Medicare-Plus Pricing Framework
| Provider Type | Typical Commercial Rate | Direct Contract Target | Savings |
|---|---|---|---|
| Hospital inpatient | 250–350% Medicare | 120–140% Medicare | 45–60% |
| Hospital outpatient | 200–300% Medicare | 115–130% Medicare | 40–55% |
| Physician services | 150–200% Medicare | 110–120% Medicare | 25–40% |
| Ambulatory surgery | 200–300% Medicare | 120–140% Medicare | 40–55% |
| Imaging | 200–400% Medicare | 110–130% Medicare | 50–70% |
Negotiation Leverage
Employer leverage in direct contract negotiations comes from: (1) volume — the employer's claims volume with the provider; (2) exclusivity — the employer's willingness to direct members exclusively to the provider; (3) administrative simplicity — direct contracts reduce the provider's administrative burden; and (4) prompt payment — direct contracts often include faster payment terms than commercial insurance.
Bundled Payments
IQ Insight
Bundled payment arrangements — a single payment for an episode of care (e.g., hip replacement, maternity care) — are an alternative to fee-for-service direct contracts. Bundled payments provide cost predictability, align provider incentives with quality, and simplify administration. Several major health systems offer bundled payment programs for common procedures.