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.”
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 in the number of self-funded employers and plans. It’s conservative in that regard. We have to help organizations understand the benefits of moving to a self–funded plan model and how it can outweigh the risks. Helping 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.