Today's healthcare landscape is evolving, with traditional service delivery adapting to meet diverse needs more effectively. The Direct to Employer (DTE) healthcare model exemplifies this shift, emerging as a significant growth avenue for health systems. This approach aims to streamline healthcare solutions, making them more cost-effective and tailored to specific employer needs. Employers making decisions between traditional and DTE systems need to understand the nuances between the two and the specific value propositions DTEs hold for self-funded employers.
Direct to Employer healthcare (also known as DTE and D2E) is a partnership between a hospital or health system and a self-funded employer. This strategy allows providers to serve employees directly by bypassing traditional insurance.
Health systems are constantly seeking new ways to stand out. The provider's main goal is to boost commercial revenue. Teaming up with a large local employer and cutting out the intermediate party could increase the market share and profit margins for growth-minded health systems. The DTE strategy complements advertising, service diversification, community engagement, and other marketing approaches.
To be successful, a DTE relationship must benefit both the health system and the self-funded employer. Many employers are open to the idea of “steering care” or offering a limited network option if there is something in it for them. The biggest concerns for most employers are the overall cost of providing healthcare benefits for their employees and the fact that healthcare costs are increasing at a much faster pace than other expense categories. The result is that for most employers the cost of healthcare is their second largest expense behind payroll.
Naturally, employers want to save money and reduce healthcare costs while maintaining sufficient access and quality outcomes for employees. If a health system can satisfy these requirements and enhance the member experience, it presents a compelling value proposition to a self-funded employer.
Many health systems start their DTE strategy with 'clinical bundles.' These are packaged pricing deals for common surgeries like orthopedics and spinal procedures. Once established, these bundles can be sold directly to an employer, either through their current self-funded administrator or on a carve-out basis outside the medical plan.
Successfully implementing a Direct to Employer strategy requires careful consideration in several areas. For health systems, ensuring comprehensive geographic and service coverage is paramount. This involves providing a full spectrum of inpatient, specialty, and ancillary services, such as outpatient imaging. Often, this necessitates forming partnerships or establishing a "wrap network" to address any service gaps. A wrap network is a supplementary network of healthcare providers that fills any gaps in services or geographic coverage. This ensures that all employee needs are met, even when the primary network does not cover certain specialties or locations.
In terms of capacity, health systems must assess whether they can manage the increased patient volume that typically accompanies a large employer partnership. If establishing a complete carve-out network is not immediately feasible, many health systems opt to start with clinical bundles or direct primary care offerings.
The financial strategy also plays a crucial role. Health systems need to develop fee schedules that offer competitive savings to employers compared to average market prices. Decisions about accepting potentially reduced commercial fees in exchange for increased volume and considering risk-sharing arrangements, like total care cost guarantees, are critical.
To enhance the attractiveness of their DTE offerings, consider integrating value-added services, such as:
As the Direct-to-Employer (DTE) healthcare model continues to redefine traditional approaches, its potential to transform health systems and benefit employers is undeniable. By embracing strategies like clinical bundles and prioritizing seamless care, health systems can build robust partnerships.
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Connect with the Risk Strategies Healthcare team at healthcare@risk-strategies.com