For Partners
What is direct contracting?
Direct healthcare contracting is when a self-funded health plan contracts directly with a provider for a single, transparent, bundled rate per episode of care — skipping the traditional PPO network repricing chain. The plan pays one agreed rate, there’s no facility fee and no chargemaster markup, and patients typically owe nothing for in-scope services. On high-cost surgical and orthopedic claims, plans commonly see meaningful savings versus hospital-based pricing. (Savings vary by plan; figures here are illustrative.)
How traditional PPO pricing works (and why it’s confusing)
In a PPO network, the insurer negotiates a discount off a hospital’s “chargemaster” (its list price). But the list price itself is high and opaque, and a single procedure still arrives as several separate claims — surgeon, facility, anesthesia, ancillary — each repriced on its own. The plan sees variable, hard-to-predict costs; the patient sometimes sees surprise bills; and the broker has a renewal that’s hard to defend.
How a direct contract is different
A direct contract replaces that whole structure for the services it covers. Before any patient is seen, the plan and the provider agree on one bundled rate per episode of care, documented up front. There’s no facility fee, no chargemaster, and no surprise anesthesia bill. The plan pays the single rate, the patient pays nothing for in-scope services, and the provider is paid the full negotiated amount on a clean claim. The savings show up plainly on the plan’s claims report, and the rate schedule is transparent enough to put in a board packet or a renewal presentation.
What “bundled rate” and “episode of care” mean
An episode of care is everything involved in treating one thing — for example, a knee replacement: the surgery, the facility, the anesthesia, and the related services. A bundled rate is one price for that whole episode, agreed in advance, instead of a stack of separate, repriced bills.
Direct contract vs. PPO network — side by side
| PPO network | Direct contract | |
|---|---|---|
| Price basis | Discount off hospital chargemaster | One bundled rate, set in advance |
| Number of bills | Surgeon + facility + anesthesia + ancillary | One rate per episode |
| Facility fee | Usually yes | None |
| Surprise bills | Possible | No — price is agreed up front |
| Patient cost (in-scope) | Deductible/coinsurance applies | Typically $0 |
| Transparency | Opaque, repriced | Published to the plan before signature |
Is it legal and compliant?
Yes — direct contracting between a self-funded plan and a provider is a well-established structure under ERISA, and it’s increasingly common as plan sponsors respond to fiduciary duties under the Consolidated Appropriations Act (CAA). Because the pricing is transparent and disclosed rather than hidden in network repricing, it aligns well with the fee-transparency obligations plan fiduciaries now face. (This is general information, not legal advice — your plan’s counsel should confirm for your situation.)
What’s in scope — and what isn’t
A direct contract typically covers a provider’s outpatient multi-specialty services — for Aptiva, that’s orthopedic surgery, spine, interventional pain, MRI/imaging, physical therapy, sports medicine, concussion care, and immediate injury care. Workers’ compensation and auto/PIP injury claims are handled under separate pathways, not the direct contract — though the same care team coordinates across them.
Frequently asked questions
What is direct healthcare contracting?
A payment arrangement where a self-funded plan contracts directly with a provider for a bundled, transparent rate per episode of care — no PPO repricing, no facility fee, no chargemaster. Patients typically pay $0 for in-scope services.
How is it different from a PPO network?
A PPO discounts a hospital’s list price and bills through fee-for-service; a direct contract replaces that with one agreed bundled rate, with no facility fee and no surprise bills.
Does it replace our existing health plan?
No. Direct contracts are non-exclusive and additive — they sit alongside your existing networks as a preferred option for in-scope services; everything else stays in place.
Who can use direct contracting?
Self-funded employer plans of any industry, brokers representing them, and government/public-sector plans.
How much does it typically save?
On high-cost surgical and orthopedic claims, savings commonly run substantial versus hospital-based equivalents. (Illustrative; actual savings depend on your rates, plan design, and case mix — a custom savings model is built from your claims before you commit.)
How long does it take to implement?
Commonly a matter of weeks from agreement to first eligible claim.
Is it ERISA-compliant?
Yes; it’s a well-established ERISA structure and fits CAA fiduciary/transparency obligations. Your counsel should confirm for your plan.
See what it could mean for your plan.
See how it could work for employers, brokers, or government plans below — or start a 20-minute discovery conversation → aptivahealth.com/direct-contracting.
General information, not legal, financial, or tax advice.