Health systems and employers are bypassing insurers to deliver higher-quality, more affordable care

By MICHAEL J. ALKIRE

Employee health plan premiums are rising along with the total healthcare spending tab, spurring employers to rethink their benefits design strategy. Footing the tab, employers are becoming a more active and forceful driver in managing wellness, seeking healthcare partners that can keep their workforce healthy through affordable, convenient care.

Likewise, as health systems assume accountability for the health of their communities, a market has been born that is ripe for new partnerships between local health systems and national employers in their community to resourcefully and effectively manage wellness and overall healthcare costs. Together, they are bypassing traditional third-party payers to pursue a new type of healthcare financing and delivery model.

While just 3 percent of self-insured employers are contracting directly with health systems today, dodging third parties to redesign employee benefit and care plans is becoming increasingly popular. AdventHealth in Florida announced a partnership with Disney in 2018 to provide health benefits to Disney employees at a lower cost in exchange for taking on some risk, and Henry Ford Health System has a multi-year, risk-based contract with General Motors.

The notion of bypassing payers is attractive for employers, especially on the back of consecutive cost increases they and their employees have swallowed over the last several years. Payers have traditionally offered employers rigid, fee-for-service plans that not only provide little room for customization, but often exacerbate issues with care coordination and lead to suboptimal health outcomes for both employees and their families. Adding to this frustration for employers is the need to manage complex benefits packages and their corresponding administrative burdens.

The direct-to-employer model is necessary, but hard to get right

In a direct-to-employer contract, a health system partners with an employer to create a customized health plan that is based on predictable outcomes and provides healthcare services that span the continuum of care, from primary care and inpatient stays to rehabilitation. These arrangements allow employers to work directly with health systems to share in the cost and quality gains that come from improved outcomes. One major pro is that the health system owns the employee health data, unlike in managed care arrangements.

While today’s claims data is often held ransom by third-party payers, direct-to-employer plans create actionable insights for providers. The increased transparency into claims information enables health systems to deliver the most appropriate care using evidence-based practices. This allows them to digitally monitor at-risk employees; easily measure, track and compare progress; and engage in more coordinated care practices to improve outcomes and reduce variation and waste.

All of this may sound great in theory, but one major challenge exists: with few direct-to-employer contracts in the marketplace today, a large national employer, such as Target or Lowe’s, has no evidence that it can form a nationwide network of providers that delivers consistent value-based care. Most of what we’ve seen in the market up until now are Centers of Excellence (COE) programs, a space in which Walmart has been a leader.

Labor and delivery account for 20 percent of the employer’s spend on healthcare nationally, and children born with health problems consume more than 60 percent of all dollars spent on dependents. To get a better handle on these costs and reduce the variation in outcomes, Walmart started contracting directly with health systems as part of a COE program that helps evaluate whether care is needed – and if so, that it’s delivered appropriately from the onset.

As a major national employer, Walmart has figured out that better costs and better outcomes means happier employees. But, while COE programs are great for employers contracting with health systems in a specific area, employers have yet to create a successful prototype for how to duplicate the model across the country.

The keys to making it work

This win-win-win scenario for health systems, employers and employees can yield success faster when providers have access to the right technology and data, and are committed to learning from each other.

First, any such attempt needs to be provider-led. Employers are clearly open for alternatives to current managed care agreements, but they need to be sold by health systems on why and how this style of contracting will work for their specific workforces. Health systems’ engagement in leading this effort will set the direction and pace, and this will encourage endorsement from major employers.

Secondly, data and technology will need to be intelligently leveraged to identify leading practices as well as common areas of opportunity for improvement. Savvy health systems will routinely use data to drive enhanced networking and create best practices. They will analyze claims and pinpoint variation, benchmark performance in high-value episodes of care, drive gap assessments and performance improvement activities, and generate appropriateness criteria for specific episodes of care. They need to show employers how technology, such as clinical decision support tools, can prompt providers to follow evidence-based practices at the point of care, and how their surveillance and monitoring capabilities are leading to improved outcomes and lower costs today.

The most important factor here will be shared learnings. When health systems commit to sharing data and insights, they also get results. Expect for collaboration around leading and lagging practices – and joint development of interventions – to drive innovation in this space and a faster spread of these networks, and thus more prompt and appropriate care for employers’ entire workforces.

There’s no doubt that employers today are seeking alternatives to the managed care models that have insured their workforces – and, in some cases, left something to be desired – for decades. Done well, direct-to-employer models can benefit employers, employees and the local health system, all while generating actionable data to eliminate unnecessary variation in care practices and drive improved outcomes. This is exactly the type of innovative care model that today’s health systems should be leaning into and collaborating around to ensure employers in their own backyards have coordinated, strategic healthcare partners.

Michael J. Alkire is the Chief Operating Officer of Premier Inc., a leading healthcare improvement company uniting an alliance of more than 4,000 U.S. hospitals and health systems and approximately 165,000 other providers and organizations to transform healthcare.