If a major health system wasn’t already dabbling in direct contracting, the options to do so are 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.
For Nick Stefanizzi, CEO of Northwell Direct, the growth of direct contracting could eventually produce a multistate alternative to the traditional insurer-controlled network.
“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,'” Mr. Stefanizzi told Becker’s. “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.”
Born out of lessons learned from a 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. The company leases the Northwell provider network directly to self-funded employers and unions, which bear the risk of covering their employees and can cap their exposure by purchasing stop loss coverage. And where there might be geographic gaps in the provider network, Northwell Direct partners with other systems such as Maimonides Medical Center, RWJBarnabas Health, Garnet Health and “a whole slew of independent providers.”
“It’s a different model that is less risky, less financially burdensome, and a little bit of a lighter footprint in terms of the health system’s ability to play in this space and be in this market,” Mr. Stefanizzi said.
Today, Northwell Direct has more than 300,000 members from over 76 local, regional and national employers in the New York metro area and Connecticut. And while the company boasts a 97% retention rate and says it’s delivered more than $150 million in savings over the past four years, direct contracting as a health benefits model doesn’t easily scale 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.”
He pointed to Whole Foods as a client that has been willing to adopt direct contracting relationships in multiple markets, even if the model isn’t available to all its employees across the country. But he acknowledged that not every national employer is willing to take that approach.
Northwell Direct’s highest-profile test came in May, when the organization went live with the 32BJ Health Fund and its 170,000 participants. The union deal is structured around a two-tier benefit design that wraps a preferred, lower-cost network from Northwell alongside the fund’s existing Anthem network. When announced late last year, the fund estimated $46 million in savings in the first year and an additional $5 million in savings for members through lower copay burden, figures Mr. Stefanizzi said are on track to be met as medical appointment and care navigation call volumes grow.
The two-tier design also means union members aren’t disrupted when they need care outside of Northwell’s umbrella. And Mr. Stefanizzi said some insurers are recognizing that they’d rather participate in a direct contracting model than lose out to those members entirely.
As for the health systems that haven’t yet joined the direct contracting trend, Mr. Stefanizzi offered two main pieces of advice: dedicated leadership and resisting the urge to build everything internally. For example, Northwell Direct has outsourced capabilities such as claims processing 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.
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