Model checklist: Physician-employer engagement: Direct-to-Employer arrangements

Employers that self-insure their health benefits are looking to engage directly with physicians in efforts to improve their employee experience, improve employee health outcomes and to better control their health care expenditures.

Physicians considering Direct-to-Employer arrangements should be cognizant of key issues when negotiating with an employer. Each arrangement can be highly customized by the employer, who may have very specific goals in mind.

Assessment of practice capabilities

Physician practice financial health and strategic plan

Direct-to-Employer arrangements may not be appropriate for every physician and every practice. Those physicians nearing retirement may prefer not to assume the financial risk of a new payment model. Physicians already associated with Accountable Care Organizations (ACOs), Clinically Integrated Networks (CINs), or large health systems that are currently working on their own Direct-to-Employer offerings may not desire to engage in their own Direct-to-Employer contract.

Direct-to-Employer arrangements may require significant investments of time, money and effort, potentially crowding out other business opportunities now or in the future. Physicians should also consider their practices’ finances, strategic goals and relationships with other providers in the community when considering a Direct-to-Employer arrangement.

Physicians, non-physician health care professionals and equipment/supplies

Prior to entering into a Direct-to-Employer arrangement, physicians should assess whether they have the capability and capacity to provide the necessary services and fulfill their own and the employer’s goals and objectives.

Direct-to-Employer arrangements are not the same as new managed care arrangements in which a physician’s existing practice model can be applied to new patients coming from the new payer. If, for example, a Direct-to-Employer arrangement includes staffing an onsite clinic on the employer’s campus, practical issues such as whether other patients can be scheduled at the clinic, whether travel to and from the clinic will be an issue, the supplies and equipment that need to be transported to the clinic and the logistics of such transportation, should be considered.

Compensation issues to consider

Clarity about whether compensation includes medical services

Some Direct-to-Employer arrangements cover the furnishing of medical services and some do not. Any Direct-to-Employer agreement should specifically state whether the payments received include payment for medical services furnished.

If the compensation covers the professional medical service, the physician should not submit a separate bill to the employer’s third-party administer for that service, as doing so could result in being paid twice for the same service. In agreements that do not cover these services, the expectation is that the physician will separately submit claims to and be reimbursed by the third-party administrator.

Accepting payments from health savings accounts

Funds withdrawn from a Health Savings Account (HSA) are tax-free only when used to pay for “qualified medical expenses” as defined by Internal Revenue Service rules. See, e.g. I.R.S. Pub. 969 (2018); I.R.S. Pub. 502 (2018).

Some Direct-to-Employer arrangements involve payments for services that are not qualified medical expenses. For example, concierge medicine arrangements often include payments to ensure a physician’s availability on short-notice. Such availability is not a medical service. When the Direct-to-Employer arrangement includes payments from employees (instead of from the employer), physicians should consider whether they can or should accept payments from the employee’s HSA.

Value-based, Direct-to-Employer arrangements

Many Direct-to-Employer arrangements tie compensation in part to performance on certain value-based metrics. Care should be taken when selecting and committing to specific performance metrics; physicians should ensure they are well-defined, measurable using available data sources and systems reasonably achievable, and are relevant to the population to be served.

Metrics used in other existing value-based arrangements may be similar and yet different from those in a given Direct-to-Employer arrangement. In addition to clinical metrics, it is not uncommon for value-based payments to also be tied to non-clinical metrics such as patient satisfaction or access to care. Physicians should be aware of value-based metrics that will necessitate significant changes to workflow, require significant investments or are associated with incentive payments that will not cover the cost of implementation.

Download the checklist

For a detailed breakdown on how to assess your practice capabilities and suggested topics to explore, download the "Model checklist: Physician-employer engagement" (PDF).

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