Have you ever wondered if large employers get a better deal on health care costs? The answer is a resounding yes. That doesn’t seem quite fair as an SME employer does it? Well, what if I told you that you could buy health care the same way that they do through a direct contract?
A direct contract is simply an agreement between a facility or a group of facilities and a provider to deliver care for a previously agreed upon price; and in turn, the hospital or facility will be paid in a timely manner. Large employers and a few special third-party administrators that help self-funded employers manage their plans use these contracts to control the cost of health care both in the short-term and over the long term. This helps employers to better budget the cost of care and plan for the types and quality of care. High quality care is the most important element of any plan. Not only is it the right thing to do, but it is the best way to control your costs because high quality care is usually less expensive and in the long run there will be less side effects and better outcomes with high quality care, ensuring that your employee returns to work more quickly and can get back to doing their job and helping you run your business.
There are a few components to direct contracts, including what services are covered, what the reimbursement level is, and how quickly the provider needs to be paid. Ultimately, this is no different from equipment leasing agreements or other long-term contracts your business may have. In these cases, you know what the cost is going to be, and direct contracting is the same concept.
Payment terms are key in direct contracts because hospitals need revenue to run their operations and one of the largest revenue cycle problems that hospitals have is the member responsibility often goes unpaid, which is the initial $1500, $2500, $3000, or $5,000. This makes it very difficult for hospitals and facilities to manage their budgets. However, if your company can negotiate a fair price with a facility based on the number of employees you have, you will find that they will be quite receptive to your offer. Plus, if they are already providing high quality services, then they will have a set price list and you can easily negotiate a fair price.
As a smaller employer, you may not have enough employees to negotiate a direct contract; however, some third-party administrators have direct contracts or an advisor who has already negotiated a direct contract on behalf of their groups of employees that you can join. Yet, if you do have enough volume and the opportunity to take advantage of some less expensive pricing, and at the same time easy access to high quality care, you have to be in a self-funded arrangement.