Aramark forged a partnership with Penn Medicine for more affordable employee health benefits

Aramark and the University of Pennsylvania Health System launched a partnership this year to offer the food service giant’s Philadelphia-area employees healthcare in a test of a new model for reducing costs.

Aramark employees who choose the benefit option, called the Penn Medicine Premier Plan, face no deductibles and lower copays when they and their dependents use Penn doctors and facilities.

The move by Aramark into what is called direct contracting comes as employers are contending with years of surging healthcare costs. It’s an example of experimentation designed to slow spending growth in spending and perhaps improve quality, experts said.

“We certainly would like to save money on the model, but its primary focus is to make benefits more affordable” by getting lower prices than it would get by going through an insurer, said James Startare, Aramark’s vice president for benefits.

The model is called direct contracting because Aramark negotiated prices and other terms of the contract directly with Penn, instead of relying on an insurer to negotiate prices.

It’s Penn’s first such contract and the first large-scale direct contract in the Philadelphia region. Aramark talked with other systems in the area, but Penn emerged as the partner willing to enter into the experimental contract. Penn described the deal as a multiyear contract ultimately expected to roll over from year to year.

Aramark didn’t provide details on savings, but its goal was to negotiate prices that are lower than those it would pay though a benefits administrator, such as Aetna.

By eliminating deductibles that function as a barrier to care, the plan is expected to encourage primary care visits. This could reduce long-term costs by catching patients’ health problems early.

For health systems like Penn, such contracts offer a chance to increase market share, streamline payments, and hone their ability to manage the health of a population.

Penn is Aramark’s third major direct contracting partner.

Employers, even those like Aramark that are self-insured, typically rely on an insurer’s negotiated prices.

With the new direct contract, an Aetna administrative unit still processes the claims for Aramark, and patients who go outside Penn for care use the Aetna network.

Aramark launched its first such contract in 2024 in Dallas and expanded to Chicago last year, each time getting a strong employee enrollment, though it took two years in Chicago, Startare said.

In the Philadelphia region, 35% of eligible employees (those who work 30-plus hours a week on average) have chosen the Penn plan, which took effect Jan. 1, Startare said. That amounts to 800 employees.

Coincidentally, the health contract started at the same time as Aramark’s contract to manage food and other services at Penn Medicine facilities, but the two deals were not linked.

Employees who were moving to Aramark with the food services contract were worried about losing their Penn benefits, said Megan Lieberman, a patient services manager at Chester County Hospital who was among those who became an Aramark employee.

But the Penn Premier Plan was very similar to what they were used to. “It was definitely a huge relief to know that we got to hang on to those benefits,” Lieberman said.

A separate contract covers pediatric services at Children’s Hospital of Philadelphia for Aramark employees and their families.

Next year, Aramark plans to take direct contracting into central New Jersey, but did not name the system it’s using there.

The Aramark contract is an opportunity to focus on “chronic disease management, preventive care, cancer screenings, things like that” for a specific group of 1,400 patients who are motivated to stay within the Penn system, said Mark Angelo, Penn’s chief medical officer for population health.

A key goal is to reduce the deductibles, copays, and prior authorizations that can slow access to preventive care. The model is designed to take care of people before they end up in high-cost places like the emergency department or hospital, Angelo said.

Keeping more patients within Penn is expected to result in savings because of better care coordination and fewer repeated tests, Angelo said. Penn Premier plan members can seek care outside of Penn, but it will cost them more out-of-pocket.

As it is, the typical Penn patient also uses other health systems for some services, said Roy Schwartz, Penn’s vice president for payer strategy.

“Sometimes it’s the right choice, sometimes it can fragment their care,” Schwartz said. “There should be savings just simply coming from having integrated, coordinated care at a place like Penn.”

Penn does not yet have much of its own data on Aramark employees, but indications from Aramark are that the plan’s members were using more Penn services in the first six months, Schwartz said. “It was not just patients who were using Penn anyway for pretty much everything.”

Penn and Aramark officials plan to meet regularly to review results and consider modifications. “We’re hoping this works out well for everybody because we’d love to do some more of these,” Schwartz said.

Employers nationally have long contracted directly with doctors and health systems for specific procedures, like joint replacements, cancer care, and heart surgery. For years, they’ve also paid directly for primary care through on-site clinics.

Aramark’s move to an all-encompassing healthcare plan with a single provider fits into a newer trend gaining momentum nationally. Investors have created platforms like Cost Plus Wellness, Mishe Health, Nomi, and Transcarent to help health systems implement direct contracts.

Northwell Health, a major health system in New York and Connecticut, started a for-profit subsidiary called Northwell Direct and now has more than 70 contracts that cover more than 300,000 people.

Northwell Direct’s biggest contract covers 100,000 building service workers in the New York area and their dependents. It took effect this year and is expected to save 20% in the first year.

Big savings to start are not guaranteed.

“They may not go into it with a lower cost, but they’re going to go into it with better access, better quality for their employees, and what they’re finding is eventually those lower costs will come,” said Jenny Goins, chief of staff at the National Alliance of Healthcare Purchaser Coalitions.

The Washington nonprofit is putting together a direct contracting advisory council to help more employers to do what Aramark is doing, Goins said.

The model is not expected to replace traditional coverage anytime soon in the Philadelphia region.

“It is not for everyone, and it does take effort and coordination on the part of the employer,” said Tom Belmont, CEO of the Greater Philadelphia Business Coalition on Health. “Also, some health systems are ready for the discussion, while others are not.”