Photo: Northwell Health/Courtesy Northwell
Direct contracting is gaining traction in what is seen as a lower-cost alternative to traditional health insurance.
Northwell Health recently ditched its commercial insurers to contract directly with employers who are self-insured through its new subsidiary, Northwell Direct.
Northwell Health, among New York's largest employers with over 70,000 employees, became the company's first self-funded employer. But the business is expanding within the New York City region, with nothing to stop nationwide expansion, according to Northwell Direct CEO Nick Stefanizzi.
"So long as we continue to deliver on goals and objectives, we're only as limited as our imaginations," Stefanizzi said. "It is fully our intention to grow this solution, regionally and in time, nationally."
Montefiore in the Bronx and RWJBarnabas Health in New Jersey are among the health systems that have joined the network of over 19,000 providers and 50 hospitals, according to Stefanizzi. This high-performing narrow network is more than adequate, he said, to offset the cited downside of direct contracting and its narrow networks.
Also, he said, "We have over 40 employers in the network area in various discussions."
Northwell Direct has established third-party administrator Brighton Health for claims processing and administration, and has the traditional insurance relationships with pharmacy benefit managers and stop loss carriers.
WHY THIS MATTERS
The bottom line is savings.
"The discounted rates we've negotiated could yield savings on average up to 20%," Stefanizzi said. "For the last number of years, the trend lines have been moving in the wrong direction."
The question executives asked, he said, was, "'How much of an increase can we absorb as a business?' At some point, it becomes too much."
Northwell Direct's focus on self-funded employers creates an alternative to the BUCA insurers – Blue Cross and Blue Shield, UnitedHealth Group, Cigna and Aetna – that make up the lion's share of this market.
The idea of direct contracting began a couple of years ago before the emergence of COVID-19.
"We had a perspective we could offer to employers at a lower, sustainable price point," Stefanizzi said. "Over a number of years, this idea was in the incubator of the health system."
Northwell Health's CEO Michael Dowling is intensely focused on driving innovation to diversify revenue streams of the health system, Stefanizzi said. This view permeated throughout the organization.
Northwell Direct launched in 2020. It provides both the network and care management.
"We've created an integrated solution," Stefanizzi said.
Its first focus was on work services that were deployed in the office or virtually. These included flu shots onsite and health-and-wellness centers. It then expanded to get ahead of acute care issues, he said, such as sending a nurse to the bedside for a transition from the hospital to the home.
In a tight labor market, employers need to attract talent. One way to do this is through health-and-wellness benefits at a lower cost.
"I think we're at an interesting moment," Stefanizzi said. "Employers want innovative solutions to control healthcare expenses and create a quality and experiential benefit."
THE LARGER TREND
Direct contracting is not new. The concept was expected to become part of the business model for the former Haven, the healthcare company launched in 2018 by Amazon, Berkshire Hathaway and JPMorgan Chase.
Another innovator, Transcarent, recently formed to offer a digital platform to lower costs in the self-insured market.
The Centers for Medicare and Medicaid Services launched a direct contracting model. Northwell Direct is not part of this, according to Stefanizzi. Northwell Direct was founded to address some of the very same challenges of ease of use and affordability that Haven set out to address, he said.
The difference between what Northwell is doing and what other companies are doing is that it's part of a not-for-profit health system, he said. While Northwell Direct is for-profit, it comes with a different philosophy.
"What's different, even from Haven, there are providers in these organizations. There are healthcare people developing these solutions. Healthcare is incredibly complex. Our system is complex. If success is having a transformative effect, you have to have people who know the system and can partner with the right folks for innovative solutions to problems."
Twitter: @SusanJMorse
Email the writer: susan.morse@himssmedia.com
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