Spoiler Alert……You Can Just Pay a Fair Price

Direct contracting is easier than people make it sound.

Most employers think the price of health care is set for them. The network picks the rates. The insurance carrier gives you a discount off a price you can’t really see. You take the network you’re offered, or your people go without care. Those feel like the only choices.

They are not.

Here is something most employers never learn. With direct contracting, you can call a hospital, agree on a fair price, sign a short contract, and start sending your employees there. No network in the middle. No carrier deciding what you are worth. Just two sides agreeing on a number that makes sense. For an employer with a self-funded health plan, this is one of the simplest ways to cut cost without cutting care.

We did this last month. From start to finish, it took a few emails and one short phone call.

The setup

A client of ours was building a resort community in a small town a couple hours outside of Dallas. They had close to 100 employees and 70 of them on the health plan. They were spending about half a million dollars a year.

At renewal, we had a strategy that would save them $100,000. That is a 20% cut. A clean win. But there was one problem. The only hospital in town was not in the new network. The employees live and work in that town. No local hospital almost meant no deal.

And this is where most brokers stop. They say the hospital is out of network, so the plan won’t work. The renewal moves on, the savings disappear, and that is that.

We did something simpler. We asked.

You don’t need a Dallas benefit broker to know how the market works.  You just need someone willing to do the work.  

What we did

It took about ten minutes to find out who owned the hospital and who handled their contracts. We sent one email to the person in charge of contracting. We asked if they would do a direct contract for a client with about 70 employees.

They wrote back the same day. The answer was yes.

After that it moved fast:

• Day one: First email. They asked which company. We told them.
• Day two: They sent us a draft contract.
• A few emails later: We worked out how to set the rates.
• One short call to confirm how it would all work.
• The deal: 175% of Medicare for the hospital and 150% of Medicare for the doctors.

 

 

The client kept the $100,000 in savings. The employees kept their local hospital. The hospital got a fair, steady contract with a self-funded employer. Everyone came out ahead. Nobody was trying to squeeze anybody.

That is the part the industry does not talk about.

Why direct contracting works

Direct contracting for health plans feels strange because the normal system is built to keep you away from the real price.

In a network, your discount is taken off the hospital’s list price. That list price is made up. A 60% discount off a price that is marked up four times over is not a real discount. You never find out what you actually paid compared to what the care really costs. That is on purpose. The confusion is the product.

Medicare-based pricing fixes this. Medicare is a real, public number for what care costs. When you set your price as a percentage of Medicare, both sides know exactly what they agreed to. 175% of Medicare means 175% of Medicare. There is no list price, no hidden markup, and no secret rate you are not allowed to see.

The takeaway

You do not need permission to pay a fair price. You just need to be willing to ask for one.

The companies that sit between you and the hospital are not a law of nature. They are middlemen. Each one takes a cut and makes the price harder to see. Direct contracting removes them. What is left is two sides and a number both can stand behind.

Most people treat renewals as something to survive. They are really a chance to fix things. The next time someone tells you a key hospital is “out of network” and that is the end of it, remember that it is not the end. It is the start of a better conversation.

You can just pay a fair price. Most people never ask.

BeneSmart helps mid-sized employers rebuild their health plan from the supply chain up. We use direct contracting in healthcare to put self-funded employers back in control of cost and access. If a hospital or provider is standing between you and real savings, that is a problem worth a conversation, not a dead end.