Direct-to-employer contracting and private practice

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Amid discussions of different health care payment models over the years, various references to “direct-to-employer” health care or “direct contracting” may leave some confused.

The most common form of direct-to-employer contracting is a relationship that simply replaces an insurance carrier with an independent administrator to process claims. The independent administrator handles business processes after a fee schedule is negotiated between an employer plan sponsor and a health system, or network of health care providers.

Direct contracting may also exist in centers of excellence such as ambulatory surgery centers, or through direct primary care or concierge medicine. Some of these models are insurance-related models and some are cash pay models administered outside or carved out of traditional insurance.

There has been plenty written on the potential benefits of the direct-to-employer model for patients and providers – but what about for primary care physicians in private practice in particular?

Primary care at the center

Direct-to-employer contracting in the broadest model may be aligned with accountable care organization (ACO) functions. These models have the primary care provider (PCP) at the center of the model where providers participate as part of a health system or owned enterprise or as independents with a practice outside of the flagship system. The ownership structure generally doesn’t influence the role of the primary care provider. Either model, with owned practices or independents, generally establishes the PCP as the “quarterback” for the patient’s care plan.

PCPs are not just at the center of this model but the center of health care in general, touching various other providers and medical services. This is the case regardless of urban or rural settings. PCPs in independent or private practices are most often the mortar between the bricks when it comes to rural medicine. Within urban areas, independent and private practice PCPs are critical to meeting the needs of the community and assisting with capacity constraints. In the most well-functioning models, PCP’s can handle a majority of the high-value care for patients and closely work within referral models that allow for continuity of care and network use that favors the plan for financial utilization and clinical integration of data.

Most clinically integrated networks – arrangements in which like-minded hospitals and/or independent providers share performance improvement, quality, value, and efficiency goals that result in improved quality and coordinated care at a lower cost – have a mix of both types of PCPs, owned and independent. Additionally, most value-based or risk-based arrangements have the PCP as the lynchpin and as the primary clinician within the model that is accountable to outcomes and performance. These primary care clinicians typically receive an incentive when performance measures are met. Often, they can be arranged and aligned with employer needs and the population of patients served. Women’s health may be of particular interest in a teachers’ union plan, whereas musculoskeletal outcomes and optimized care taking into account a return to work may be more important to factory line workers.

What are the benefits?

So how would primary care physicians in private practice benefit from a direct-to-employer relationship?

Within "low-friction" environments in particular – i.e., ones with fewer hand-offs between the people, processes and technology involved – PCPs can flourish within direct-to-employer arrangements.

When we work in collaboration, we can help inform, communicate, and pay for various aspects of the care path. PCP’s are critically important to allow all resources within a network to practice at top of license. Primary care is also important to establish new relationships or to maintain and better manage a patient. It is to the benefit of private practices to be in a tighter relationship with their health plans or patients and have a coordinated workflow with much less administrative burden if everything is being done correctly and information is shared comprehensively.

With a direct-to-employer relationship, PCPs are aligned with a tightly maintained referral network, standing to gain the most from value-based-care performance, where they generally contribute minimally to overall costs. Their appropriate referral to in-network, high-value specialists is critical to maintain cost savings in performance and appropriate utilization.

Shared resources might be offered either through an administrator within a direct-to-employer arrangement or from a system partner. These resources may include medical management, case management, care advisers, transition advisers, utilization management, prior authorization, care navigation, health care analytics, and more.

So long as process and workflow are not completely disrupted, every decision made in this direct model with PCPs and patients at the center, stands to create benefits for patients and health plans.

Patient views

Providers often wonder how the patient views whatever alternative payment methods or contracts are hanging behind-the-scenes. But the truth is that patients are steadfast in what they have always wanted: value, convenience, and low friction.

An employer with high turnover (such as a chain restaurant or retailer) might know that customer satisfaction and quality are important, but not as vital as convenience. Short-term costs are front and center and may cycle every year because turnover is simply too high. This sort of population still needs management, but in risk-based arrangements, the employer may not see the benefit of better, high-value care delivery from a robust PCP arrangement.

Health plans for a school district, municipality, union, or a destination employer, should be doing more than just checking the box for an adequate, low-cost health plan. Progressive and strategic human resource leaders want employees to feel like they're getting something special. If they have to leave work, a more intimate relationship with their PCP allows them to better accommodate their schedule and to be more well informed of appropriate use of emergency departments, urgent care, and telehealth options. This way, patients can receive outstanding service, and the experience is not disruptive to patient satisfaction or employer/employee productivity. This is a marked example of how important a high-value PCP might be in a well-managed health plan.

Patients and consumers of health care often want simplicity. If the model is improved in most or all of the "key" areas patients use to measure their providers, such as value, convenience, and low friction, it could make the interface and experience better.

Ultimately, when there are too many stop-gate mechanisms or middlemen in between patient and clinician, it dilutes the value of that one-to-one relationship. Whereas a closer and more streamlined relationship with providers and provider systems creates an enhanced relationship for patients and better continuity. Needs are easier to meet, friction is reduced, and a more complete picture emerges driving cost out.

Potential hurdles

Of course, any private practice PCPs involved in a direct-to-employer relationship will have some potential hurdles and ripple effects to consider.

For example, independent practices can find critical mass when aligning with larger entities, but can also be overwhelmed by requirements for clinical integration given the amount of stakeholders being served in this equation. Being a part of a direct-to-employer system doesn’t always help with capacity constraints. Additionally, the overhead required to be compliant, interoperable, and efficient within risk-based clinically integrated networks can be a detractor.

Governance is a double-edged sword. You do have to align incentives and, as part of the clinical integration, data-sharing is expected. Some PCPs have traditionally balked at having to share data with larger hospitals or health systems, despite it ultimately being of benefit to their patients and helping to form a more complete picture for a care plan.

Benefits administrators can help providers through this process by forging collaboration, aiding with outreach, providing analytics and metrics, and offering transparency, while designing a plan around key anticipated outcomes, and reporting on it.

A way to flourish

In principle, the health care industry seems to agree that this is fundamentally the right direction it needs to shift in, despite any lingering logistical concerns or red tape that may be holding many back from taking the leap.

While primary care providers who are considering participating in such a model will need to weigh the risk to benefits, primary care can truly flourish within direct-to-employer arrangements that revolve around working with partners on designing care that is beneficial to everyone, sets expectations in advance, tracks accountability and continues to reduce friction in the process.

Troy Williams is vice president, health systems partnership for First Choice Health, an alternative to traditional health care insurance headquartered in Seattle. Previously he served as the vice president of employer solutions for Vanderbilt University, where he was responsible for the school’s statewide clinically integrated network product as well as partnering with Aetna, UnitedHealthcare, and Cigna. He has worked for GE Healthcare and Unisyn, where he was the vice president of service sales.

Anisha Sood is chief financial and strategy officer for First Choice Health, where she oversees finance, strategy, and corporate development. She joined FCH in 2019 and has been a partner at health care investment firm Echo Health Ventures, a principal in Cambia Health Solutions' strategic investments group, and a vice president of health care investment banking at Credit Suisse.