A hospital price is a negotiation you were not part of.
Direct contracting and centers of excellence are ways of buying particular care at a price and a quality standard you set, instead of taking whatever the network negotiated on your behalf. They do not fit every plan — they need self-funding, an administrator willing to load them and enough volume to matter. We advise on them case by case, against your own claims.
Three arrangements, and they are not the same thing.
They get discussed as one idea and they carry different work, different risk and different savings.
Centers of Excellence
A named facility for a defined set of procedures, usually at a bundled price covering the surgery, the implant and the readmission window. The case for it is variation: on a joint replacement or a spinal fusion the spread between facilities is wide on price and wider on revision rates.
Direct Contracting with a System
The plan contracts with a health system on its own terms rather than through the network’s fee schedule. It takes concentration in one geography, which is why it suits an employer whose people are mostly in one place. Volume at that one system is what gives you leverage.
Bundled and Episode Pricing
One price for an episode of care, with the complication risk sitting on the provider rather than on the plan. What it buys you is the end of the surprise line item after a bad outcome. Define what the bundle includes before comparing prices.
It is a volume and geography question before it is a savings question.
Three things decide whether this is worth starting, and none of them is how much a vendor says you will save.
Self-Funded, or It Does Not Apply
A fully insured plan buys the carrier’s network at the carrier’s price, and there is nothing for you to contract. This is a conversation for a plan that holds its own claims risk. A level-funded plan may or may not allow it, depending on its administrator.
Where Your People Actually Live
A direct contract is only worth signing where enough of your employees can reach the building. A workforce spread across a state or several states gets centers of excellence with travel, not a local contract. Map the census against the building first.
Enough Procedures to Matter
A handful of joint replacements a year will not move a renewal. The volume has to be real before the contracting effort is worth what it costs you in time. Look at two or three years of claims to see whether the volume is steady.
The savings show up only if three things are true after signing.
Employees Have to Choose It
A center of excellence nobody uses is a line in a benefit guide. The design has to make the choice obvious — cost share waived, travel and lodging covered, a person who arranges the trip — or utilization stays exactly where it was.
The Administrator Has to Load It
Somebody has to load the contract, pay claims against it and reconcile what was actually paid. An arrangement your administrator cannot process is an arrangement that fails at the claim line, quietly, for a year. Ask for a test claim before launch.
The Network Still Has to Work
You are not replacing the network. You are carving a few high-variation procedures out of it, and everything else on the plan runs the way it did before. Employees keep the same network for everything outside the carve-out, which keeps the change easy to explain.
What employers ask before they start.
Is this the same as reference-based pricing?
No. Reference-based pricing sets a ceiling across the board against a published benchmark and then defends it. This negotiates a price for specific care at specific places, and the rest of the plan keeps running on the network. The two can sit in the same plan.
Do employees have to travel?
For a center of excellence, usually yes, and the plan pays for it. For a local direct contract, no — that is the point of it, and it is also why geography decides which one you are talking about. Ask how travel and lodging are covered before you promote it.
Will our administrator allow it?
Some will, some will not, and a few will agree and then be unable to process it. That answer comes before the design work, not after. Ask for a written answer and a sample claim run before anyone signs a contract with a provider.
Send us your renewal.
We’ll tell you whether it looks competitive, where we see opportunity, and the five questions we’d put to your carrier. No cost, and no obligation to move anything.
The renewal letter
Your current plan summary
Contribution split by tier
Enrolled counts by tier
Four documents — two more if your group is 50 or more. Nothing else; every extra one is a reason to postpone.
An independent employee benefits consulting firm. We look at the entire benefits program — cost, plan performance, risk and administration.
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