WALMART HAS EMBRACED A NEW APPROACH TO IMPROVE THE QUALITY OF CARE AND LOWER COSTS. THE RESULTS HAVE BEEN DRAMATIC.
By LISA WOODS, JONATHAN R. SLOTKIN and M. RUTH COLEMAN
A 56-year-old man who works at Walmart — we’ll call him Bill — had been suffering from mild neck pain for years. Recently the pain had worsened, and his wife noticed a subtle tremor in his hands. An MRI showed some narrowing of the spinal column along with disc degeneration. A local surgeon explained that Bill’s best option was spine surgery.
Bill had two choices. He could have the surgery at his community hospital and absorb deductibles and co-pays. Or he could enter Walmart’s travel surgery program and fly with his wife to a top spine center in another state, all costs covered. Bill opted for the travel plan.
Two weeks later the couple headed to Danville, Pennsylvania, for an evaluation at Geisinger Medical Center. The team there immediately noticed Bill’s tremor and some shuffling as he walked. They suspected the problem wasn’t his neck. A neurologist saw him that day and confirmed the team’s suspicions: Bill had Parkinson’s disease.
The team conferred with Bill’s local doctors to map out a plan of care. The next morning Bill and his wife flew home, and he began treatment, which was covered under Walmart’s standard plan. He paid exactly zero for a correct diagnosis and avoided potentially dangerous surgery that wouldn’t have helped — and Walmart saved about $30,000 by averting the unnecessary procedure. Bill’s symptoms have dramatically improved, and he’s returned with new energy to his hobbies and work.
For competitive companies, providing quality coverage is good business. It helps attract and retain employees (good health plans are a sought-after benefit), and workers who receive good, affordable care are more satisfied and productive. But that coverage is expensive, and costs are rising. Employer spending on health care services increased by 44% per enrollee from 2007 to 2016, reaching an annual amount of nearly $700 billion in 2017 — roughly what the Pentagon spends on defense. Walmart alone spends billions of dollars a year on health care for its associates (as the company refers to its employees).
Much is at stake: Various actors in the health care ecosystem, some large insurers and providers among them, benefit from an arrangement that layers on administrative costs and rewards volume, not value. Yet business as usual is unsustainable for those absorbing the costs and experiencing the uneven quality of care. Pioneering employers and providers are in a position to upend the status quo and change expectations about what affordable, quality care can and should be. What follows is an account of our experience with one important effort, among several being tried, to find a better way.
Walmart and other innovative companies, including Lowe’s, McKesson, GE, and Boeing, are disrupting how employers pay for care by taking insurers out of the equation and contracting directly with leading health systems. Working closely with providers such as Geisinger, the Mayo Clinic, Johns Hopkins, and Virginia Mason, and with the help of specialized consultants, they are crafting bundled payment arrangements that cover the cost of an employee’s care for certain episodes from start to finish — all the procedures, devices, tests, drugs, and services needed for, say, a knee replacement or a back surgery. They’re also, in most instances, picking up the tab for any necessary travel, lodging, and meals for the employee and a caregiver, thus democratizing destination care programs that have historically been reserved as an executive perk. Bill is one of many notable successes of Walmart’s six-year-old Centers of Excellence program, which covers several common surgeries, cancer evaluations (to confirm the diagnosis and treatment), and, through the integration of an earlier initiative, organ transplants.
COE programs are at the vanguard of U.S. companies’ efforts to control health care costs while providing employees with superior care, and results have been dramatic. Working with teams at our respective organizations, we have played key roles in crafting Walmart’s initiatives with Geisinger and other clinical partners: Lisa as the senior director of strategy and design for U.S. benefits at Walmart, Jonathan as the director of spine surgery at Geisinger’s Neuroscience Institute, and Ruth as the founder of the third-party administrator Health Design Plus. As we’ll show, the resulting bundled care programs have saved the company and its associates tens of millions of dollars and produced better outcomes than conventional care has. To the best of our knowledge, the data we provide below is the most thorough and transparent on employer-purchased care ever published. Drawing on this experience and that of other companies and providers, we offer guidance that many employers, even midsize companies, can apply.
WHAT’S DRIVING COMPANIES
Employers provide the lion’s share of health care coverage in the United States. They insure 49% of Americans, while government entities (principally Medicare and Medicaid) cover another 35%. (The remaining population is self-insured or uninsured.) Walmart itself, the largest private employer in the world, provides coverage to more than 1.1 million U.S. associates and their families under its self-funded plan.
Expense isn’t the only problem employers face. Like other health care purchasers, companies struggle with tremendous variation in cost and quality from one provider to the next. Walmart associates live in every state, and costs for the same service can vary by more than 50% from region to region and sometimes even within a community — and they often have little relation to quality. At the extreme end, costs vary more than tenfold; a 2011–2012 survey, for example, found that hip replacements ranged from $11,100 to almost $126,000 nationwide.
Such variation makes it hard for companies to accurately budget their health care expenses. And although employers shoulder much of the growing cost, employees are absorbing a large and increasing burden too. Nationally, workers’ out-of-pocket expenses (beyond premiums) have increased in parallel with employers’ costs; according to the Health Care Cost Institute, they topped $5,600 per person, on average, in 2017.
At the same time Walmart, like most other employers, has had limited control over the quality of care workers get, given the wide variation in outcomes for common procedures among different providers. This isn’t a new problem. Nearly 30 years ago Walmart founder Sam Walton was taped at a meeting of his senior leadership, excoriating the health care industry for gouging payers like Walmart and, by extension, their employees, himself included. Walton challenged his team to do something about it. “These people are skinnin’ us alive,” he said. “Not just here in Bentonville but everywhere else, too….They’re charging us five and six times what they ought to charge us….So we need to work on a program where we’ve got hospitals and doctors…saving our customers money and our employees money. We haven’t even started to do that. And if we don’t get it done this year, I’m gonna get real upset. I mean real upset.”
That impassioned speech is still talked about as a defining moment for the company — the point where Walmart turned its formidable procurement capabilities to the challenge of buying affordable, quality health care. The company didn’t get it done that year, of course, but it did start on a decades-long project. There’s a direct line from Walton’s 1991 call to arms to Walmart’s Centers of Excellence program today.
Companies have long used traditional measures, such as increasing employees’ share of expenses and limiting their access to specialists, with mixed success, and to workers’ frustration. Only recently have growing numbers taken a more active role in the development of their health plans, applying their purchasing power and procurement smarts to do an end run around insurers and negotiate directly with providers. According to a Willis Towers Watson survey, although just 6% of employers had such relationships in 2017, 22% said they either planned to contract directly or would consider doing so by 2019.
These relationships can take many forms, and they use a variety of payment schemes, including payment of a set amount per enrollee over a defined period (so-called person-year arrangements); shared-risk contracts, such as an accountable care organization (ACO) model, which commonly reward hitting quality and cost targets, penalize missing them, and split any savings or additional expense between payer and provider; and bundled payments — the single-price, soup-to-nuts coverage Walmart has negotiated with providers for specific, defined episodes of care.
Walmart has developed not just bundled coverage but also ACO arrangements with selected providers. In each case the driving principle has been to secure the highest-quality care at the best price. Bundles, as we’ve seen, are well suited to travel surgery programs; ACOs work well for broader coverage, including primary care for associates in a local market — say, the community within a 45-minute drive of a given provider.
In this article we’ll focus on how the travel surgery program works and the results it has obtained so far.
All employers are trying to control health care costs, but a single-minded focus on cost containment would be shortsighted. From the start Walmart, like the providers it partners with, has explicitly pursued health care value — lowered costs coupled with better outcomes. It would do little good to secure bargain-priced care if that didn’t help people resume their lives and return to work.
Walmart had traditionally used various insurance carriers to manage its health benefits, but those companies were huge and often had limited ability to innovate and to negotiate on Walmart’s behalf for high-value deals. In 2012, building on its experience with a long-term relationship with the Mayo Clinic for organ transplants, the company set out to develop similar arrangements with other providers for an expanded set of conditions. Early in the discussions its benefits plan leadership zeroed in on the procedures with the greatest opportunity for improvement: common and expensive surgeries (those costing more than $20,000, on average) with high variation in cost and clinical outcomes across providers. Heart and spine surgeries meet those criteria. What’s more, they’re risky procedures that, done poorly, can have a devastating impact on a patient’s health and well-being; in the case of spine surgeries, evidence suggests that a large number aren’t even necessary. Walmart launched its heart and spine surgery programs in 2013. It went live with joint replacements (hip and knee) in 2014, certain cancer evaluations in 2015, and bariatric, or weight loss, surgery in 2016.
The benefits team knew that crafting and administering these complex contracts and running the travel program’s ongoing operations would require specialized expertise — a third-party administrator. TPAs provide care management, claims administration, and benefits structuring, generally at a fee of 2% to 4% of the cost of the total plan management, depending on their exact role. Although they offer full benefits administration, they generally don’t take on insurance risk, and they are small and flexible enough to craft customized programs for single employers.
Health Design Plus, or HDP — a TPA founded in 1988 by coauthor Ruth Coleman — was instrumental in developing and managing Walmart’s program, including its bundled care contracts.
Companies that rely on traditional insurance generally view doctors’ offices and hospitals as mere vendors of care. It’s different with the COE providers Walmart associates use. Walmart and the HDP team sought true partners — providers that would share the company’s vision for the program, take a team approach to care, and include patients and their families in decisions.
The process started with a review of health benefits data to identify providers that had delivered significant amounts of high-quality service to Walmart associates. Publicly available information on the quality of care from these and other providers was also evaluated. On the basis of this analysis, Walmart reached out to potential hospital partners. Medical centers in targeted regions throughout the country were selected according to the distribution and needs of associates. The company focused on integrated systems, in which care is closely coordinated across constituent provider organizations and clinicians. The assumption (which has largely been borne out) was that the hospitals in such systems would be better aligned than others, would resonate more fully with Walmart’s health care mission, and would be better equipped to take on bundled rate contracts. Providers participate in bundled pricing much more readily now than in 2012, but many health systems had to be eliminated from consideration because they were unwilling or unable to commit to the model.
We’ve found that good integration and a willingness to build bundles are necessary but not sufficient. Becoming a COE provider can suddenly increase patient volume. Some providers have assumed that the main challenge would be ensuring adequate surgical capacity. In fact it has to do with the support team — having enough nurse practitioners, navigators, and other staff members to manage patients throughout the process. We’ve had to pause referrals to some medical centers so that they could better prepare for an influx of patients.
Success with bundled contracts turns out to be a good indicator of the capabilities and character of a hospital and its providers; it shows that a provider is motivated and able to integrate the work of a diverse clinical team around a patient’s needs, align incentives to improve value, and track outcomes to inform continued improvement. Walmart and HDP found that providers with those capabilities were more likely than others to meet key selection criteria, including:
- strong quality indicators, such as low complication rates, good performance on patient safety metrics, and systems for measuring quality, including at the individual physician level
- evidence-based, integrated care delivery
- patient-centered, collaborative, team-based decision making
- a willingness to construct competitive bundled prices
Although bundled pricing is critical to the program, we intentionally put it last on our list. Walmart decided that no center would be selected if the first three criteria weren’t met, no matter how attractive the price.
By defining and pricing all the elements in an episode of care, prospective bundles (which are defined in advance and paid for soon after the end of each episode of care) cap costs and can improve quality. They should appeal to employers for those reasons alone. But they have other advantages, too. They encourage integrated care, reduce incentives to perform unnecessary care, and make it easier for employers to accurately predict their health care costs. And once the initial employer-provider negotiation is concluded, price discussions are largely off the table. This lets all involved focus on what’s best for the patient.
As mentioned, employers rarely have the in-house expertise to negotiate bundled care contracts, and Walmart enlisted the help of Health Design Plus. In developing a bundle for, say, hip replacements, HDP identifies the procedure’s standard billable components (which include imaging, tests, devices, and pre- and postsurgical inpatient care) and negotiates a total price with the provider. The negotiated rates typically average 10% to 15% less than prices paid under conventional insurance and traditional fee-for-service reimbursement. In some cases a bundle may cost slightly more than FFS, because it provides higher-quality care; unit cost reduction is far from the biggest driver of the COE program’s financial success. High-quality, ethical providers have lower complication rates and provide less unnecessary care.
The transparency of the process means that all parties know precisely what is being bought and paid for. In the spine surgery bundled care program that Geisinger and other centers provide for Walmart associates, for instance, all episode-related inpatient care is included, but postdischarge skilled nursing and rehabilitation isn’t. Bundles might include a second visit, depending on the type of care (weight loss surgery always involves two visits, for example). And although providers engage with associates far in advance of travel, the bundled payment starts when a patient arrives at the hospital and typically ends upon discharge for the trip home.
Being clear about the arrangement from the start prevents disputes later on about what’s covered and what’s not — the bane of providers when dealing with insurers. Of course, it’s impossible to predict every contingency, so contracts need some flexibility. Patients might require unanticipated tests or have unforeseen complications, such as a previously undiagnosed cancer or a fall after arrival but before care. Provisions in the contracts address surprise costs and assure fair compensation for the provider (without shifting those surprise costs to the patient) — a feature that reinforces the sense that the employer and the provider are partners in patients’ care, not adversaries jockeying to minimize their own costs. All procedures include a warranty: If a patient has complications and needs to return for further treatment within 30 days, the provider does not receive additional compensation for that care.
When managing bundled arrangements for employers, HDP oversees the entire process, from initial employee referral to discharge home and payment of claims. Although the provider ultimately decides what care is needed, if there are anticipated or actual charges outside the bundle, HDP approves payment on a case-by-case basis. Because the COEs are so carefully vetted and are regarded as team members, conflicts about charges are rare. The various clinical sites, along with HDP and Walmart, have frequent calls; during them, clinical feedback from the sites is occasionally used to expand (and more rarely to remove) covered services.
A known risk of bundled payment strategies is that they can create incentives for providers to perform more episodes of care. This can be mitigated in various ways, including having strict treatment criteria defined by the provider organization and selecting only providers with a track record of sound clinical decision making and integrity.
THE PROGRAM IN ACTION
Most Walmart health care benefits are covered by traditional self-funded plans managed by a major carrier, but associates are encouraged through incentives and various communications to use the COE program for the surgeries we’ve described. Promotions across the company intranet, open enrollment materials, testimonial videos, benefits portals, and other channels tout the program’s upsides: access to superior providers; all travel, lodging, and meals covered for the associate and a caregiver companion (except in the case of weight loss surgery); and (with a few other exceptions) no co-payments, coinsurance, or deductibles.
Associates who are eligible for the program can choose not to use it — but at a cost. Beginning in 2017, those opting for spine surgery outside of the COE network (to avoid travel, for example) had to pick up half the total cost; the amount climbed to 100% in 2019. The same applies to associates who want surgery even though the COE concludes it’s not needed. In 2018 Walmart instituted a 50% co-pay for non-COE joint replacements. (These charges are always waived for emergent and urgent conditions.) The co-pays have driven a dramatic increase in utilization: After Walmart introduced the one for joint replacements, the number of patients choosing to have their surgery at a COE site increased by 113%.
Associates typically start to engage with the program when they are clearly on a path to surgery. The first step is to connect with HDP. A customer service team there conducts an initial triage; if the associate meets the basic criteria for the program, she is put in touch with a dedicated nurse-management team. Continuity of care is critical for good outcomes, so associates are accepted into the program only if a local physician — usually a primary care doctor — has agreed to provide follow-up care after the patient’s return. The nursing team educates the associate about the process, evaluates her self-reported clinical status and symptoms, and, if she meets more-detailed program criteria, refers her to the appropriate provider. Program coordinators and specialist physicians at the COE take over at this point. They review the patient’s records to determine whether surgery or a medical evaluation visit (in the cases of spine and bariatric surgeries) is appropriate; if so, the provider submits a plan of care to HDP and schedules a surgery or a nonoperative visit.
HDP handles all logistical and financial arrangements and communicates the details with the associate and her caregiver. The caregiver is much more than a companion; he or she must be an able adult who can meet specific support requirements and assist the patient after leaving the hospital and with travel home. HDP verifies that the caregiver has agreed to this role before the associate receives final approval.
Unless they choose to drive themselves, the associate and her caregiver board a flight a day or two before the surgery. They are picked up by a hired sedan at the airport in the provider’s city and brought to a hotel experienced in hosting postsurgical patients. The next day they make a short trip to the hospital, where they connect with the navigators and nurse coordinators who will shepherd them throughout their stay. The associate also meets the treatment team for a medical evaluation; barring the unexpected, the surgery is performed the following day. Inpatient stays vary according to procedure and patient status but are generally a few days. The associate is discharged to the hotel, and after the medical team issues an all-clear, she and her caregiver are driven to the airport for their flight home.
The medical team communicates with the associate’s local physician about her experience, clinical status, and follow-up care, and the COE provider remains available as needed. Most centers check in frequently with the patient and her local doctor to track her recovery. Payments now revert to the associate’s standard benefits. A dedicated HDP nurse relays her status and care needs to a nurse at her insurance carrier, who arranges any additional care related to the episode in the rare cases when that’s needed.
More than 5,000 associates have participated in Walmart’s travel program, and the overwhelming majority give it high marks. Despite the disruption inherent in travel, HDP surveys find that more than 95% of patients are “satisfied” or “very satisfied” with the care and the overall experience. One associate said, “This has been the best medical experience of my life. This is the most important benefit of working at Walmart.” The company and its COE clinical sites have received scores of similar, unsolicited testimonials.
Of course, some patients have been less thrilled; complaints from the small percentage who are “dissatisfied” tend to center on the decision not to move forward with surgery. In most cases these patients have been told by their local doctor that surgery can heal them; learning otherwise can be frustrating and disappointing. In other cases COE surgery isn’t an option because of health issues such as obesity and tobacco use. Although we work with these patients on necessary lifestyle changes, the experience of being denied surgery and advised to lose weight or quit smoking doesn’t always sit well.
Other challenges range from the merely inconvenient — travel patients have missed pre-op appointments because they were sightseeing — to the serious: One year we had to divert patients from several locations because of hurricanes and wildfires. Preparing for the unexpected is a less obvious but critical part of running the program.
The happiness most participants report with their COE experience stems in part from its concierge aspect. But good outcomes and affordability also boost satisfaction. Patients receiving their care at the centers do better, on average, than other patients on a host of clinical measures — and recall that in most cases they pay nothing. We’ll look now at data for three of the travel programs in turn. (Unless otherwise specified, the statistics given for them represent averages.)
1. SPINE SURGERY
Almost half of the Walmartassociates who had spine surgery or a medical evaluation without surgery from 2015 to 2018 did so at a COE site. That group, totaling 2,300 patients, was divided equally between men and women, and most were 50 to 64 years old.
One reason for the good outcomes is the fact that, as we’ve discussed, the program heads off unnecessary or inappropriate surgeries in favor of more-effective, less dangerous, and less expensive treatments. It prevented more than half of the surgeries recommended by non-COE providers.
Among associates who did undergo surgery, those at COE sites spent 14% less time in the hospital than those who went outside the program…
…and their likelihood of readmission was 95% lower.
Because of the relatively good health status of COE patients postsurgery, only 0.6% of them had to be discharged to a skilled nursing facility for monitoring and rehabilitation, compared with 4.9% of patients receiving surgery outside of the program.
Patients at COE sites returned to work sooner than non-COE patients, shaving 20% off their time away.
The cost to Walmart for surgery at a COE site is about $2,400 (8%) higher than that at a non-COE site, but as we’ve just seen, the payoffs are considerable: earlier discharge, lower readmission rates, far less utilization of skilled nursing facilities, and faster return to work. And the slightly higher cost per case is more than offset by the hundreds of surgeries that are appropriately avoided and by improved outcomes.
2. JOINT REPLACEMENT SURGERY
Eighteen percent of the Walmart associates who had joint replacement surgery from 2015 to 2018 had it at a COE site. Roughly two-thirds of these 1,836 patients were women, and most were 50 to 64years old.
Here, too, COE specialists headed off unnecessary procedures, having determined that many patients would not benefit more from surgery than from more-conservative treatments, such as physical therapy, or had health reasons that rendered surgery inadvisable.
Among the associates who had surgery, those at COE sites spent 32% less time in the hospital than those who went outside the program.
Because COE patients experienced fewer postsurgical complications, they were 70% less likely than non-COE patients to be readmitted.
Given their relatively good health status postsurgery, none of the COE patients needed a skilled nursing facility after discharge, compared with more than 5% of the patients treated outside the program.
And because they were discharged sooner and recovered more quickly, the COE patients returned to work a week and a half sooner than their non-COE counterparts.
Walmart’s cost per case is about 15% less at COE sites than at non-COE hospitals, and the savings from avoiding inappropriate surgeries and from better outcomes are great.
3. BARIATRIC SURGERY
As we’ve discussed, obesity can cause or exacerbate medical problems such as diabetes and high blood pressure. It can be expensive for employers and employees alike: Medical and pharmaceutical costs can exceed $10,000 per member per month.Bariatric surgery — which reduces the size of the stomach, routes food past it, or limits the amount that can be eaten — can help people lose weight and keep it off. Walmart covers 75% of the procedure’s cost; patients pay the rest, along with their travel expenses. The surgery is offered only through the travel program, so we lack data comparing it with non-COE care. Still, early results are promising.
To date more than 300 associates have had the surgery. Three-quarters were women; the average age was 46. Before surgery the group’s average body mass index was just over 50. (For reference, a 5’4” woman with a BMI of 50 would weigh 291 pounds; a 5’9” man with a BMI of 50 would weigh 338 pounds.) Six months after surgery the women had lost an average of 39 pounds, the men 45.
It’s too soon to know definitively whether this weight loss reduces absenteeism or so-called presenteeism (working while sick), but preliminary data suggests so. We do know that it dramatically cuts pharmacy and medical costs. Those decreases reflect the profound impact of the surgery on patients’ health: Complications of obesity drop sharply, as does the need for medication.
Sources of savings. To understand exactly how the COE programs save money, HDP has analyzed direct cost reductions, the effects of care quality and decreased complications on cost, and the impact of avoided costs, including surgeries recommended outside the COE program but not performed along with reductions in hospital readmissions, additional operations, and the use of skilled nursing facilities. For the 2017 benefits year we estimate that Walmart, Lowe’s, and McKesson together saved $19.4 million through their spine and joint surgery programs (Walmart associates made up a majority of those patients). About one-third of the savings resulted from direct cost reductions; the rest came from the avoidance of unnecessary care and a decrease in complications.
WHAT’S NEXT FOR WALMART — AND FOR U.S. HEALTH CARE
We’ve focused here on Walmart, but a growing number of other companies have launched or are developing similar value-based, direct-to-provider programs, sometimes sharing models, partners, and resources, in conjunction with HDP or one of the several other capable TPAs operating nationally.
In tandem with the rise of these programs is the emergence of business coalitions that help employers connect with superior providers and advocate for value-based contracts. To that end Walmart has partnered with HDP and the Pacific Business Group on Health, a San Francisco–based not-for-profit employer-advocacy organization, to create the Employers Centers of Excellence Network, or ECEN. The state of Washington, through its Health Care Authority, has selected two hospital systems to cover hip and knee replacements and spine care for its employees, with clinical standards and bundled pricing informed in part by the Bree Collaborative. Dozens of purchaser coalitions exist in the United States, providing a smorgasbord of resources and services; nearly 40 can be found within the National Alliance of Healthcare Purchaser Coalitions, which serves 12,000 purchasers. What they broadly have in common is a focus on helping employers use their clout to improve the value of care for their employees. These employers’ combined scale (NAHPC members alone cover 45 million Americans) strongly suggests that companies will become an increasingly powerful force in the transformation of U.S. health care — and providers and commercial insurers should pay heed.
All this may look very complex — and when first approached, it is. We advise employers and providers contemplating direct employer-purchased care not to wait while they assess the feasibility, clinical benefits, and return on investment; we, and coalitions such as ECEN, have already done that work. As legacy insurance companies assume less and less insurance risk (while often operating at a notable surplus), it makes sense for health care purchasers and providers to connect directly, and many validated approaches for doing so exist. The right providers and an experienced third-party administrator can lift the burden from the employer. Although there will be demanding work up front, once programs are established the work becomes less complex, and even more of the burden is borne by the TPA and the providers. The return in both dollars and employee wellness and satisfaction is high.
Walmart CEO Doug McMillon has publicly stated that health care now represents one of the company’s two most significant areas of innovation focus (digital transformation is the other). So, what does the future hold? Walmart’s COE program ensures that associates get high-quality care; however, it is not realistic to think that employers can ask employees to travel for all types of care, or that travel is always the best approach. By design Walmart’s program has focused on acute episodic surgical care. General medical and chronic conditions such as diabetes, high blood pressure, and heart disease are more common and, in aggregate, more costly in both dollars and employee health and well-being. Care for them is often best done by the top providers in patients’ own communities. Walmart’s ultimate goal is to bring a COE-level experience to the communities where its associates live, offering convenience, quality, and transparent, fair pricing. This will also allow the company to measure and continuously improve the impact of its programs on health.
Employers will shoulder a substantial portion of the cost of U.S. health care for the foreseeable future. Until recently they’ve had few options but to shift some of the growing cost to employees and fight for rate decreases. Those tactics have not stemmed rising costs and have done little to address quality. But as we and others have found, higher-quality care is reliably the most cost-efficient. The success of Walmart and other employers in improving health care value through direct partnerships can be a model for others, helping them address the cost-and-quality dilemma and drive change nationally. We urge other companies to act on Sam Walton’s call to arms.
c.2020 Harvard Business School Publishing Corp.
LISA WOODS, JONATHAN R. SLOTKIN and M. RUTH COLEMAN
For the past 29 years Lisa Woods has worked in a variety of benefits roles at Walmart. Today she’s in charge of the design and strategy of U.S. benefits, including the Centers of Excellence program created in coordination with teams at Health Design Plus, Geisinger, and other providers. “When you start a project like COEs, you feel like the innovative scientist behind the curtain,” she says. Now that meaningful data on outcomes is available, Woods wants to open up about what Walmart has learned. “It doesn’t mean we have all the answers, but we want to share and teach,” she notes. “Our goal is to create positive changes in the health care space. It’s become a mission. It’s that important.”
Jonathan R. Slotkin, a neurosurgeon, directs spine surgery at Geisinger Neuroscience Institute and is the associate chief medical informatics officer at Geisinger Health. This means he not only operates on patients but also focuses on digital transformation, the reengineering of care delivery, and the design of novel methods of health care payment. According to Slotkin, Geisinger’s partnership with Walmart and Health Design Plus shows that providers don’t have to be stuck in a fee-for-service system — and that providers, employers, and third-party entities don’t need to be at odds. “Geisinger focuses on innovating with the patient at the center,” he says. “Walmart’s health care transformation is likewise centered on its associates and customers. There is a perfect cultural marriage between what Geisinger and Walmart are trying to do. The alignment is truly there.”
A nurse, Ruth Coleman founded Health Design Plus in 1988. Her experience has shown that building direct contracts between companies and providers is a great way to achieve quality patient care. She calls the 30-year growth of this approach remarkable. “I’m a child of the sixties,” she says. “That’s why I started HDP — taking care of patients the right way is the best way to get good outcomes while reducing employer costs.” As for the potential of partnerships like the one HDP has with Walmart and Geisinger, Coleman doesn’t mince words: “This could revolutionize health care.”
WALMART’S ACO INITIATIVES
Accountable care organizations, or ACOs, are clinically integrated collaborations among doctors, hospitals, and other providers. They seek to decrease costs and improve outcomes through careful coordination aimed at eliminating duplication and errors, by applying best practices to reduce unwarranted variation, and by emphasizing preventive care. They often involve shared-risk contracts, which pay a set amount per enrollee for a specified period of time. These contracts may also reward good performance on clinical and cost goals and penalize falling short.
Beginning in 2016 Walmart has added accountable care plans, or ACPs, to the medical benefits associates can choose from. It currently has 11 ACOs in select markets, including Mercy, in Missouri, Oklahoma, and Arkansas; Memorial Hermann Health System, in Houston; and Ochsner Health System, in the New Orleans area. Some of these are also Walmart Centers of Excellence providers. ACPs cover many medical services with a co-pay ($35 for primary care and behavioral health, $75 for specialist and urgent care) and no deductible. Members choose an ACO provider for all routine primary care. They are covered for out-of-network medical emergencies but pay the full cost of any nonurgent out-of-network care. ACP members also have access to Walmart’s Centers of Excellence program.
A BRIEF (AND INCOMPLETE) HISTORY OF VALUE-BASED PURCHASING BY EMPLOYERS
1997 Walmart contracts directly with the Mayo Clinic as its exclusive provider for organ transplant surgeries.
2010 Lowe’s begins a program with the Cleveland Clinic to provide eligible full-time employees and their covered dependents with enhanced benefits coverage for qualifying cardiac procedures.
2010 Lowe’s engages Health Design Plus to assist in designing and managing a Centers of Excellence program for heart surgery.
2013 Walmart launches COE cardiac and spine surgery programs at five hospitals and health systems.
2013 Intel and Presbyterian Healthcare Services debut Connected Care, an initiative with novel risk-sharing arrangements and a value-centered payment structure that includes bonuses for hitting certain quality and financial targets.
2014 Walmart launches COE hip and knee replacement programs.
2015 Boeing starts offering employees access to narrow-network local care delivery initiatives in several cities. This direct employer-purchasing arrangement has provided more than 15,000 employees with benefits, including low or no co-pays, same-day appointments, and access to expanded digital-health tools.
2015 Walmart launches a COE cancer evaluations program.
2016 Walmart launches a COE bariatric surgery program.
2018 Dallas Area Rapid Transit launches an accountable care organization offering with the Baylor Scott & White Quality Alliance. It emphasizes preventive care, measurable outcomes, and the involvement of providers with a population health-management perspective.