As we assess progress toward value-based care models, it’s worth examining the role large employers are playing. Certainly, they have led the way in contracting. The largest enterprises – which are by and large self-insured – have largely proven the success of at-risk contracts in general and bundled payments in particular. According to Harvard Business Review, “Boeing and General Electric have been among the leaders in adopting bundles.”

Bundled payments “usually average 10% to 15% less than what would traditionally be paid in standard fee-for-service arrangements.” The appeal to large employers is clear. That’s why more employers can – and should –  use direct contracting if they are not already using it. And those companies currently using them should expand at-risk contracts for more sets of services. If you’ve already had success with joint replacements, for instance, consider adding spine and cardiac procedures.

Self-insured employers have a lot to think about in terms of engaging health systems and thinking through which procedures to cover. Groups like Employers Centers of Excellence Network (ECEN) can serve as resources for larger employers. Such groups are familiar with the quality metrics and parameters regarding which services are best included or excluded when designing a bundle.

For local or regional companies, partnering with a broker or consultant who’s previously negotiated directly with health systems on behalf of employers would make sense. Regardless of which path you choose, it’s important to have someone on your side of the table who has previously negotiated contracts with healthcare providers. These are complex contracts that should strike the right balance of incentives and potential penalties and be based on strong underlying data regarding procedure costs and clearly defined community standards of care.

And what do health systems need from employers to make these mutually beneficial and effective? Aside from the increased volume from the new contracts, they should recognize how risk sharing can lead to stronger practices across the entire system. That has been the case for the consortium described in the HBR piece.

“[P]articipating health care [sic] systems, including Geisinger, have found that the care delivery reengineering needed to earn and maintain this type of payment model has led to improved processes and efficiencies beyond the program.”

Bundled payments also help set the stage for integrated delivery systems, which more healthcare organizations are considering, and prepare them for direct contracting with more employers.

As the benefits of direct contracting are confirmed, it is likely that these models will become the norm. Thus, both employers and providers should work on understanding the key principles and best practices, as well as the lessons learned by early adopters.

Time for Mid-Sized Companies to Embrace Direct Contracting

As bundled contracts grow, more types and sizes of companies will begin participating. Self-insured firms with fewer than 1,000 employees can be a good fit for value-based contracts and innovative care delivery models, though conventional wisdom does not necessarily hold that to be true.

Smaller and mid-sized employers might work with regional health systems or large non-profit hospitals on contracts to support comprehensive care, from urgent care and primary care, to specialty treatments and surgical procedures, to home health and skilled nursing. For health systems, these are manageable programs that map to their full range of services and for employers they are likely to offer significant cost advantages.

What else can mid-size and smaller employers do to prepare for the world of value-based care? Strengthening wellness programs to be more outcome-oriented is a good idea. That starts with measuring outcomes more accurately and linking them to rewards and/or penalties. Greatly reducing co-pays for employees who participate in fitness programs or complete their annual physicals is one way to drive healthier behaviors. Raising co-pays for smokers and non-participants is, too. Employers can also educate their workers by offering price transparency tools to compare costs across providers.

Bundles Will Get Bigger and Broader

At-risk contracts and bundled payments have been at the forefront of the early stages of the transition to value-based care. And they will only become more prominent as the value-based care evolution continues to gather steam. That is why employers of all shapes and sizes should take steps to embrace bundled payments for the procedures that make sense for their employee base and communities. And those early-adopting employees should expand their programs based on proven practices and their experiences to date. In other words, self-funded employers will continue to lead the way in advancing the promise and achieving the improved clinical and financial outcomes associated with value-based care.