My recent post on the battles between large health plans and hospitals/health systems generated a good bit of debate. One comment deserves special attention; “the other Joe” notes that the western PA landscape is marked by a combination health care system/health plan that dominates the region. While this type of vertical integration has been tried many times in the past with rather limited success, this version looks to be much better positioned to succeed.
But as the other Joe points out, there are significant costs associated with that “success”, costs that are borne by the system/plan’s employees, payers, insureds, patients, and employer customers.

A reader asked several excellent questions about when and under what circumstances direct contracting makes sense. That’s when an employer contracts directly with health care providers.
My take is an employer has to have at least 750 lives in one area – plant, school, city government, facility, etc. in order to have any buying power at all. And 750 may well be on the low end.
As to whether a partially self-insured employer, say one with a specific deductible of $50,000, should do this, I’d say yes. The vast majority of bills will come from members with total costs well under the $50,000 limit.
Lastly, direct contracting takes expertise and patience. Knowledge of provider payment mechanisms and expectations, an understanding of the related legal issues, an intimate understanding of the local provider community, and really good employee relations are the bare necessities. Without these, stick with a “regular” health plan.

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