• Large employers, aiming to reduce the health costs for their employees, are forming tighter relationships directly with large provider networks, tying the contracts to the Triple Aim.

• Such direct-contracting strategies for now require a command of the whole continuum of care, and an employer large and concentrated enough to make the numbers work.

• Excelling in employer-led accountable care organizations requires new skills like data management and analysis.

• Hospitals that can’t directly contract to treat the health of an employer population are demonstrating value through other means, hoping to avoid getting cut off as the unfavorable option in a market.


Aiming to quench Americans’ appetite for the kinds of consumer-focused services for which modern companies like Uber and Amazon are known, a number of health care systems are partnering with large corporations to design care precisely the way those purchasers and their employees want it.

Self-insured employers like the Boeing Co. and Intel Corp. want more say in how care is designed and delivered. They want to rein in costs, they want to promote a healthy workforce and they want to know that they are getting good value for their money.

For providers, the collaborations — known as direct contracting — create a defined pool of patients and troves of claims data they can analyze to better engineer their whole continuum of services for efficiency and quality.

Hospitals already involved in such partnerships, like Providence-Swedish Health Alliance, are bullish on the concept and are seeking more lives to manage in a similar fashion. Presbyterian Healthcare Services — which contracts directly with Intel in New Mexico — recently inked an accountable care organization arrangement with UnitedHealthcare to offer the same incentives to companies contracted with that insurance company.

All the participating employers are asking the same questions: how to deliver benefits in a better fashion, make costs more predictable, and use relationships with local health systems to offer the kind of benefits that help to recruit and retain employees, says Jim Hinton, president and chief executive of Presbyterian Healthcare Services. “This is clearly the future,” he says. “No matter who is paying for health care these days, I think they all basically want the same things, and it’s not what we’ve delivered over the last 40 years.”

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Upgrading care

Boeing is a prime example. Starting in fall 2014, the company began offering about 30,000 of its employees, retirees and their dependents the option of keeping their current health plan or choosing a new narrower network of facilities offered by either Swedish-Providence Health Alliance or the UW Medicine Accountable Care Network. In exchange for choosing the smaller selection of providers, Boeing employees receive a range of perks, such as same- or next-day appointments, online access to scheduling and test results, and lower costs in the form of smaller contributions from their paycheck or free generic prescription drugs.

One year into its efforts, Boeing is finding success with the model — so much so that, at the end of July, the company announced two more partnerships, one with Roper St. Francis Health Alliance covering more than 6,000 employees in the Charleston, S.C., area and another with the Mercy health system, covering 13,000 employees in the St. Louis area.

Jeff White, director of health care strategy at Boeing, which has about 157,000 employees working in all 50 states, says it’s certainly possible that more partnerships with health systems will follow. The company is analyzing data from the Swedish-Providence partnership, but it’s too soon to release any of the early results or draw any conclusions, he adds.

“At a high level, we’re very pleased with the partnership that we’ve gotten from the systems, recognizing that some of the transformation of health care delivery is going to take a long time and we may not see that all in Year 1,” White says.

More to come

Some health care experts foresee growth in direct contracting in the coming years, as providers hone their skills in such things as population health management and are better able to meet the requirements sought by employers. FitchRatings wrote in a 2014 report, "Seeking Value: Direct Contracting Strategies," that vertically integrated health systems with a strong market presence and the ability to provide a continuum of health care services are in the best position to adopt direct relationships with employers.

Consulting firm Leavitt Partners also predicted growth in such relationships. In its May 2014 report, “Moving Closer: Employers Directly Contracting with Providers,” Leavitt wrote that employers’ frustration with a lack of price transparency and inability to control health care costs are pushing them to act.

“It makes a lot of sense to move your insured employee population to the provider and give the financial incentives to manage them effectively, which will lower your total costs,” says David Muhlestein, senior director of research and development.

For now the approach is most attractive to large companies. “What we underestimated is just how much work it takes to do that, and how many employers are really large enough that they’re in a position to do it.,” Muhlestein says.

“I do think that there will be a significant increase among those that are large enough, but the total pool is likely smaller than we projected.”

Piecing it together

Implementing a direct-contract arrangement takes more than finding a proper employer partner. A health system also has to build out the network of providers. For Providence-Swedish, that work began in 2011, when two organizations — 27-hospital, Renton-based Catholic Providence Health & Services, and five-hospital, Seattle-based Swedish Health Services — affiliated to better coordinate care with one another across western Washington.

Craig Enge, chief operating and administration officer of the Swedish-Providence Health Alliance, says the affiliation expanded its own provider network early on, and recently added firepower with outside physician groups.

Boeing was attracted by the alliance’s ability to offer a broad geographic reach and range of services. “The provider needs to have a network that covers the continuum of care,” Muhlestein says. “You can’t be just a hospital system with a couple of clinics. You need a full contingent of hospitals, clinics and even post-acute care that is pretty comprehensive, because if you’re managing this population, you have to be directly providing the care. It just doesn’t make sense to outsource a lot of it to other providers.”

UW Medicine Accountable Care Network went through an intensive process of building out its network and infrastructure, says Johnese Spisso, R.N., chief health systems officer. The four-hospital system now offers Boeing employees a network of 19 hospitals and emergency departments. UW’s network includes the only two children’s hospitals in the Seattle region, Seattle Children’s and Mary Bridge Children’s, along with a Level I adult pediatric trauma and burn center.

One challenge, Spisso says, was integrating behavioral health into primary care. Fortunately, UW had been building the infrastructure to do so for a number of years leading up to the agreement, with some of the necessary services already in place.

“We started all of those things years ago, and that has paid off,” Spisso says. “Had we not been doing that, it would’ve been hard to put all that together in a short period of time. We were able to build on our strategic road map, and I think that’s one of the challenges for more organizations today with how fast the market is changing.”

Early signs positive

Boeing’s executives say financial performance reports on the direct-contracting arrangements aren’t available yet. They declined to specify how many employees in the Puget Sound area signed up for the direct-contracting plan during the November 2014 enrollment. Boeing's White says participation was “more than expected,” though it’s unlikely a large majority of employees will ever take part.

The aerospace giant held focus groups with members in June, and nine out of 10 surveyed expressed satisfaction with their choice, with the same proportion planning to re-up in the second enrollment period held last month.

Regardless of how the numbers shake out, Boeing is sticking with the approach for at least half a decade. “We may pay more to get people the right care today, but if that keeps them healthy and prevents a hospital readmission two years from now, that investment was likely worth it,” White says. “Some of these things are just going to take a while to play themselves out.”

In addition, Boeing has scoured its other locations to expand the model. A certain minimum threshold of employees in those areas would need to show to justify the investment.

White says the company conducts a “rigorous” competitive bid process in potential markets, based on quality of care, the footprint of the provider’s network, leadership’s engagement with the Triple Aim, willingness to take on risk and number of employed physicians, among other factors.

Providence Health & Services is eyeing further partnerships with employers. It launched another deal with Intel around the same time as the Boeing arrangement, covering some 17,000 employees and 50,000 lives in Hillsboro, Ore. The Providence system operates in five western states, and Enge says, “In every market we are in, we are talking to engaged employers about this work.”