How Congress sees direct contracting impacting hospitals

Members of Congress said they expect hospitals and health systems to see both financial benefits and losses under a broader rollout of direct contracting.

An expansion of direct contracting and direct primary care (DPC) between employers and providers drew bipartisan support at a July 1 congressional hearing that highlighted legislation to boost such arrangements.

These arrangements could improve affordability for employers and workers by cutting out payers and driving efficiencies.

“Healthcare costs are continuing to rise, and businesses are having to turn, as businesses do, to innovative ways to provide high-quality healthcare to their employees at lower costs,” said Rep. Rick Allen (R-Georgia), chair of the House Health, Employment, Labor and Pensions Subcommittee. “Direct contracting gives employers a way to work directly with providers to reduce administrative costs and focus more healthcare dollars on patient care.”

Provider benefit

Members of the panel also highlighted potential benefits they saw for providers who engage in direct contracting.

These benefits include a reduction in the documentation and billing costs required to meet the requirements of payers. Additionally, prompt pay arrangements under direct contracting could eliminate payment delays that are common under commercial insurance.

“In healthcare, the cost to get paid for a provider is weeks, months and hours and is about 15% to 30% of the cost” providers charge, Mark Newman, co-founder and CEO Nomi Health, told the panel.

Such arrangement could eliminate the 15% provider surcharge to cover their cost to collect, said Newman. They also could eliminate the average 75% write-off of patient balances, he said.

Overall, health systems reported in 2026 that they collected 31% of total patient billings, which was an improvement from 24% of total patient billings they reported having collected in 2025, according to a recent survey of 205 healthcare revenue cycle leaders by PayZen and HFMA.

Such arrangements also could help address clinician burnout, said Rep. Robert Onder Jr. (R-Missouri), because they would cut the time-consuming coding requirements of commercial payers. For instance, cutting employers’ use of commercial plans could reduce the estimated two hours that physicians spend on administrative tasks for every hour they spend with patients, he said.

Newman said direct contracting specifically could benefit rural hospitals and address the ongoing closures of those facilities.

“Most hospitals don’t go out of business because of a lack of revenue; they go out of business because of a lack of cash,” Newman told the panel. “And the lack of cash to keep them in business is a direct derivative of the terrible policies that insurance companies inflict on America.” 

Provider downside

But part of the savings from direct contracting also would come from the finances of health systems.

A mixed effect anticipated from the arrangements is the potential to cut emergency department (ED) utilization.

Employers using Nomi Health services in Michigan saw ED visits decrease 16%, urgent care visits decrease 34% and primary care visits increase 45%. Broadening such effects across the healthcare system could relieve ED overcrowding but also reduce hospital revenue from those services.

Similarly, DPC arrangement cut ED usage by 41% and inpatient hospital admissions by 20%, according to a Society of Actuaries 2020 report cited in the hearing.

“Primary care is the cheapest place to access care but instead we’re [underusing] the inexpensive option, primary care, and we’re saturating the ERs,” Chad Savage, MD, president of DPC Action and founder of YourChoice Direct Care, told the panel. “By freeing up space in the primary care area, we’ll actually have lower ER utilization, which helps everyone.”

Beyond reduced wait times, reducing ED volumes could help address clinician burnout by relieving them of nonemergent patient volumes, he said.

However, those reduced hospital patient volumes inevitably would reduce the revenue of those organizations. The potential scale could reach $400 billion annually, which was the potential savings Savage said would accrue to employer-sponsored plans if the same volume reduction occurred nationwide.

Another benefit of DPC, according to Onder, is encouraging more physicians to remain or become independent, thereby cutting unnecessary utilization.

“With [DPC] we do not have a large, let’s say hospital, employer looking over the doctor’s shoulder saying, ‘You need to order more tests, more X-rays, refer to more of our employed specialists,’” Onder said. “You have the doctor looking out for the patient.”

Onder noted that in his practice, when patients he knew well would call after hours with concerns, they could often avoid the ED. But when covering for other physicians and their patients called, he often would send them to the ED.

Legislative push

To encourage the nationwide spread of direct contracting and DPC arrangements, members of the panel pushed various bills, including:

• Transparency in Billing Act of 2026 (HR8684) would target hospital facility fees by requiring them to use unique provider identifiers for off-campus outpatient departments.
• The Health Data Access, Transparency and Affordability Act (HR9228), which would mandate that health insurers provide employers de-identified healthcare claims, cost and quality data on their enrollees.

James Gelfand, president and CEO of The ERISA Industry Committee, said HR8684 was needed so employers could find and eliminate “inappropriate facility fees,” spot upcoding and downgrade those charges to “more appropriate levels.” Expanding that requirement nationwide could save billions of dollars annually, he said.

The bill, which was unanimously approved in May by the House Education and Workforce Committee, has raised concerns from hospital advocates. The American Hospital Association warned that it would create a significant administrative burden to providers and the healthcare industry at large.