How Wal-Mart May Have Just Changed the Game on Health Care

by Dan Diamond, California Healthline Contributing Editor

TOPIC ALERT:

Entitlement spending: Discussed.

The contraception mandate: Made an appearance.

But once again, the most important health care story of the week didn't come up in the primetime presidential debates.

And no -- "Road to Reform" isn't referring to the oft-overlooked Medicaid program, but more news from the private sector: Wal-Mart's decision to directly contract with six leading hospitals, which could be a real game changer.

The company announced last Thursday that it will become the first retailer to offer a national program that covers certain heart, spine and transplant procedures for its employees. Essentially, when the 1.1 million employees and dependents enrolled in the company's health plan need those procedures, Wal-Mart will steer them to six "centers of excellence" around the nation, including Cleveland Clinic and Mayo Clinic, at no additional cost to them.

It could be a major step toward other firms directly contracting with hospitals of their choice, potentially reshaping referral patterns.

While the Thursday afternoon news was somewhat buried by other news coverage -- namely, the debate between Vice President Biden and House Budget Committee Chair Paul Ryan later that evening -- several health care experts took note.

"This could change medicine," influential surgeon and author Atul Gawande wrote on Twitter.

Inside the Plan: How the Partners Came Together

The new plan will take effect in January 2013, with Wal-Mart also pledging to cover the cost of travel, lodging and food for the patient and one caregiver.

Beyond Cleveland Clinic and Mayo Clinic, the six "centers of excellence" include:

  • Geisinger Medical Center in Danville, Pa.;
  • Mercy Hospital Springfield in Springfield, Mo.;
  • Scott & White Memorial Hospital in Temple, Texas; and
  • Virginia Mason Medical Center in Seattle.

Wal-Mart selected its hospital partners after a "nationwide search," spokesperson Randy Hargrove told California Healthline. The company was seeking a range of hospitals that were geographically diverse and offered an established, accredited program for evidence-based care in these procedures.

Meanwhile, participating providers who were approached by Wal-Mart said they were swayed by the company's stated health care strategy. "We reviewed Wal-Mart's philosophy articulating a commitment to providing their employees with access to high quality medical care and found it to be in alignment with our own goals," Glen Couchman, chief medical officer for Scott & White, said in a statement to California Healthline. "We're looking forward to the opportunity to deliver that care."

While Wal-Mart hasn't released planned savings from the partnership, it expects the program to reduce health costs through bundled payment agreements with the participating hospitals.

According to Michael McMillan, Cleveland Clinic's executive director of market and network services, the arrangement is a "triple win" for the company.

"It's a boost in quality, it's an improvement in value and it's no cost out-of-pocket for employees, so we think it is a great opportunity," McMillan told Reuters.

Wal-Mart leaders hope employees "have greater peace of mind knowing they're getting the best quality of care," according to Wal-Mart's Hargrove. "They are going to save money ... [with care] covered at 100% and no out-of-pocket expenses."

Looking Ahead: How it Would Change the Game

In some ways, "the Wal-Mart announcement wasn't overly surprising," the Advisory Board Company's Rob Lazerow told California Healthline. (The Advisory Board Company publishes California Healthline on behalf of the California HealthCare Foundation.)

A handful of other big employers, like Pepsi and Lowe's, already have entered into their own bundled payment deals. In that context, Wal-Mart's move makes sense, especially given the company's history of innovation, Lazerow said.

But the announcement is eye-catching because of its scale, both in terms of possible patients and number of partners.

Wal-Mart is among the largest employers in the country, second only to the U.S. government; its 1.1 million employees and dependents represent about 1% of all U.S. residents who get health coverage from their employers.

And contrast Wal-Mart against those earlier announcements like Lowe's and Pepsi, which partner with only one hospital, Lazerow said. While Wal-Mart's move to offer employees access to a range of facilities across the country could increase employee satisfaction, it also makes the program more complex to develop and operate.

What's at Stake: How Participants Might Be at Risk

It's not hyperbole to say that Wal-Mart's transformed health care before. In 1996, the company partnered with Mayo Clinic for a similar program on transplant surgeries; it's been a pioneer in the Medicare prescription drug market; and its support for national health reform helped fuel the push for the Affordable Care Act.

At the same time, Wal-Mart's made missteps. Its aggressive retail clinic strategy hasn't quite worked out, for example. And one real risk for Wal-Mart is that its employees push back on having to travel to one of the six participating hospitals for care.

Participating providers face risks, too, Lazerow noted. For example, "the volume of patients treated under the agreement [might be] lower than they would expect or hope." And there's significant cost in developing a bundled payment program and modeling out the impact.

According to Hargrove, the company can't forecast volumes for each individual hospital because it will be dependent on individual factors like Wal-Mart associate usage. However, Scott & White said that Wal-Mart shared projections that an "estimated 400-500 potential cases" per year will be referred to the hospital through the partnership.

Meanwhile, Hargrove said the company's plan "is to expand to include more procedures and providers,  [and] evolve over time," he told California Healthline, although Wal-Mart is excited about its initial cohort of high-performing centers.

So where would Hargrove -- a Wal-Mart employee, after all -- go if he needed a heart or spine procedure?

"They all have excellent track records," Hargrove demurred. "If I was to travel and get one of these procedures, I'd be [confident] at any of these facilities."

Here's what else is happening around the nation.

Rolling Out Reform

  • Military families are criticizing a law related to the Affordable Care Act that allows young adults up to age 26 to remain covered by Tricare if families pay a fee. The ACA prohibits private insurance plans from levying such fees on families wishing to cover adult dependents, but a separate law covering Tricare directs families to pay the full cost of such coverage. Some families have expressed concern that they cannot afford the additional fees or the potential costs if their children have to go uninsured (Radnofsky, Wall Street Journal, 10/9).

Studying Its Effects

  • Medical practices have been slow in using comparative effectiveness research to boost care quality and delivery, according to a new RAND study in the journal Health Affairs. Proponents say CER, a centerpiece of the ACA, can help identify medical services and treatments that are cost-effective and provide optimal benefits to consumers and patients. The researchers identified five barriers to the adoption of cost-effective, results-driven treatments and practices that are based on CER and suggested three strategies for reducing the barriers (Pittman, MedPage Today, 10/9).
  • An excise tax on so-called "Cadillac" plans in the ACA would affect more than half of workers in Massachusetts when it takes effect in 2018, according to a study by the Pioneer Institute. Health insurance costs in Massachusetts are the highest in the country, according to the study. As a result, the health plans for many middle-income individuals -- such as state, municipality or unionized employees -- will be affected by the tax, the study found (Donnelly, Boston Business Journal, 10/10).
  • New ACA regulations will have cost states and private business more than $27 billion once the law is fully implemented, according to a study by the American Action Forum. Private businesses will have spent $20 in new compliance costs, while states will have spent another $7.2 billion. In addition, states will have spent $580 million and 21.2 million hours on paperwork to make changes to Medicaid eligibility, and private employers will have spent $757 million and 2.6 million hours complying with new menu-labeling requirements (Baker, "Healthwatch," The Hill, 10/10).

On the Campaign Trail

  • During a meeting with the Columbus Dispatch editorial board last week, Republican presidential nominee Mitt Romney defended his plan to repeal the ACA and replace it with his own plan, and downplayed its potential effects on individuals who would remain uninsured. He said those people could continue to receive care at emergency departments, adding, "We don't have people that become ill, who die in their apartment because they don't have insurance" (Vardon et al., Columbus Dispatch, 10/11).

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