Direct-to-Employer Contracts: Benefits to Your Health System

Episode Overview

Transcript:

Daniel J. Marino: Welcome to another episode of Value-Based Care Insights. I'm your host, Daniel Marino. For today's episode, we're going to spend some time talking about direct-to-employer arrangements that over the last couple of years have really started to take off. It's no secret that health care spending has really increased for many employers to the point where employers can't afford to even provide health care insurance for their employees. I was reading a recent article that the cost of health care was the number one issue impacting small businesses. Today with the rise of inflation, managing our workforce is an additional challenge being placed on particularly small businesses, but health insurance premiums continue to rise. When you couple that with some of the inflationary pressures we're seeing right now, pressures is placed on our employers. So the whole concept of creating a direct contractual relationship between the hospital or the provider network in a community, and the employer within that community has a tremendous amount of benefits, not just in terms of reducing costs, but also in streamlining the services and creating a great partnership between the health care provider and the community employers.

So joining me today, I have two wonderful guests, Brad Olson, who is a senior leader in charge of managed care services for a large Midwest health system, and his colleague, Britney Bart, who is in charge of business development and corporate liaison for the corporations in the businesses within their community. Brad and Brit, welcome to the program!

So Brad, let's start with you. As we think about these direct-to-employer arrangements, they can take on different structures. There's a lot of different types of services that are out there. As you've started to structure some of these, what are some of the key structures or contractual relationships that you're seeing that have  been beneficial to employers within your community?

Bradley Olson: That's a great question. I know that in a number of different opportunities that I've had to lead organizations in the last 20 years, I think it all comes down to the value equation, that value equation between cost and quality is very important. As you evaluate where you want to go and where you need to meet that employer, sometimes it's a relationship with a network that has an exclusive arrangement for a DTE for that importer. Sometimes it's a relationship with a TPA, sometimes it's working directly with the employer themselves. It can look like a number of different things: it can be a center of excellence, it can be a complete replacement program, it can be an alignment of some sort with that employer, so it can look and act in a number of different ways. And then the main thing to be thinking about is how both entities come together to produce a better value equation than they had recently or they haven't had in the past.

Daniel J. Marino: Right, I agree with you. And when you think about the needs of the employer, the biggest need right now is for the employer to provide strong health care insurance coverage for their employees, but to do it in a way that is cost effective. And a lot of times when the employers are thinking about providing those services, in some cases, those costs can be 30% of their overall budget, if not a little bit more. So when you're seeing these contractual relationships, are you seeing a value proposition around being able to reduce that premium dollar for the employer, or is it more around improving the overall service that's occurring?

Bradley Olson: I believe it has to be both. I believe there has to be a tighter connection and a relationship so that employers don't feel like they have to go through the nuances of a large insurance organization. So there is the collaboration, it could be where an ID card has the logo of the facility or provider. That way it makes a deeper connection, it removes the “where do I go for those services?”. I also believe that it has to be cost effective. If it's not cost effective, there's really not a need to make a big change on where that employer historically has received their health care. If that was a large national carrier, or a local carrier, I think the main thing is to create that value equation that both parties lean in and create something that may be different, maybe a little bit new, but it may provide a 10 to 15% reduction in their health care costs. But it also provides predictability for hopefully years to come.

Daniel J. Marino: I would agree with you. I would think that at least initially, the focus is on maybe reducing, offering some level of a discount of particular services. But as we've talked about many times on this program, the real benefit for patients and for providers, and even for folks in the community is to put in place some type of value-based arrangement. Are you seeing a lot of direct-to-employer contracts? Are they all based on reducing or offering a discount? Or are you also incorporating some type of a value-based component where you're actually sharing in some potential savings of reduction of cost? 

Bradley Olson: Our organization didn't go the shared savings route, we preferred to work towards more of an exclusive or a tiered arrangement.  What we wanted to do was give all that savings back to the employer. And in return, we got the market share growth or the direction. And so from that standpoint, there's a number of ways to be able to do that. I believe if they’re getting the steerage (meaning the hospital system, maybe even the providers, clinically integrated network), you don't always have to get a shared savings component out of that. Now, if it was a limited steerage, and it was a limited relationship with the employer, you may want to build in some pay-for-performance opportunities that could share in that reward. However, we just haven't done that at this time in our direct-to-employer relationships.

Daniel J. Marino: As I was hearing you talk about that, it reminded me of a conversation that I had with a client not too long ago. We were working with a health system in the Midwest, and putting together a direct-to-employer arrangement. And this particular health system had a fairly large provider network that was obviously incorporated  with the hospital. And when we built the arrangement, we had to offer at least a 10% discount in order to make it worthwhile for the employer. And I can remember a couple of physicians coming to me and saying, “Why would I want to accept a discount when I'm getting the full rate from the insurance plan?” And really, the value proposition is around what you said. If you're able to create a stronger relationship with those employers, and are able to pick up a little bit of volume and utilize what we call the domestic network, then it's a volume play in the relationship, right?

Bradley Olson: You're absolutely right. I think in any organization as they go through the evaluation stage of a direct-to-employer arrangement,  you have to look at your payer mix. Payer mix comes into play into all these equations for a physician organization.  We've taken the position to keep our physicians whole. On the hospital side of the equation, we've taken the position to take the reductions. That way the physicians remain engaged throughout the life of the relationship. They put those members, maybe, in the same position on their panels. They get even a little bit of a special attention with a navigator or a call-in phone number if they need some support. Then the physicians don't see this as a deterioration of their panel or their revenue. The hospital though, can help to migrate their payer mix into a little bit favorable position.

Daniel J. Marino: That's a great point. I'm really happy to hear that’s the way that you structure it with your providers, because I do think there's a little bit more flexibility you have in the hospital. And plus I think it shows just the partnership that you have between the hospital and the provider network to really offer a strong service to the employers. One concept I do want to get your opinion on is this whole thought around value congruence. As I was working with a number of organizations around the country, particularly clinically integrated networks, one of the big frustrating areas is that these clinically integrated networks (which are provider networks and hospitals coming together with the idea that they're managing together cost and quality), and most of those that have been doing a good job with that have really reduced the cost of care. And the challenge that many of these high performing clinically integrated networks have seen is that as they are reducing the cost of care and that cost reduction isn't necessarily being translated back to the employers in the way of lower premiums. In some cases, the insurance plans are actually reaping some of those benefits and opportunities. And unfortunately, they're even offering higher premiums to the employers. So this thought about value congruence - where you're able to directly link any type of shared savings, reductions of costs that are occurring from the network- seen as a true benefit to the employer? Is it something that's really important? How is that coming into play within your direct-to-employer strategy?

Bradley Olson: Another great question. What we've done and been very intentional.  Throughout the creation of the direct-to-employer relationship with that TPA, or with that network, what we make sure is we investigate all components of the premium dollar. What we've seen is exactly what you just articulated - the hospital will lean in with a reduced rate, however, somewhere in the premium build - up the rate or the premium that goes back to the employer - never materializes. So what we do is we dissect from the pharmacy benefit, to the physician benefit, to the hospital benefit, to the ancillary, to the lab, and we go through all those pieces. And then we begin to ask the relationship around the stop loss carriers. Are there any kickbacks on the stop loss? Or are there kickbacks in the pharmacy? Because what we want to try to do is put as much money back into that employer's hands so that they're extremely supportive of this relationship. So when they're in their chamber discussions, or in their business meetings inside their communities, they're talking about the great things that come from this relationship. It didn't materialize from that relationship. Those are things that you have to look at. It's a very detailed and complex design. However, having those kinds of more stringent conversations at the beginning of the relationship really helps to reduce problems downstream and years to come.

Daniel J. Marino: Absolutely. I think just building on that, it aligns the incentives. So knowing what the cost targets are, what the actual cost is of providing the service as a health care provider, you're able to take that to the employers and say, “here's what's driving your costs.” Whether it's poor diabetic management, or there's a predominant view of employees having high blood pressure, whatever the case may be, you have the ability to be able to manage that from a chronic disease perspective. But you also have the ability to manage efficiency of utilization, which often gets lost. That's where the real value comes in. An important part of these direct-to-employer relationships, obviously, is the employee. The success really comes down to the comfort level of the employee, the ability of the employee to use the contracted network. As we begin to structure that, maybe within the benefit plans, I would think that's got to be an important component. How have you worked with the human resource (HR) folks of the employers to structure a benefit plan that creates the right alignment of incentives between the employee, the employer, and you as the provider? Anything that you can share in that regard?

Bradley Olson: Our large Midwest CIN has historically allowed the TPAs in the networks to work with the employers in that design. Our contracts talk about what we would like to see from that, the type of steerage, the type of benefit design, but we have never been in contact or direct contact with the HR departments. That has historically been between the network, the TPA, and the employer.

Daniel J. Marino: So you've probably provided some components to it but not necessarily have worked with the HR folks are the benefit folks to really design what that benefit structure is for the employees.

Bradley Olson: We have requirements in our relationships with the TPAs and networks. We asked for our logo on the ID cards, we asked for differentiations in the benefit design and the tiering. However, we are not paid to staff up to take those types of calls and to be that intermediary. A lot of times consultants are the brokers. They're the ones that are part of that relationship with the HR departments and their employers.

Daniel J. Marino: Right, they would manage it and oversee it. I think just based on your requirements, it would be an important step to make sure you're closing the loop. So Brit, let me turn this over to you. You've got an interesting role. You work with many of the employers on setting up different types of programs. With some of the wellness programs that you structure, how is it linked in with some of the direct-to-employer relationships that you have between your health system and with the employers?

Britney Bart: That's a great question. That's part of what I was going to add on to what Brad said. Outside of the contracts, we do have teams who work directly with HR folks at different employers, and they really take time to get to know them, and what their culture is and what their needs are in terms of their health and wellness benefits, to support whatever other initiatives they may have. A lot of times when you talk about what's driving costs, part of what Brad does is impacting costs, and then part of what our team does, we have teams to do biometric screenings. It is interesting when you pause to think about it's just a simple biometric screening. But how many people go to their doctors every year and get that information so that you know what your BMI is, what your cholesterol is, and what your blood pressure is. The other part of that is, when you get biometric screenings done, you get an aggregate report. So to your point earlier, you need to know what is driving costs outside of the utilization of the ED so you can really tailor costs. If we find that there's a lot of high blood pressure, how do we work with that group to really design programs that are engaging and meeting people where they are? I think there is that complimentary approach. Even if it's not directly a part of the value-based contract there is a way to support what that contract is trying to do from another perspective. We're focused really on that employee and that employee optimizing their health to thrive at work.

Daniel J. Marino: I absolutely agree with you. A lot of times you know, within your network, as we think about the value of what clinically integrated networks, what provider networks can provide - not only do they create efficiencies from the care that's being delivered to patients, but as they start to manage chronic diseases, and as they start to proactively manage certain health conditions of patients, there's a lot of value that comes out of that by reducing future costs. But that concept around the value congruence, physicians are only as successful as the compliance and the relationship that they have with their patients. I would think in hearing you kind of talk about your program, you become that link between what the physicians provide, the chronic disease management programs that they put in place, and then getting the employees to participate in those programs. That's the real value congruence.

Britney Bart: Yes, I would agree with you. And we've got a really wonderful example of that here. It was what you were saying, because there's a lot to care continuity you alluded to earlier, when you have that whole care continuum, under one network - since it's not fragmented, you're not going here for one service, and then to another place for another service. There is that whole continuity. We have an example of an onsite clinic with a local employer, and we really hand select the provider who's there based upon the culture.  Because of that, there's a lot of trust. I'm setting up the story because there's so much to that because then those employers, those employees, those associates who may not have been to a physician in the past, but because they've engendered this relationship with this person who's onsite, they feel comfortable going. So they seek care earlier, they don't delay care.  All of those things contribute to that value. But then when you add biometrics into it, and have follow up onsite with that provider, that is another element. So you can really see how everything comes together and is linked and how that provider can then do a warm handoff if a specialty referral is needed.

Daniel J. Marino: Because really what you're doing is that the provider in the employee is building a really strong relationship, and it's that relationship around not just providing the health care service, but it's really building the trust.

Britney Bart: Exactly. Well, and as I said earlier, if you trust that person, you're not going to delay your care. You're gonna say, “gosh, I have this”, you may not have stopped at your physician office or an urgent care clinic, but this person is right there, you know them, you feel comfortable with them. So that's where you start to see some of that value too, because you're catching something earlier. And there have been some really amazing success stories in this particular instance, with catching things early that are phenomenal. So it takes that provider having that, that really amazing personality that fits right in with the culture and building that relationship. 

Daniel J. Marino: As I hear both of you talk, it's it just reinforces the fact with me that for a successful direct-to-employer relationship, contract, if you will, you need to have two pieces of this, you need to have the contractual piece that really manages the health care conditions, the issues related to the employees, in a way that is cost effective for the employer. But you also have to have these wellness programs that really provide a strong compliment to the health care service, but really builds that relationship and trust with the employee. Would you both agree?

Britney Bart: Yeah. So I would, and I think there's, there are a lot of opportunities to support this and a lot of different ways to support this too with wellness. But I think right now, we hear a lot, and everyone has heard it across the country - emotional well being. But I think when we pause and say, “how can we look at this because we know that everyone might not be the same?”. There's a continuum of the needs for emotional health - we have some who definitely need to see a provider and have counseling. And then there are some who are at another stage and need another type of support. And that's where I think when you have an opportunity to talk with a health system or health care provider, how do we help support that range? Because when we just say, yes we have emotional well being needs in the workplace, that is a very big topic. So how do you really break it down? So you're really meeting individuals where they're needed, because sometimes even having a health coach who uses motivational interviewing and really understands the person, can really make great progress. And so when we think about different challenges with providers in that area, behavioral health, I think it's helpful just to bring that up, because there are a lot of different ways to approach it, that it's not just a provider, but utilizing creative programming to really support that, what the needs are of the entire population.

Daniel J. Marino: Well, and I think you hit an interesting point there, Brit, because not only is that wellness program important to kind of address some of the chronic care needs of patients or employees. But you also want to touch on behavioral health. And if you can combine that, it’s a value add. At the end of the day, if you do it, well, you're going to have happier employees, you're going to have employees who are going to take less time off. And from the employer's perspective, at the end of day, you're going to have healthier employees and your lost work-time hopefully goes down as well, which is an additional add on. So I fully agree. Well, I want to give you all an opportunity to sort of provide some insights or maybe some advice to our listeners. This has just been a great conversation. Brad, maybe we can start with you. For our listeners today, especially those that are thinking about developing a direct-to-employer relationship with their health care system and with their employers in the community, any piece of advice you might want to provide our listeners today?

Bradley Olson: It doesn't have to be as difficult as one may think. And you don't have to go all in with one partner, or one TPA, or one network, or build it on your own. There's ways to design it so that it's meeting the needs of employers through multiple facets. That could be from delivering or offering this for a couple different services, or a center of excellence, or even a wellness program, all the way to a full replacement. So making it too complicated usually means you don't start and you don't initiate and you don't roll it out. Just get in there, understand your business, understand what you're good at, understand where you can provide that consistent cost and quality equation to an employer. And then roll it out, reach out to local brokers, reach out to your local TPAs and networks, see if they're willing to create a relationship with you to help drive business to your organization and share in that savings or sharing that value equation with your employers.

And to employers that may be listening, you don't necessarily have to take the full plunge with a full replacement inclusivity.  You can go small and you can do individual services with the the local physician organization or hospital system.  You don't have to go all in with a full replacement.  The full replacement might create the best value, or may reduce the most cost at the end of the day but there's still a progression to doing something like that. 

Daniel J. Marino: Well, and it's complicated to get to that point, right?

Bradley Olson: It is.

Daniel J. Marino: So I love your advice. Start simple, start small, but you know, create something that's impactful, I think, then you sort of can create some momentum on it on itself. That's great advice. Brit, anything you would add?

Britney Bart: I just have two different things that I would add. We talked a little bit earlier about being a valued and trusted partner. And I think anyone who is working with employers, needs to really understand the whole environment and landscape of what employers are operating in right now. The discussions that we have now are very different than they were in 2019, because things have evolved and you need to go in knowing what they're going through. So it's a workforce challenge. If you don't have a workforce, you don't have a business. So it's really being sensitive to those topics. Supply chain inflation. It makes you a better partner when you understand what they're going through. And then the second thing is really understanding how health care consumerism is evolving in regards to what has happened in the past few years. It's also not only in health care, but what's happened with everything outside of health care that has changed people's expectations for health care. Organizations like Amazon, and Uber and all those other entities that have really evolved consumerism in general. I would just encourage us to be open to thinking about how do we help evolve the health care consumerism portion of that?

Daniel J. Marino: Well, that has to be incorporated into the relationship I would think, because as you said, I think it's a great point, the needs and the wants of our health care consumer in our employees is different than it was a couple years ago. So I think you have to include that in and another point, I fully agree, is that as you're building a wellness relationship, you have to meet the employees on where they're at and have to meet the company where it is at. And some of them have different needs. Well, I want to thank you both for this great discussion today and commend you on the programs you put in place. I can't help but think that the employers and particularly the employees and probably the beneficiaries have received just tremendous amounts of value from the relationships that you've had. So again, I want to thank you both for joining us today. Really appreciate the time and love the conversation.

Britney Bart: We thank you very much for providing this opportunity. And for all the great work you do. Thank you.

Bradley Olson: Thank you very much for the opportunity to be on today.

Daniel J. Marino: So in closing, I think a few things that really resonated with me as we were talking to Brad and Brit. One - I think there is such an opportunity to develop a direct-to-employee relationship between a provider, health care provider and an employer in a way that you really can reduce that cost as long as it's focused. And I love Brad's point that you don't have to boil the ocean right? It doesn't have to be this large complicated arrangement, it can be simple, it can be small. And if it's impactful, that's going to create a lot of value. And I think the second point that I really appreciated hearing was that through a strong direct-to-employer relationship you can create this value congruence. So as the health care network starts to reduce costs, you're assured that cost then is translated back to the employer and to the community in the way of lower premiums and reducing the overall cost of care. And then third, wellness is a big part of this. And as we are structuring these wellness programs, it's a great opportunity to further foster that relationship between the employee and the provider. But more importantly, it's a real opportunity to meet the employers and really their employees needs where they're at. And especially as we've seen things change, whether it's with behavioral health or it's still managing chronic diseases, or maybe it's, some other back to work programs. Meeting the employer and the employee, specifically where they are, creates just a tremendous amount of value. So again, I want to thank Brad Olsen and Britney Bart for their time today. Wonderful discussion. And until next time, I'm Daniel J. Marino. Thank you for listening. Have a great day.

About Value-Based Care Insights Podcast

Value-Based Care Insights is a podcast that explores how to optimize the performance of programs to meet the demands of an increasingly value-based care payment environment. Hosted by Daniel J. Marino, the VBCI podcast highlights recognized experts in the field and within Lumina Health Partners.