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October 26, 2019 12:00 AM

Employers finding new ways to collaborate with providers, in search of quality, lower costs

Suzanne Delbanco
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    Suzanne Delbanco

    Suzanne Delbanco is executive director of Catalyst for Payment Reform.

    Most self-insured employers and other healthcare purchasers rely on health plans to act as their agents in the healthcare marketplace—especially when it comes to contracting with providers and administering claims. And it’s likely that the majority will continue in just this way.

    Recently, however, there has been a noticeable uptick in the number of self-insured purchasers, big and small, procuring healthcare services in new ways and outside of this traditional relationship. This offers healthcare providers an opportunity to form new relationships with purchasers directly or with vendors, from alternative third-party administrators to firms that specialize in helping purchasers carve out particular services and send their plan members to hand-picked, higher-value providers.

    This innovation is spurred by a rolling series of revelations over the last two decades. The quality of care and the prices purchasers pay for care can vary widely, with little to no relationship between the two. Traditional fee-for-service payment gives incentives for more care without giving incentives for quality. Meanwhile, provider consolidation is leading to higher prices. Information alone, without benefit design incentives, does not make employees sophisticated healthcare shoppers. And increasingly, Americans are willing to make trade-offs between a broad choice of providers and healthcare affordability.

    So it’s no surprise that fresh players are entering the market to meet the needs of both purchasers and consumers. New third-party administrators are emerging that use quality and cost criteria to create selective provider networks that purchasers can offer as an alternative insurance option to employees at open enrollment. In addition, some of these third-party administrators offer a “concierge” to help members navigate the network; a technology platform that integrates add-on programs offered by the purchaser in areas like mental health and weight loss; and apps that match employees to provider or emphasize the patient’s relationship with the primary-care doctor.

    One third-party administrator is trying something really new—flexible insurance. They have narrowed benefits to coverage for core, necessary services, reducing the basic cost, and patients can add on coverage as needed, providing an opportunity to scrutinize the necessity of the care and find the right provider.

    Another trend among purchasers is to contract directly with healthcare providers. Some contract directly with a health system as an accountable care organization in a shared-risk payment arrangement to strengthen the provider’s incentives to improve the patient experience and the quality of care, and to keep costs under control. Purchasers usually offer these arrangements—essentially a narrow network built around an ACO—as one insurance choice to employees among two or more others.

    Other purchasers identify particular services for which they have experienced great variation in quality and price and carve them out, contracting with a provider who has proven to offer better value, often using bundled payments, and then creating favorable incentives for plan members to use that provider for those services.

    According to the Willis Towers Watson Best Practices Survey, 22% of employers are considering direct contracting with healthcare systems and physicians by 2020 to secure improved pricing of medical services and using centers of excellence through a carve-out provider.

    Contracting directly with healthcare providers isn’t for every purchaser. It requires bandwidth, sophistication and in-house capabilities that are rare. As a result, a new crop of vendors has materialized to support purchasers in doing direct contracting. They pre-qualify providers, negotiate the method and amount of payment, and then bring this packaged, carved-out opportunity to purchasers.

    Not every provider may be eager to add more contracts with new and varied quality expectations and payment arrangements. But for those ready to give it a try and assume some financial risk on a small scale, these new trends pose an exciting opportunity to form new relationships with vendors and third-party administrators and to collaborate directly with those footing the bill.

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