GM’s decision to partner with Henry Ford Health Systems seems to be another piece of evidence that larger companies are increasingly looking to direct contracting as a solution for their healthcare cost woes. Building on the momentum of decisions by major companies like Apple and Amazon to completely retool their approach to healthcare, the payer system appears to be in a bit of a scramble.

To find out more about what these changes in the marketplace look like from a broker’s perspective, we reached out to Tracy Watts, Senior Partner, National Leader for U.S. Health Care Reform for Mercer. Here’s what she had to say.

Q: What is the scramble going on in the payer environment right now? How is the environment changing?

Tracy: While the recent activity is certainly interesting, I don’t know that it necessarily means that there’s more of it happening. Instead, I think we simply have the technology and media available for all of us to know a lot more about what’s going on. Employers have been conducting direct contracting for many, many years.

When I first joined Mercer, a little over 30 years ago, one of the first things that I worked on was a hospital PPO that renegotiated directly with hospitals on behalf of Bell South Corporation.

Because some of these stories are making it into the news, I have had conversations with clients over the last two weeks around whether they should consider doing something similar with regards to direct contracting.

The questions I always ask them are:

  1. What are you looking to achieve?
  2. What problem are we solving for?
  3. What change are we trying to drive?

In order to answer that question in a way that gives you a return on your investment for your effort, you have to go look at your data. Since larger employers have better access to their data, they’re able to see what kinds of things are going on within their population in terms of healthcare needs which might trigger them to consider something like direct contracting.

Download Now: 7 LIES We’ve Told Ourselves That Prevent Us From Fixing Healthcare

Q: What do you think is driving employers to consider direct contracting options?

Tracy: Employers have shifted costs as much as they possibly can and people have higher deductibles and higher out-of-pocket outcomes than ever before.

They’re definitely looking for more creative strategies for managing costs or helping people be more healthy so that there’s not as big of a demand for healthcare services. Or, they’re focusing on making sure that people are accessing the right care at the right place at the right time.

Q: Has uncertainty about healthcare policy from Washington, DC influenced employer decisions about healthcare? Why or why not?

Tracy: There are always going to be employers that wait to do something because they’re waiting to see what’s happening in Washington. They’re under pressure to provide healthcare benefits which are highly valued by their employees, but they also have a fiduciary responsibility to manage resources for that plan, so they stay apprised of policy and compliance issues and deal with them if they need to.

Q: Are the recent moves by large companies like Apple, Amazon, and GM trends for the entire marketplace or will they only have an impact on how large employers provide healthcare to their employees?

Tracy: I think what will ultimately define how successful any of these models are, is the provider’s ability to really reengineer how they provide care by focusing, not just on what the person presents for at the office that day, but their overall health. I think that’s the key to whether any of these models creates a broader impact.

How this all hangs together with the direct contracting piece in my mind is that if you’re big enough or if you’re in a community where you can do an on-site or a near-site clinic, certainly it’s a strategy to explore.

Q: What are the top things you advise employers to think about as they are designing their benefits strategy?

Tracy: It goes back to the data. How would you go about identifying the opportunities for direct contracting? What’s your shortlist of providers? Or is there one in particular that you’ve decided that you want to target?

I think I would probably take a step back and cast a broader net. Not just to focus on doing direct contracting but to look at what’s going on within your population. What kinds of services are people using? How much do they cost? What’s the variation? Are there some that are so much larger than others and, if you focused on them, would there be a good return on that effort? Develop a strategy that way. It might be direct contracting, it might be some type of chronic condition management program, it might be more of a focus on your highest cost clients. It could be anything, but I think it’s important to look at everything and all of the various strategies that you could take advantage of before just deciding on one.

Want to learn more about the current state of the payer environment? Check out our Q&A with Vera CEO on Unscrambling The Current Chaos of Payer Environments.

7 lies we've told ourselves that prevent us from fixing healthcare - download white paper

Back to blog