Direct Contracting: A Case Study

Employers use direct contracting in order to bypass the usage of insurance companies and health plan administrators. Contracting directly with providers allows for control of rising costs associated with insurance premiums and the delivery of health care services [Cite E]. This method has been effective on the reduction of plan costs and administrative fees. It also allows for employer clout and customization of employee health care needs, thus increasing access and funds to be used for medical services.A contract can be with a hospital alone or may include physicians. Direct contracting with a physician hospital organization includes services of the hospital and physicians summed under the same contract. This type of agreement is attractive because physician-hospital organizations (PHO) can negotiate prices, register beneficiaries, manage utilization programs, track quality, and disburse provider's' bills without the additional administrative cost of a fiscal intermediary. …show more content…
Distributing insurer responsibility decreases transfer costs and unnecessary system costs. The healthcare industry is a dynamic and competitive market; contracts are bid out and patients are directed to the winning provider.Price is a major consideration in direct contracting. However, access and quality of care are concerns for larger employers. Therefore, the lowest cost provider does not necessarily win a