Healthcare Uncovered Episode 19: Direct Contracting: Where to Start

Dr. Eric Bricker
Dr. Eric Bricker
October 26, 2023

How much do you know about direct contracting?  

The idea that by teaming up with a hospital or surgery center you can set up agreements directly with employers, effectively bypassing insurance middlemen.

Sounds great, but not sure where to start? I'm breaking down how it all works.

You probably have heard about direct contracting in healthcare.

It’s when a doctor and a hospital or surgery center form an agreement directly with an employer to provide care to their employees and their families... effectively bypassing the insurance company and its cumbersome payment system.

Direct contracting can be done for an array of services – from elective surgeries such as joint replacements and spine surgery to primary care practices for on-site and near-site clinics for an employer.

But Direct contracts are different from traditional insurance contracts in several ways:  

1. The total cost of a procedure is typically bundled into one price.  

That one price includes the surgeon’s fee, anesthesiologist’s fee, the facility fee and any pre and post operative care.

Doctors and the facility fees are not billed separately.

2. There is a warranty on the outcome of the procedure.  

Any complications from the surgery are addressed by the doctors and hospital without any additional charges to the employer.  

3. The doctors and hospital benefit by having the employer steer employees and their family members to them for their services by offering the surgery to the patient at zero out-of-pocket cost

AND finally...

4. The employer will oftentimes pay for travel to the doctors and hospital for the patient and a family member.

It’s win-win-win.

It’s a big win for patients who get to have their surgery done at no additional cost to them.  

  • The employer wins by having their price guaranteed and not having to pay for complications.
  • The doctors and the facility win by having more patient volume from a payer that may pay slightly less than commercial insurance, but still pays a lot more than Medicare.  
  • Plus, the employer typically pays much faster than the insurance company does.

Let me give you a concrete example:

The classic example of direct contracting is from Walmart, the largest private employer in the country.

Walmart first started entering into direct contracts with physician groups and hospitals over 20 years ago for elective surgeries like joint replacement and spine surgery. And they have had fantastic results. Patients and employers love it.  

For example, joint replacement complication rates via direct contracts are 70% less than the industry average and spine surgery complications are 95% less, with a return-to-work rate that is 3 weeks sooner.

Doctors and healthcare facilities love it because it's Walmart paying, which means they get paid faster than by going through the cumbersome process of dealing with commercial insurance

Even though the rates will be typically lower, yet significantly higher than Medicare.

And it’s not just Walmart.  

GM, Intel, Lowe’s, Boeing, Disney and many other companies also engage in direct contracting with doctors and hospital systems. Many physician groups would like to set up similar direct contracts with employers, but they don’t know where to start.

Doctors, there are alternatives.  

Fortunately, there are newer networks outside of traditional insurance carriers that set up arrangements similar to a direct contract.  

You have options- like joining the Nomi Health Open Network which is really taking a radically different approach.

Healthcare shouldn’t be complicated. Check out Nomi Health’s Open Network of physicians to break through the red tape, collect the money you’ve earned, and get back to why you’re doing this in the first place.... helping patients.

Join the Nomi Open Network

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