnership.
HealthLeaders: How do IDN-affiliated providers view the shift to direct contracting?
Stefanizzi: In general, physicians and providers view direct-to-employer relationships favorably … There are generally reduced administrative burdens for physicians since they work collaboratively and directly with the network as opposed to a traditional carrier … The volume and frequency and denials are also greatly reduced in these direct-to-employer relationships, which leads to greater physician satisfaction.
HealthLeaders: What impact, if any, has the pandemic had on direct contracting?
Zettergren: Employers across the nation have been proactively reaching out to their local health system for support on COVID-19 safety protocols, on-site testing, and on-site vaccinations. We've observed that pandemic and workforce changes have been drivers and have accelerated interest in employer-health system partnerships.
“We believe in this model; it's the way of the future.”
Nick Stefanizzi, CEO, Northwell Direct.
Laura Beerman is a contributing writer for HealthLeaders.
Northwell Direct and Brighton Health Plan Solutions are in a direct contracting relationship that moved all Northwell Health employees to a new coverage model.
The companies are now looking to broker direct contracting for other employers.
Both companies say that direct contracting can become a successful and prevalent alternative to traditional payer relationships.