If a major health system wasn’t already dabbling in direct contracting, the options to do so appear to be growing fast, whether that’s through building out an entire subsidiary, working with entrepreneurs like Mark Cuban, hiring a third-party vendor or even partnering with other systems.
“It’s a different model that is less risky, less financially burdensome, a little bit lighter footprint in terms of the health system’s ability to play in this space and be in this market,” Nick Stefanizzi, CEO of Northwell Direct, told Becker’s.
Born in part out of lessons learned from a previous health insurance venture that the New Hyde Park, N.Y.-based health system wound down starting in 2017, Northwell Direct is one of the most established direct contracting organizations in the country, boasting a network of 33,000 providers and 62 hospitals. Where there are geographic gaps, the network includes other systems such as Maimonides Medical Center in Brooklyn, RWJBarnabas Health in New Jersey, and Garnet Health in the Hudson Valley region, along with “a whole slew of independent providers,” according to Mr. Stefanizzi.
In total, Northwell Direct has more than 300,000 members from over 76 local, regional and national self-funded employers and unions in the New York metro area and Connecticut, including the health system itself. And while the company says it has a 97% client retention rate and has delivered more than $150 million in savings over the past four years, direct contracting as a health benefits model typically isn’t practical for employers with workers spread across multiple states.
“Today, in general, this is more of a local and regional strategy because of where these networks are able to reach,” Mr. Stefanizzi said. “It’s my hope that as more health systems get into this business in their own markets, we can figure out ways to link up our networks and start to chip away at the multi-state problem.”
Northwell Direct’s highest-profile test began in May, when the organization went live with the 32BJ Health Fund, which provides benefits to 170,000 property service workers. The union deal, described as the largest of its kind, is structured around a two-tier benefit design that includes the preferred, lower-cost network from Northwell alongside the fund’s existing access to Anthem’s network. When announced late last year, the fund estimated it would see $46 million in savings in the first year and an additional $5 million in savings for members through lower copays, figures Mr. Stefanizzi said are on track to be met as early data shows growing use of the Northwell network by fund members.
“I get asked all the time, and I hear people say in conversation, ‘You’re cutting out the middleman. You’re cutting out the insurance company'” he said. “I don’t think that’s the right way to describe what we’re doing. To me, this is a reorientation of the relationships, and it’s recentering those relationships on the true payer and the provider of care.”
For health systems considering a future direct contracting move, Mr. Stefanizzi offered two main pieces of advice: dedicated leadership and resisting the urge to build everything internally. For example, Northwell Direct contracts out capabilities such as claims processing, pharmacy benefits and utilization management.
“A lot of times what we see is somebody gets tasked with building direct-to-employer off to the side,” he said. “This requires discipline and focus and protection from the other competing priorities of the organization because it’s different, it’s hard, and it’s complicated.”
“The more of us that are doing this, the more that it normalizes it as a concept, the more it makes people comfortable with adoption, and the more widespread the results become,” he added.
