Industry Voices - Health Systems and the Rise of Direct Contracting

As employers continue to experience unsustainable healthcare cost growth, a significant number are starting to embrace direct contracting with health systems to reduce healthcare spending and improve provider accountability for the quality of care they purchase. According to a recent survey by the Business Group on Health, nearly a quarter (24%) of all employer healthcare purchasers are considering contracting directly with integrated delivery systems. Direct contracting’s rising popularity is fueled by results that demonstrate the model can achieve effective, affordable and higher-value care. In fact, we expect it to become dominant in employer-provided healthcare benefits within the next 10 years, which means it’s time for health systems to acknowledge this growing opportunity by developing strategies to successfully compete for direct contracts.

Direct contracting establishes a one-to-one relationship between a health system and a self-insured employer. These employers assume the financial risk and responsibility of paying their employees’ medical claims. Typically, they contract with third parties for enrollment, claims processing and provider network construction. Direct contracting consolidates employee healthcare within an integrated health system for reduced duplication and better coordination, giving the health system and employer greater influence over cost and quality of care.