Direct contracting evolves from a pricing product to a platform of medical services

By Sean P. Johnson

The evolution has begun.

Controlling health care costs has long been a challenge for self-insured employers. When NOVO Health launched bundled pricing as part of its direct contract between employers and independent physicians, those employers finally had a tool providing known costs for procedures up front.

The price bundles gave employers control of their medical spend and encouraged employees to act as consumers. Costs were contained and rates flattened.

It’s no longer enough, Curt Kubiak, NOVO Health CEO, said. The time is now for a critical shift.

“There are a number of bundling strategies that have now come onto the market, but that misses the point,” Kubiak said. “Price bundling is a product of the solution, not the solution itself. The platform is the solution.”

Kubiak is referring to NOVO Health, which creates a hub for employers to purchase medical care for employees directly from the top independent physician groups and specialists, as well as related services like onsite physical therapy care and medical tourism. It’s growing into its own ecosystem, with the NOVO platform connecting partners to additional specialists and services – think chronic disease management or telemedicine — all in response to needs identified by employers.

Established in 2013, NOVO Health connects independent specialists with self-insured companies. Each of the medical groups represented by NOVO are recognized Centers of Excellence who meet and exceed state and national requirements.

Kubiak recently outlined the evolving approach to NOVO Health and direct contracting to the Wisconsin Chapter of the Healthcare Financial Management Association in a presentation entitled “Direct Contracting 2.0, Beyond Bundled Payments.”

The shift is similar to what has happened in other industries as demands changed. Take the Blackberry, for example. It was a great product, perhaps one of the best ever developed for text and email. Then the iPhone was introduced, allowing people to choose more services at their discretion and the Blackberry faded away. The Blackberry was a product, the iPhone a platform, which also supports an ecosystem of related app developers and other services.

“If the business model is solely bundled payments, then you will be bypassed when self-insured employers realize they want more,” Kubiak said. “They will seek those options.” With its evolution toward a broader ecosystem, NOVO Health is bringing together providers and companies with common interests that can spark innovation and facilitate the challenge of providing quality health care to employees more efficiently.

Driving the impending medical marketplace disruption are the escalating rates companies face with each year’s health insurance renewal. In 2018, the premium cost of employer-sponsored health insurance rose to $6,896 for an individual and $19,616 for a family, according to the Kaiser Family Foundation’s Employee Health Benefits 2018 Annual Survey.

Along with the premium increases, employees are picking up greater deductible and out-of-pocket costs, the KFF study shows.

That’s money spent before the first claim is ever paid.

“It’s simply unsustainable,” Kubiak said. “What NOVO Health has learned is that companies want a platform where they can access top providers, use bundled payments and select other services such as onsite care that fit their needs. One-size-fits-all no longer works.”

Access to the platform comes via direct contracting.

Since employers pay the majority of health care costs, a direct contract creates greater value for by empowering them to take greater control of the company’s health care spend, pharmacy and high-cost specialties such as spine and orthopedics.

A direct contract through the NOVO Health platform, which sets agreed upon and inclusive fees, for care between the provider and employer enables direct and more flexible access to these services in fully accredited facilities at affordable rates. In addition to the bundled payments, direct contracts might also include onsite services such as primary care medicine or physical therapy, access to telemedicine and chronic disease management. The model has been proven to work.

Many folks are familiar with and use similar platforms as both business and personal tools almost every day: Facebook, Amazon, Google, Apple and even Starbucks. These platforms have always started with a very small niche, built an audience, built trust and then added other offerings on top of that platform to create a sustaining ecosystem.

As employers opt to choose new and different approaches for health care, the NOVO Health platform will evolve to deliver the desired experience, Kubiak said.

“The market is telling us they want us to be a platform for independent physicians and specialists to sell their services directly to the self-insured employer,” he said. “NOVO Health is situated to provide greater access to those services at a lower cost.”