Becker's Hospital Review

121 Executive Briefing Sponsored by: E mployers are exploring direct contracting options with hospitals, health systems and other medical facilities in their quest to reduce costs and improve health outcomes for employees. These arrangements can help employers achieve savings, and they are also appealing to provider organizations that have developed strategies to effectively manage the health for specific conditions of a given population. Direct contracting arrangements let employers negotiate bundled case rates with provider organizations, which is a huge benefit for companies looking for ways to achieve healthcare savings. Under these agreements, employers with self-funded insurance plans make a single payment to providers and healthcare facilities for all services to treat a specific condition or provide a specific treatment. Since direct-to-employer contracts aim to maximize cost- savings opportunities, these agreements typically cover highly specialized care and treatments that can be particularly costly, such as cardiovascular care, bariatric surgery or joint replacements. Employers can gain more control over employee health benefit design and realize potential savings by entering into a direct deal with a health system that provides high-quality care with little variability in outcome. These agreements are also a way for progressive health systems and other medical facilities to increase patient volume and market share. However, there is risk involved with these types of agreements. Provider organizations responsible for improving health outcomes and reducing the cost of care for a specific population are exposed to financial risk if treatment costs or patient outcomes don't meet set benchmarks. When this happens, the health system absorbs excess costs of care or is financially penalized for lower quality metrics. To ensure direct contracting terms are fair and sustainable for both employers and providers, stakeholders see value in engaging bundled payment experts for design, development, technology and administrative support. Direct-to-employer models are on the rise Direct contracting arrangements have been on the rise in recent years and are expected to continue growing in popularity as more employers and healthcare providers gain confidence in risk management, according to John W. Adams, director, president and CEO of Global Healthcare Alliance, a Houston- based company that designs, builds and manages prospective bundled payment arrangements. He said payers' lack of progress in improving the value of healthcare has caused employers to seek out direct contracting agreements. "While employers like the convenience of accessing large provider networks at negotiated reimbursement rates through large payers, they are getting frustrated with the payers' lack of innovation and lack of incentive to change," he said. Instead of waiting for payers to more fully embrace value-based care models, some employers are seeking out predictable, multiyear agreements with hospitals and health systems that include prospective bundles for episodes of care. Direct contracting agreements let employers and provider organizations develop innovative partnerships, and they allow provider organizations to operate more efficiently outside of health insurance companies' narrow rules. Mr. Adams believes these types of arrangements will help drive the industry's shift away from traditional fee-for-service medicine. Key factors to consider in direct-to-employer arrangements To achieve success with direct contracting agreements, the employer must first select the right provider to partner with. "Based on the service lines the employer is interested in … they need to select a center of excellence program with high-quality care, significant volumes and a strong reputation," Mr. Adams said. A COE program involving bundled payments can not only promote high-quality care, but also help improve the patient experience and increase cost savings, according to Mr. Adams. He said employers should seek out healthcare organizations that meet the following criteria: 1. The hospital or health system is nationally ranked 2. The healthcare organization achieves better patient outcomes than its competitors 3. The hospital or health system generates enough volume in the specialty covered by the agreement to establish best practices in clinical integration 4. There is a multi-disciplinary team approach among physicians, and other providers, and the healthcare organization 5. The hospital or health system has the capability to administer the program, including patient engagement and navigation 6. The healthcare organization can coordinate the claims administration and adjudication process to ensure proper payment to all of the providers, and manage the shared risk pool The right technology and administrative processes are vital Before entering into a direct contracting agreement, hospitals and health systems need to ensure they have technology with the data capabilities required to manage complex payment Your hospital signed a direct-to-employer contract — 6 factors to help build a successful program

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