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 MediBid Adds Needed Flexibility and Transparency to Direct Contracting

The cost of providing medical benefits to employees is rising quickly, and some employers are considering direct contracting as a cost containment strategy. Direct contracting, though, comes with limitations, but these have been solved by MediBid’s competitive medical marketplace.

According to the Large Employers’ 2019 Health Care Strategy and Plan Design Survey, the average cost of healthcare per employee is projected to be about $14,800 during the year. The survey, which included 53 Fortune 100 members and more than 300 Fortune 500 members, also noted that employers will shoulder 70 percent of those costs. Unsurprisingly, close to half of the survey’s respondents confirmed that they are looking for alternatives to traditional fully-insured and self-funded health plans. That includes the 3 percent of employers that are considering, or already implementing, direct contracting, bundled pricing or centers of excellence with providers. Some of these employers include major corporations, such as Wal-Mart, Boeing and Lowe’s.

However, challenges remain with direct contracting, including a lack of price transparency and volume floors that can be difficult for employers to guarantee to providers. MediBid has resolved these issues for employers.

Why Direct Contracting is an Attractive Alternative

Directing contracting eliminates the insurance company from the picture. The employer approaches the provider directly and negotiates prices for their employees. This, hopefully, results in reduced costs and a positive relationship with the provider. The provider enjoys the price and volume certainties, along with the reduced overhead that comes with a direct contracting relationship.

The Limits of Direct Contracting

Although direct contracting offers employers cost certainty, it doesn’t guarantee cost reduction, and here are the reasons why:

  • Providers rarely provide price transparency for procedures – Hospitals are frequently reluctant to provide a clear, stable price for the services and procedures it offers. In many cases, employers will have to contact several people with the facility to get that price, and it may be impossible for a facility to commit to a firm price.
  • There is little consistency in pricing between facilities – According to the United Network for Organ Sharing, a coronary bypass surgery in the U.S. costs between $70,000 and $200,000 (though winning bids on MediBid are typically much less than the U.S. average). One hospital could charge $150,000 for the surgery, while a hospital across the street may only charge $65,000. Costs can vary greatly between providers in the same city, or on the same city block. This is a major obstacle for employers looking for direct contracting, as they must collect pricing information from many providers to make an optimal choice.
  • Pricing can change with time – Procedure costs can change instantly and are rarely stable over time. Direct contracting reduces this instability, but it locks the employer into a price that may not be favorable if costs drop among other available providers. Cost certainty does not guarantee cost effectiveness. Direct contracting usually results in hospitals charging the maximum amount, and not taking advantage of the market forces of supply and demand, the way MediBid does.

There is an additional concern with direct contracting in that employers must be able to offer significant patient volume to generate leverage during direct contracting. This is something the largest employers can accomplish, but employers that fall just outside of this range may lack the buying power they need for better contracting terms.

Direct contracting is often touted as “removing the middleman.” In some cases, however, it simply replaces one middleman with another. MediBid’s model truly does remove the middleman.

MediBid has solved these problems, while retaining the cost containment that direct contracting is prized for.

How MediBid Fixes Direct Contracting

MediBid doesn’t require employers to negotiate terms with providers. Instead, patients make a request for medical care on MediBid’s bidding platform. Providers from around the world are then able to bid competitively to win the patient’s business. The patient is provided with a single, comprehensive bundled price for the procedure, the facility and the anesthesiologist, along with MediBid’s quality metrics and the provider’s training and history. This wealth of information allows the patient to make the cost-effective choice, without the need for an insurance provider and without the need to shop providers for favorable pricing.

The patient enters into a direct contracting relationship with the provider, with all important details known to both parties. In this way, the patient and employer are able to maximize the cost containment potential of direct contracting.

MediBid, though, requires providers to be transparent with their pricing from the beginning, so the employer does not need to commit resources to negotiating terms with providers. The patient is able to make the smart decision every time, multiplying the employer’s savings with increased reliance on MediBid.

Also, employers are not required to hit volume targets. Employers are not locked into sending their employees to any one provider, and employees may pick the provider they want to contract directly with. In this way, MediBid reduces the effort on the employer’s end, empowers the employee to make medical care decisions like a consumer, and leverages a competitive medical marketplace to keep costs down.

The benefits of MediBid’s direct contracting approach are also available to employers of all sizes. With no volume benchmarks to hit or leverage required, even small business owners can take advantage of direct contracting’s cost containment.

This is what direct contracting was designed to do, only MediBid is finally making it possible.