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Northwell Direct CEO takes aim at the traditional model for health benefits 

Gabriel Perna | May 11, 2021

In the first year of operations as a direct contracting service, Northwell Health’s Northwell Direct has signed high-profile partnerships with JetBlue and Whole Foods. It’s a sign that the high cost of paying for health benefits for employers is potentially a ripe opportunity for disruption. 

That’s one reason going to Northwell Direct was an appealing jump for Nick Stefanizzi, who took the role of CEO in June of last year when it was formally launched to the public (after a few years in incubation). Stefanizzi has spent 12 years at Northwell, most recently as an executive of Formativ Health, a revenue cycle management commercial venture from Northwell. Taking this role was a no brainer, he tells Health Evolution.  

“The opportunity to step into a leadership role and build a business from the ground up, one that not only has the opportunity to disrupt a segment of the market but have a meaningful impact on the lives of thousands of people here in the New York metropolitan area, I couldn’t say no,” Stefanizzi says. “I believe we are well positioned to grow, be successful and benefit employers.” 

Read more: Post pandemic, employers feel the urgency to address unsustainable health costs 

For Stefanizzi, disruption was on his mind when Health Evolution spoke with him about why Northwell decided to get into the direct-to-employer business. He spoke about facing off against the “BUCA” [Blues United Cigna Aetna] health insurance companies in a competitive landscape and why employers are tired of the traditional model of paying for benefits.  

What made Northwell get into the direct-to-employer business? 

On the one hand, there is an element of Northwell’s organizational DNA. [CEO] Michael Dowling is constantly pushing us to think about innovative strategies that can generate new revenue streams for the organization, commercialize internal capabilities, and create partnerships to work with the communities we serve.  

With that as the backdrop, this notion of getting into the direct-to-employer space and work more closely with employers was driven by several factors. Number one is our own experience as an employer. Northwell Health has 75,000 employees in New York. It’s the largest employer in the state outside of the state government. In addition, we are a self-funded employer. We have seen the financial and engagement impact that the health and wellness strategies we’ve engaged for our own workforce have yielded over the last few years. We’ve brought our health spend significantly under control and bent that cost curve. We’ve also had incredible achievements from an engagement perspective as measured by Press Ganey. For the second year in a row, we are one of the few health systems recognized on the Fortune 100 Best Places to Work List. Last year, we were in the 90s. This year we were 19th overall. As a self-funded employer that uses health and wellness strategies to lower costs and drive engagement, we felt we had credibility in this space.  

Secondary to that, we have seen the trends. Nationwide, year over year, employers are grappling with the increases from the traditional payers. They have to ask the perennial questions, ‘How much can the business absorb?’ and ‘How much are we going to pass on to employees?’ At some point, they have to find a new way. Couple that with the financial pressures from COVID over the past year, it’s truly a perfect recipe for businesses to look at new partners and offer a new way to provide quality care for their employees at a more cost effective and sustainable price point. We’ve seen COVID over the last year create and drive new and unique partnerships. You have health care providers working with airlines and real estate companies in a way that didn’t exist to try and control the pandemic. All this together forms the rationale of why we decided to get in this space.   

How does Northwell Direct set up and measure its partnerships with employers, such as JetBlue and Whole Foods?  

We are able to provide care at a lower cost than is offered by the traditional carriers. That is a component of the value proposition. The other element is we have a robust care management infrastructure that is fully integrated into our offering for these employers. I’m not talking about somebody working with the BUCA plans that sits in a call center, either in the U.S. or offshore, and takes a few calls. I’m talking directly integrated into clinical practice where they are receiving care. It’s seamless from a navigation perspective, so not only is it easier for patients but we can better manage their care. We can deploy our gaps in care, transitions of care or home care programs for them. The unique thing here is that all of those services are directly integrated with the plan and with the care delivery network. That allows us to manage the care more proactively and yield savings and value beyond the discount that you don’t see in the traditional plans. That fully integrated approach is a key component of what differentiates this and how we structure these yields to add maximum value for these employers.  

What are the challenges Northwell Direct has encountered in getting into the direct-to-employer contracting space? 

There is a newness factor. People are used to the traditional model. It’s traditional for a reason. The newness factor is something people will have to get comfortable with. The nice thing from that perspective is people may not know us [as a direct-to-employer contractor], but they know the health system is a high-quality organization. That helps. But that’s definitely something that we will have to overcome and address 

There are also tactical challenges in implementing and enacting these relationships. We’re focused on self-funded employers. The New York market lags behind some other regions in the country ithe number of self-funded employers and plansIt’s conservative in that regard. We have to help organizations understand the benefits of moving to selffunded plan model and how it can outweigh the risksHelping them understand the mechanics of stop loss and reinsurance so they can get comfortable making the jump into this arrangement. It requires some upfront education and change management.  

..the BUCAs use a lack of transparency and control of data as a defense mechanism. It’s a shame because at the end of the day, the data belongs to the employer. It’s on their workforce and they have a right to it. Unfortunately, the traditional payers view a lack of transparency as a competitive advantage for them. That’s something we run into.

Nick Stefanizzi, Northwell Direct

From a process standpoint, one of the things the traditional BUCA plans does is hold on tight to information. They don’t like to share with their own clients, forget about us, but with their own clients they don’t like to share claims information and data. They view it as a way to hold onto that account. It can be challenging working with the employers to get the information that’s needed to structure and price the program and tailor the care management aspect to the unique needs of their population based on their data. Once we have access, we can do all those things and set up care management programs on day one.  But the BUCAs use a lack of transparency and control of data as a defense mechanism. It’s a shame because at the end of the day, the data belongs to the employer. It’s on their workforce and they have a right to it. Unfortunately, the traditional payers view a lack of transparency as a competitive advantage for them. That’s something we run into.  

Last thing I would say from a challenges perspective is that there is a lot of competition. We welcome competition. We think we have a competitive advantage and differentiation in what we’re offering, particularly in the New York metro area. But it’s becoming a crowded space. We view competition as good and healthy but it’s certainly a challenge.  

Employers are tired of high cost of care – this is something we’ve heard a lot over the years. And yet there has been a struggle for employers and health systems to come together to solve this problem. Why is this movement different?  

We are a different player in this space. We’re not driven by the same pressures and motivations that the insurance carriers are. We have board we’re accountable to. We’re owned by nonprofit health system. We’re not beholden to shareholders and investors that are looking for return on their investment. The idea of provider organizations getting into this space, they come to the table with a different set of motivations, expectations, and priorities. I think they are very different than that of the traditional insurers.  

So, what’s different? It’s who is lining up on the field to play and what their organizational philosophy and motivations are. That will play a true role in making this different than previous times where this was the topic du jour. This is something that has been talked about for an awfully long time and I think that’s why employers are frustrated. They’re frustrated because they have been raising the concern for a long time and year after year they continue to get hit with the premium increases. We come to the table with a different philosophy and set of motivations. The reason it will be different is because year over year, we will show them the value and a more sustainable cost point than what they’ve seen previously. That’s why it will be different.  

What role has COVID played in the employer view of cost?  

I think COVID has exacerbated existing financial pressures that businesses were experiencing. As we get to the other side of this new normal and people reflect on the totality of the financial impact, there will be increased interest in finding solutions that can drive savings. The careful balance is you don’t want to trade off quality or experience for savings. I think that’s where we have the solution that meets the moment.  

By the way, the premium holiday from the BUCAs that many companies enjoyed last year…it would be short sighted of us to believe that generous behavior will continue year over year. They have a different set of motivations than we do. We’re better positioned to truly provide a sustainable solution.  

What is your advice to health systems getting into these arrangements? 

Make sure you are ready. Find the right partnersEmployers and the individuals who run them, from my experience, they take very seriously the health and wellness benefits they provide their employees. It’s the livelihoods, safety and health and wellbeing of their employees and their families. That’s a real obligation that you’re potentially stepping into the middle of in these direct-to-employer relationships. There has to be an appreciation for the obligation that comes with that. You have to be ready day one when you establish one of those relationships.  

We’ve taken an approach where we’ve decided to partner with the best in this space because we want to support and enable this product. We take that obligation seriously. We’re working with best-in-class TPAs, PBMs, reinsurance for stop loss. We want to make sure that when an employer makes that serious decision to entrust us [with their health benefits], we are ready to deliver. I would suggest anyone that’s thinking about doing this, be deliberate and thoughtful about it. Find the right partners to plan and meet that obligation. And focus on delivering value and savings. But don’t lose sight of what truly differentiates us as health care providers vs. health insurers. That is our ability to focus on quality and experience. That combination will ultimately differentiate us and have a transformational impact across the country.   

About the Author

Gabriel Perna, Senior Manager, Digital Content

Gabriel Perna is the Senior Manager of Digital Content at Health Evolution. He brings 10+ years of experience in covering the intersection of health care and business. Previously, he was at Chief Executive, Physicians Practice and Healthcare Informatics. You can reach him via email at gabrielp@healthevolution.com or on Twitter at @GabrielSPerna