Outside of health benefits, your organization is likely to have direct relationships with hundreds of partners with specific agreements, point of contacts, the price for services, and expected quality of delivery. Why can’t it work for health benefits? It can.

Contrary to popular belief, direct contracting with health systems is not a new idea. It had been tried and tested several times before and has proven to be successful for several employers. Large companies such as Boeing, Walmart, Intel and many others have successfully implemented it to lower costs and improve outcomes.

Can this model work for everyone?  Yes, but the success heavily depends upon the motivation of the employer to make it happen.

Let us start with the reasons why someone should not make a switch. First look at your overall healthcare costs. Are you Ok with the amount you’re spending as well as the inflation rate? If yes, why fix it when it is not broken for you.

But if you are like most businesses, you are not happy with the rate of cost increase. Now try to answer the next business question – What is the value or ROI you are getting in return for your healthcare spend?

The ROI can be determined based on the following formula.

Value = Outcomes/dollars

If you are unclear about the value, then you may not currently have the right metrics to justify increasing the budget this year or next.

What kind of outcomes should you be tracking to determine ROI?  Professor Michael Porter suggests that outcomes can be based on the improvement in the medical conditions of your population. For example, if your employee population is facing serious chronic conditions, is your medical spend improving that condition? If not, your money is not bringing the returns it deserve.

Of course you can measure other metrics such as average number of days taken by employees with a specific condition to come back to work.  Beyond the health outcomes, you can also set metrics based on member experience; such as how long it takes for your members to get appointments, how engaged are your providers in getting your employees go through annual wellness checks? How satisfied are they with the service they receive from your provider network.

If the answers to these questions is “not sure”, you may want to explore direct contracting, which will help you take direct control over the cost of care, define and measure the metrics and align the payments to your provider partners.

Obviously, this is not going to be easy. You must have serious purchasing leverage as well as support from an intensely focused administrative intermediary to make a move toward direct purchasing.

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