Direct contracting refers to a contract for health care services offered by a provider sponsored organization, such as a Physician-Hospital Organization (PHO), to an employer in which the PHO accepts the risk for utilization of health care services above the anticipated level. Direct contracting between an employer and a PHO eliminates the health plan as the bearer of insurance risk, and substitutes the employer and the PHO as the bearer of insurance risk.
Individual, self-insured employers or business coalitions contract directly with providers for health care services with no HMO or PPO intermediary. This enables employers to include in the plans the specific services preferred by their employees.
(see also Physician-Hospital Organization): A direct, contractual relationship between a purchaser and a provider or provider system in which no intermediary manager of care is involved.