Brian DeVore, director of healthcare strategy and ecosystem at Intel, said Intel's new direct contracting initiative follows the company's previous efforts to slow spending and improve workers' health through consumer-directed health plan designs, wellness checks and biometric screening. “I think we've done what most employers have done,” he said. “We realized that wasn't going to bend the trend.”
Intel projected the company could save $8 million to $10 million through 2017 with Presbyterian as better care improves population health, though costs are initially expected to rise, Graham said.
Presbyterian officials saw an opportunity to gain experience with a large, innovative employer that could help inform other direct contracts with other companies. “This is what we must get good at,” said Lauren Cates, Presbyterian's senior vice president of market development and operational planning. “This is our first experience in an employer-driven ACO,” she said. “We believe there's a lot of potential for this in the future.”
The move goes beyond an earlier effort by Intel to work directly with two Oregon hospital systems. And it's more sweeping than direct provider contracts by other major employers, whose contracts typically are limited to specific procedures and conditions. Intel will expand the direct-contracting, narrow-network approach to other markets, Graham said. Its health benefits covered roughly 127,000 people across the country at the end of last year, primarily in Arizona, California, New Mexico and Oregon.
Employers have for years sought to use their clout as buyers to extract lower premium increases and higher quality of care from insurers and providers. But that effort has intensified as companies look for more traction to slow-rising healthcare costs. “Getting the healthcare system to change is really, really, really hard,” said Graham, who said the company has learned from its collaborative work since 2009 with Providence Health & Services, Tuality Healthcare and Cigna Corp.
There, Intel and its partners in Oregon used total quality improvement methods to develop better care processes for back pain, hip, knee, shoulder and headache treatment. Intel and its partners said one result was $2 million in administrative savings in 2011, from reduced costs for patient scheduling and registration, for example.
Helen Darling, president and CEO of the National Business Group on Health, said employers contracting directly with providers “is actually the next logical step. It should have been done earlier, but it's not as easy as it sounds.”
Few employers surveyed by the business group have direct contracts with provider systems. The NBGH survey found that just 7% of the 583 large employers with a combined 11.3 million full-time employees who responded to the poll had such direct contracts. Another 6% said such contracts were planned for next year. “There's more interest than actual action,” Darling said. But that interest, she added, is “intense.”
Darling said employers and health systems are now better prepared for direct contracts after recent investments to diversify operations to include complex services typically undertaken by insurers, such as claims processing or contract negotiations.
Intel joins Wal-Mart in this latest move to use more muscle and talk directly with health systems. The Bentonville, Ark.-based retail giant said last October it would fly insured employees who need certain heart, spine and transplant operations to six health systems with strong quality measures for those operations. Wal-Mart workers will pay nothing for medical care or travel to those centers.
Meanwhile, some provider systems are investing in strategies to capitalize on employers' demand for more savings and companies' willingness to work more closely with providers.