6 Issues to Explore in Direct Contracting Relationships

Direct contracting deals increasing — here’s what to ask

Walmart Oschsner partnership imageWhat’s New?

The Ochsner Health Network will start a new accountable care plan on Jan. 1 to cover about 6,600 Walmart and Sam’s Club employees in the New Orleans, North Shore and Baton Rouge areas. The deal is designed to improve the quality of care and lower overall health costs for employees from 41 store locations who opt into the plan. The Arkansas-based retailer also hopes the plan will lead to reduced emergency department use and increase access by enabling ACO members to receive care through a network of 200 Ochsner health insurance plan primary care physicians.

What’s Going On?

While this is the first time Ochsner has contracted directly with a large national employer, Walmart has been active in making such deals to improve quality and cut costs for its associates. In April, Emory Healthcare and Walmart said they will create an ACO to serve about 10,800 Walmart employees in the Atlanta area. That ACO will include a bundled-payment program for spine surgery and joint replacement.

More deals like these between large employers and providers are expected in the near future. A survey recently conducted by the National Business Group on Health showed that direct contracting with health systems and other providers is expected to increase from 3 percent in 2018 to 11 percent of large employers in 2019. Direct contracting between large employers and Centers of Excellence will rise sharply as well, from 12 percent this year to 18 percent next year.

Walmart, which employs about 1.5 million people in the U.S., has been developing a number of more narrowly defined partnerships through Centers of Excellence around the country since 2013. The programs, which are typically concentrated on select spine, cardiac and joint-replacement surgical procedures, do more than just give Walmart associates access to top-flight facilities and specialists. Walmart covers the procedures 100 percent, including travel, lodging and an expense allowance for the patient and a caregiver. And Walmart isn’t alone in taking more direct control of their health care offerings. Boeing, GE and others have been active in this area for some time.

Health care organizations participating in Walmart’s COE program include Mayo Clinic facilities in Arizona, Minnesota and Florida; Cleveland Clinic’s Miller Family Heart & Vascular Institute; Virginia Mason Medical Center in Washington; Geisinger Medical Center in Pennsylvania; Johns Hopkins Bayview Medical Center in Baltimore; Memorial Hermann’s Mischer Neuroscience Institute in Texas; Northeast Baptist Hospital in San Antonio; Mercy Hospital Springfield (Mo.); and Scott & White Memorial Medical Center–Temple (Texas).

6 Points to Consider

While direct-contracting programs show potential for increasing access to care, improving quality and reducing costs, the deals are not without risk. Experts suggest that hospitals or health systems exploring direct-contracting relationships, answer these six questions:

  • What is the process to be selected as a site?
  • What characteristics are common among health systems that earn one of these contracts?
  • What evidence is there that the program will lead to improved value in care delivery?
  • What risks will we assume and what options will we have if we enter the agreement?
  • How will data be shared among the ACO, health plan or third-party administrator?
  • How should we engage our surgeons and other physicians, who may be part of the plan, for input before executing a deal?

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