HFMA Weekly News: June 26, 2016
June 26—Large self-insured employers, frustrated with the healthcare system’s rising costs and questionable quality, are bypassing traditional payers and contracting directly with providers and accelerating the development of accountable care organizations (ACOs) in the process.
This new market is providing new opportunities for healthcare organizations, but Dudley Morris, a senior advisor with BDC Advisors, warned that “It’s not a market for the faint of heart.”
Morris, along with BDC colleagues Jackie Macias and Peter Snow, and John Clark, program manager of population health and value care for Raleigh-Durham, N.C.-based UNC Health Alliance, spoke Tuesday at ANI: the 2016 HFMA National Institute. They described ways large companies, like Boeing and Intel, are contracting directly with providers. They also addressed how organizations like California’s Stanford Health Alliance, the Integrated Health Network of Wisconsin and Albuquerque, N.M.-based Presbyterian Healthcare Services are working with such large companies to deliver services to their employees.
They began by quoting Tom Williams, vice president of accountable care for Stanford Health Care, who said that employers “are frustrated because they can’t figure out how to deal with the healthcare system in the same manner they deal with other suppliers.”
Health Benefits Matter
Companies like Boeing and Intel, with highly trained and technical workforces, are losing employees who are seeking better healthcare benefits. So staff retention is another factor driving the direct contracting trend.
“It is a factor, it’s not the only factor, but employee retention is a major issue,” Morris said. “Having somebody quit is very expensive. They take it very seriously.”
Variations in these arrangements include value-based benefit design, high-performance or tailored networks, access to centers of excellence, and direct contracting with ACOs, Morris said. Another new development is companies hiring or contracting with providers to exclusively provide care for their employees.
Morris said how some large manufacturers have utilized a form of the last arrangement with employee clinics, but now service companies also are looking at the model.
Healthcare organizations are forming new structures to meet the demand. Integrated Health Network of Wisconsin is a clinically integrated “Super ACO” with eight participating health systems. The Stanford Alliance is a network of 2,600 specialists, 350 primary-care providers, and 80 urgent care centers. It began by offering services to Stanford employees and it is now negotiating with Silicon Valley companies. And the Stanford Alliance guarantees to match the lowest price offered by any other provider, Morris said.
Increased Volume Of Insured Patients
Citing Boeing’s contract requirements, Morris said the key is to have systems in place that employers find attractive. Some of the elements Boeing requires include primary-care practices with highest level of patient-centered medical home accreditation from the Nation Committee for Quality Assurance, set quality and performance targets, a 24-hour, seven-days a week nurse call line, depression assessment by primary-care providers, and shared decision making between patients and physicians.
“Employers are extremely sophisticated and very serious about improving healthcare for their employees—and saving money,” Morris said. “The tradeoff is that you’re going to get an increased volume in patients, increased market share, and these patients are fully insured.”
But he added that risk needs to be managed carefully. Morris said that about one-third of Boeing’s Washington employees signed up for this benefit and they turned out to be the younger, healthier workers who are low-volume users of healthcare. Older employees with higher healthcare utilization tended to stay with their existing physicians. While this may seem like an ideal arrangement, he said the directly contracted providers have less opportunity for shared savings from the younger patient pool.
For the most part, the pressure to lower costs could be offset by the increased patient volume. Direct contracting is something organizations may want to look at “from a strategic point of view” Morris said.
“But go in for the long haul, at least three to five years,” Morris said. “If you jump in, you can’t jump out.”
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