Direct Contracting with Businesses by Family Physicians

Direct contracting is an employer benefit strategy employers used to contract directly with a physician group or other health care delivery organization to provide employees and their covered family members access to health care services, including primary care. The American Academy of Family Physicians (AAFP) supports physician and patient choice to, respectively, provide and receive healthcare in any ethical healthcare delivery system or payment model, including through direct contracting.

When priced and contracted appropriately, direct contracting can enable physicians to spend more time with their patients, both in face-to-face visits, and through telehealth, telephonic or other asynchronous platforms. Direct contracting can also provide relief from administrative burden to the extent it eliminates common insurance company requirements or restrictions. This model can provide numerous benefits for employers including reduction of health care costs, increase in employee satisfaction and improved employee productivity due to improved health and decreased absences.

Contracting directly with employers is an approach that can be implemented by large health systems, ACOs, clinically integrated networks or independent, physician-owned and led practices. Direct contracting entities may accept insurance on behalf of other patients or may adhere exclusively to direct contracting with employers and/or patients directly as is common for many direct primary care practices.

When contracting directly with family physicians, care for covered employees and their families may be provided at the physician’s primary practice location, at a worksite or other clinic location, or virtually through telehealth or other asynchronous platforms. Services may include:

• Comprehensive primary care services for acute and chronic care
• Wellness and preventative services
• Traditional workers’ compensation services, return to work and stay at work programs
• Occupational health screenings (drug and alcohol testing, Department of Transportation requirements, Federal Aviation Administration physicals, etc.)

Direct contracting payment can be structured in different forms, including the following:

• A negotiated per employee, or per person, per month fee
• This is a negotiated flat fee that covers the total cost, including fees for the physician or any non-physician clinicians or care team members involved in patient care delivered by the direct contracting physician or organization.
• Fee-for-service payments for services outside the scope of the direct contracting arrangement
• Patient cost-sharing in the form of deductibles, coinsurance and/or copayments paid by the patient

Regardless of the approach, payment should reflect the variables that influence the level of service agreed upon by the contracting physician or organization, including factors such as age, gender, health status and health-related social needs of the population covered by the contract.

 (April Board 2010) (October 2025 COD)