Your carrier contract has a phrase in it: "managed to contract." Most can't explain it. Here's the short version: the vendor is optimizing for what the contract allows — not for what's in your best interest.
And that phrase is just the beginning.
What the Contract Allows
Three things "managed to contract" quietly enables — each one a separate brief in this series:
- PBM spread pricing. Your carrier charges you more for a drug than it pays the pharmacy and keeps the difference. No fiduciary obligation. The contract allows it.
- Rebate retention. You get a check at year-end that feels like a win. What you don't see: you likely overspent $2M to receive $500K. The contract allows that too.
- OON repricing fees. Carriers take a cut of "savings" calculated against benchmarks they set. The savings aren't real. The fee is. Contract allows it.
"The vendor is optimizing for what the contract allows — not for what's in your best interest."
Why Direct Contracting Is the Fix
Direct contracting isn't a trend. It's what's left when employers stop pretending the carrier contract is on their side. It forces the contract to reflect what the relationship is actually for:
- Predictable costs — bundled or case rates, not fee-for-service free-for-all.
- Better care — measured by outcomes, complications, readmissions.
- Aligned incentives — savings shared with the people delivering care, not extracted by middlemen.
The Pattern
Spread pricing, rebate retention, OON repricing, "managed to contract" — these aren't separate problems. They're all the same problem with different names: the contract is structured to extract from you, not work for you.
Direct contracting fixes it because it forces a conversation the carrier model has spent 30 years avoiding: what is this relationship actually for?
Is your contract working for you — or for the vendor who wrote it?
— Tess
