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4 Challenges of Direct Contracting With Self-Funded Employers

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At the 12th Annual Spine, Orthopedic and Paine Management-Driven ASC Conference in Chicago on June 12, Tom Johnston, CEO of Austin, Texas-based EmployerDirect Healthcare Inc. — a company that helps large self-insured employers improve employee planned medical procedures — offered insight into the self-funded market and what ambulatory surgery centers need to know about direct contracting within that market.

ASCs and other providers benefit financially through direct contracting with self-funded employers by getting direct referrals and not having to "chase people down" to get payment, Mr. Johnston said. However, he also pointed out that providers seeking to direct contract with self-funded employers should consider and prepare to face the following four challenges.

1. Offering large employers adequate networks. Bigger companies are looking for healthcare providers with a national presence. "One thing that's important for these large employers is that they offer the same benefit to everybody," Mr. Johnston said. "They can't offer it in just one area." Therefore, he said ASCs and surgeons without the ability to offer nationwide access will have trouble trying to contract with large employers.

2. Executing a multilevel sales process. A provider looking to persuade an employer to enter into a direct contract might convince the company's HR department but then get sent to a consultant who manages vendor contracts related to the health plan. "You've got to sell this on multiple levels," Mr. Johnston said. "You can sell it to HR, and the consultant can kill it quickly. It takes time, and you've got to build a relationship with them. You've got to be able to organize your direct contract or your services around their other vendors."

3. Managing the referral process. Other than selling the direct contract to the employer, providers need to focus on establishing a referral process and payment process. "There needs to be some infrastructure built around this in order for it to actually flow easily," Mr. Johnston said. "Make it patient friendly so that they can use the direct contract."

4. Driving use of the benefit. Communicating why patients should use the direct contract path instead of their health plan is the biggest challenge, according to Mr. Johnston. He advised ASCs and surgeons to come up with a well-thought-out benefits communication plan, based on an understanding of who the consumers are and what they're looking for. He advised creating a financial incentive, such as waiving coinsurance. "You've got to get to the people at the time they need to procedure, and you've got to convince them you're the right people to come through," he said.

More Articles on ASC Contracts:
Can the ASC Industry Still Effectively Wield Out-of-Network Strategy?  
Healthcare Reform: Impact on ASC Managed Care Contracting Next Year  
Healthcare Reform: Where Do ASCs & Group Practices Stand? 

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