Direct Contracting in Healthcare | Real Value for Employers

Direct Contracting in Healthcare | Real Value for Employers

Direct contracting is not a "new" healthcare service; at GM&A, we’ve been doing it since 1999. But for a variety of reasons, mainstream HMOs and PPOs continue to be the default organizations for servicing corporate health plans. One of those reasons, we believe, is recognition. If the decision makers at a given employer have never heard about the concept of establishing direct contracts with healthcare providers, they may be inclined to reject looking into it any further when someone brings it to their attention. A common, instinctive reaction is, "If direct contracting so great, why isn’t everyone doing it?"

We understand that – and the truth is, we don’t want every employer to do it. If they did, then providers might not be as willing to negotiate with us on behalf of our clients. A healthcare provider’s willingness to contract with our clients for deeply discounted services is dependent on direct contracting staying out of the mainstream. It’s the law of supply and demand: If there is enormous demand for direct contracting and it eventually becomes the norm, providers will respond to the demand by raising prices – just because they can. It happened with HMOs, and it can happen to direct contracting if the service begins to permeate the healthcare marketplace.

The good news for employers is that direct contracting is still a valuable, niche service that can save them an enormous amount of money. At GM&A, our research shows that our clients’ healthcare costs reduce by an average of 30% by switching to a health plan that relies on direct contracts. That isn’t the only benefit; direct contracting healthcare services also allow employers to have the valuable cost and performance discussions that just aren’t possible when going the "traditional" health plan route. If an employer wants to know why a healthcare claim was filed by a specific employee, that information is obtainable when there is a direct contracting relationship.

An employer that wants to see hard data on its employees’ health claims isn’t going to get it with a traditional plan; with direct contracting, though, virtually anything is possible. Acting as a broker between provider and employer, GM&A can request the facts and figures the employer needs to make practical, cost-conscious health plan decisions. It’s real value that no other type of health plan provides.

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