01What direct contracting means
A direct contract is exactly what it sounds like: an employer (or their plan) contracts directly with a health system, imaging center, lab, or physician group for defined services at defined rates — no carrier network in the middle.
It's the oldest idea in commerce applied to the one industry that forgot it: buy from the source, negotiate the price, skip the middleman's margin.
02Why networks take a spread
Traditional PPO networks negotiate 'discounts' off inflated chargemaster rates, then present the result as savings. The discount is real; the baseline is fiction. The network's value is the logo and the lease of their provider list — and that lease is priced into every claim.
Direct contracts replace percentage-off-nothing with actual dollars: this MRI costs $450, this panel of labs costs this much, this outpatient procedure is bundled at this price. Transparency isn't a feature of the arrangement — it's the entire point.
03How these contracts actually get built
Building a direct contract network is unglamorous work: identifying the high-quality, high-value providers in a market, understanding their cost structures, negotiating rates that work for both sides, and then — the part everyone underestimates — building the operational plumbing so referrals, scheduling, and payment actually flow.
This is work I've done firsthand — building out direct care and direct contract networks, including DPC and concierge models. It's why we can look at a proposed arrangement and tell you in plain terms whether the pricing is genuinely good or just dressed-up network rates.
04Where direct contracts fit in plan design
You rarely direct-contract everything. The smart play is surgical: shoppable, high-frequency, high-variance services — imaging, labs, outpatient surgery, physical therapy — where price differences are extreme and quality is measurable.
Around those anchors, the plan keeps a wrap network for the long tail and stop-loss for the catastrophes. The direct contracts quietly do the heavy lifting on the services your employees actually use every month.
05The takeaway: three pieces, one structure
DPC controls everyday care. COEs fix the price of the big events. Direct contracts strip the spread out of everything shoppable. Together they form the care foundation that makes self-funding and level-funding work for employers who were never supposed to have access to it.
If this series has a single message, it's that plan design has changed more in five years than in the previous thirty — and the employers who understand these pieces will pay less for better care. That's the conversation we love having.