Facing tighter margins in the healthcare sector, Cambridge, Mass.-based Beth Israel Lahey Health is doubling down on direct-to-employer offerings to shore up revenue.
The 14-hospital system is crafting DTE packages to secure more commercially insured patients and protect its financial footing.
Rob Fields, MD, executive vice president and chief clinical officer of Beth Israel Lahey Health, broke it down for Becker’s:
The issue
Medicare reimbursement rates lag well behind commercial insurance. In 2022, the Congressional Budget Office found commercial physician rates were 30% higher than Medicare rates. Two years prior, the Kaiser Family Foundation reported private insurers paid nearly double (199%) Medicare rates for all hospital services.
Meanwhile, the Medicare population is rapidly growing — along with, to a lesser extent, Medicare Advantage, Dr. Fields said. With the share of Medicare beneficiaries rising and commercially insured patients decreasing, budget control is getting trickier for many hospitals.
“It’s a core part of our business to care for that population [Medicare beneficiaries] as we always have. So that’s not changing,” Dr. Fields said. “But you also can’t deny the economics are radically different in Medicare than they are in commercial. And if we’re honest, the vast majority of the margin of the U.S. healthcare system is built on commercially insured patients, not Medicare patients.”
To continue providing quality care as patient acuity rises, the system needs to survive. To survive, Beth Israel Lahey Health needs to capture a bigger commercial base.
The game plan
Among the strategies to ease financial pressure, DTE packages stand out as a top focus.
The system is relatively young — formed by a 2019 merger — so some current DTE offerings were happening in isolation, particularly during the COVID-19 pandemic, Dr. Fields said.
BILH provides occupational health services and one of its hospitals runs an executive health program. Looking ahead, the system is evaluating more DTE offerings, including those for chronic care, weight loss programs with high GLP-1 adherence, virtual primary care and other digital models.
Currently, BILH is figuring out how to package these services. But the way employers purchase health services — and their motivations are not uniform — complicates the approach. A high-margin tech company in New York City might focus on retaining top talent over cost, while a municipality with a fixed budget is more price sensitive, Dr. Fields said. These differences will shape how BILH structures its offerings.
Another variable is choice. A narrow network captures more patients for one system, but can be a tough sell.
“While I think any health system thinking about a direct-to-employer strategy would love to have a narrow network product … it’s hard to sell because people often don’t want to buy it,” Dr. Fields said.
A better entry point could be spotlighting service and experience — like a strong app with self-scheduling or same-day visits. Over time, that could make employers more open to narrow networks because of the perks and brand reputation.
“It’s not a change in mission,” Dr. Fields said. “This is a matter of just the economics and business of how the U.S. healthcare system is financed, whether we like it or not.”
