Direct Contracting Has Fixed US Health Care with Ron Barshop

When I began this podcast in the Spring of 2018, there were a lot of things I felt needed to be said about the US Health Care system. Foremost among them was the problems with the third party payment system (using both commercial and government insurance to make most of the payments for services). Also, the system was becoming more and more consolidated and the power of those extracting that wealth continued to expand. It was a pretty depressing outlook for patients and doctors.

However, most things aren't so black and white. While the regulatory capture of medicine is certainly a concern and no friend for docs and patients, there is a new movement that has sprung up in response to it. As my guest Ron Barshop says, it is leaderless, decentralized, and growing exponentially despite the powers that be. he loosely calls it direct contracting which is a way of bypassing the usual middlemen and gatekeepers in health care. It includes direct primary care (which we've discussed many times on the show here, here, here, and here) but is so much more.

How big is the Direct Contracting Movement?

Ron Barshop, host of the Primary Care Cures podcast, describes the direct contracting movement broadly. It involves millions of patients who are employees at small, medium, and large corporations. He estimates that direct contracting for health services comprises maybe 10% of the US population or about 30 million. But it is hard to get an exact count because it depends on your definition of direct contracting. Sometimes, just negotiating with a separate pharmacy benefits manager (PBM) or laboratory is what is done by a company. Some, however, have gone all in and are putting their employees in direct primary care offices or virtual services and contracting separately for nearly every contact their employees have in the health care environment.

What is Direct Contracting for Health Services?

The best way to describe direct contracting for health services is by looking at the financial transaction. If it is between the employer and the facility or person providing the care then is is direct contracting. If you are using a middleman or intermediary like an insurance company to make the payment, then it is probably not direct contracting. This isn't always the cleanest definition but it is a good starting point. Right now, large employers are finding millions of dollars in savings by directly negotiating with hospitals, surgery centers, imaging centers, laboratories, pharmacies, and primary care physicians. They self fund their health care needs for employees and usually save money and provide better services because of the incredible amount of waste spent on administrators within the typical health plan.

How does Direct contracting Save Health Care?

Simply put, by direct contracting and eliminating a lot of the middle men who provide no value (but plenty of expense) to health care billions or maybe even trillions of dollars can be reinvested into employees pockets. Also, by pushing for an improved model of primary care and urgent care, direct contracting has the potential to keep people healthier too. It is truly a triple win of lower costs, happier providers of care (not dealing with refusals to pay by third parties), and improved health.

The beauty of this movement is that it does not reside within any particular political ideology or camp and does not really require any legislation to occur. It is happening organically and is a quiet revolution that most still don't see.