Walmart’s sheer size makes almost any of their initiatives newsworthy. That said, despite being a lightning rod for criticism on employee benefits and health care, they have introduced initiatives with far-reaching impacts. Their generic drug program began in September 2006 – more than 300 prescription drugs for $4/month or $10 for a 90-day supply – and was widely emulated, disrupting retail drug markets and generating immense social benefit. Imagine the difference it made to a lower middle class diabetic who had been paying more than $120 per month for medications, and suddenly could get them for about $24.

Yesterday Walmart announced that “enrolled associates” – covered workers and their family members – needing heart, spine or transplant surgeries could receive care with no out-of-pocket cost at 6 prominent health systems around the country: Mayo Clinics (Rochester, MN and Jacksonville, FL); Cleveland Clinic (Cleveland, OH); Geisinger Clinic (Danville, PA); Mercy Hospital Springfield (Springfield, MO); Scott & White Memorial Hospital (Temple, TX); and Virginia Mason Medical Center (Seattle, WA).

Walmart’s Center of Excellence (COE) program builds on its own and other organizations’ pioneering efforts with similar programs. Walmart developed a relationship with Mayo Clinics in 2007 for transplant and lung volume reduction surgeries. In March 2010, Lowes reached a similar arrangement with Cleveland Clinic for heart surgeries and, last December, Pepsico announced a global pricing deal with Johns Hopkins for cardiac and joint replacement surgeries.

It’s worth asking why these large firms would bother to do these deals for expensive care, and what this means for health care in the future. What’s different about the health systems that have been involved? Could these arrangements catch on and influence care elsewhere around the country?

The procedures involved are typically complex and high cost. Because they provide health coverage for more than a million people, Walmart has accumulated tremendous data and experience, and they are famous for their analytical acumen. They know that these kinds of treatments, though relatively infrequent, consume disproportionately high resources.

All of the organizations contracted in these arrangements have developed reputations for high quality. It’s worth noting that the unit pricing of their services can be high, but their episodic costs tend to be low. Their specialists are salaried, and therefore have no financial stake in ordering unnecessary services. And, in the words of a colleague knowledgeable about these efforts, “because they use evidence-based vs. money-driven care, they tend to get the diagnoses on complex cases right the first time. They also coordinate care and are more likely to be accountable than other systems.”

The press release also noted that Walmart’s COE program is “working with all the health care organizations to collectively share best practices that will allow collaboration around best measures of service and new industry findings in comparison to industry practices.” Think about that. Absent a health care environment that, as a practical matter, actively shares and translates evidence into practice, the purchaser, out of enlightened self-interest, has incorporated this process as a cornerstone element of its program.

One of my correspondents, a physician practicing at an academic medical center, commented on yesterday’s news:

“I recently reviewed … Texas hospital data. It is quite striking how Scott & White has markedly lower costs than most other equally sized Texas hospital systems while also hitting high marks for quality. I’d love, personally, to be able to take this press release to the head of our clinical practice and ask how we plan to compete in the future.”

He’s right. Health systems and specialty groups in the US have operated completely outside conventional market forces for decades, a fact that largely explains US health care’s egregious cost, highly variable quality and rock-bottom value relative to health care in other industrialized nations. As the market becomes more cost-weary and price-sensitive, purchasers will follow the leads set by Walmart, Lowes and Pepsico. They’ll align with organizations that can measurably demonstrate better care at lower cost.

As market forces take hold, success will be associated with driving appropriateness, and with accepting lower per patient revenues in exchange for more market share and greater patient volumes. Growth will come at the expense of entrenched, less agile competitors.

The big winners here will be patients, who will be subjected to significantly less unnecessary risk associated with overtreatment, and purchasers, who will receive far better value at lower cost.

Health care organizations should not underestimate the significance of Walmart’s COE program. It is one of many signs suggesting that, after 40 years of being impervious to market forces, the health care bubble could burst. All it would take to change health care as we have come to know it is for more employers to collaborate and follow Walmart’s, Lowes’ and Pepsico’s leads. They would stop doing business with health care organizations that are unaccountable and don’t provide measurable value, and transfer that business to those that do.

Brian Klepper, PhD is an independent health care analyst and Chief Development Officer for WeCare TLC Onsite Clinics. His website, Replace the RUC, provides extensive background on the role that the AMA’s RVS Update Committee has had on America’s health care cost crisis.

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63 Responses for “Walmart Moves Health Care Forward Again”

  1. Maggie Mahar says:

    Who are “enrolled associates”?

    Why do I suspect that they do not include the low-income employees who most need good health care (because they are sicker than the rest of us.)

    Is Wal-Mart is self-insured (like many large corporations.) ?

    If it were, then it could not legally offer one kind of health insurance for exectuives, another (lesser) type of health insurance for folks in the mail room.

    When it comes to how it treats its employees, Wal-Mart will never change its stripes.

    • civisisus says:

      Maggie,

      Your remarks indicate that you don’t know enough about self-funding of health benefits to comment authoritatively. Plan designs can and do vary across employee types, fully in accord with ERISA and other statutes pertinent to self-funded group health plans, though probably less frequently than you imagine (surprise! there’s not all that much value in varying by employee class).

    • julieklooz says:

      They do include us low income employees. I have my knee replacement set for 9/10/214

  2. Maggie Mahar says:

    As I thought about it, it seemed odd to see a post headlined ‘WalMart Moves
    Health Care Forward AGain”
    just when WalMart employees have launched a historic, nation-wide strike, protesting low wages, brutal working conditions and lack of benefits.

    In my first comment I asked: “Who are these enrolled associates”?

    It turns out that, as I suspected, they are not WalMart’s lowest-paid employees.
    Those employees work for WalMart through sub-contractors–a clever way for WalMart to avoid paying them a decent wage– or benefits.

    First, some news on the strike:

    “Walmart stores and critical parts of its distribution chain have been hit by a series of strikes in recent weeks. These strikes are remarkable for three reasons. First, the workers involved have no union protection. While their strikes are technically legal, they are taking huge risks by walking out. Second, many are not technically employed by Walmart. Rather, they work for a variety of sub-contractors that Walmart can replace at will.

    ” Third, despite items one and two, these workers are winning, and the strikes seem to be spreading.. .

    “Walmart’s distribution centers represent the logical outcome of this approach to employment. Workers in these distribution centers spend all day handling goods destined for Walmart stores. But they are not Walmart employees, and usually the facilities themselves are not Walmart facilities.

    “Rather, they are operated by contractors, and staffed by “temp” agencies, even though the operations run fairly permanently—year round, around the clock. For example, the Elwood, Illinois distribution center is operated by Schneider Logistics and staffed by Roadlink Workforce Solutions, and the Mira Loma, California distribution center is operated by NFI and staffed by Warestaff.”

    In these warehouses, employees doing back-breaking work earn $9.20 an hour–doing a job that normally fetches $15.00. These employees truly need healthcare.

    “Unsurprisingly, low pay and low to no benefits are the norm at these centers, as are long hours and unsafe working conditions. The web of warehouse and staffing contractors allows Walmart to evade responsibility for working conditions, while giving it the flexibility to swap out contractors if one group of workers poses a potential threat.

    “In this, the new world of work in Walmart’s warehouses today bears a strong resemblance to that of a bygone era, a time before the NLRA. It resembles the “shape-up” system used on the docks in the early 20th century. Then, longshore workers would line up every morning to see who would be lucky enough to get picked to work the ships that day. Then as now, those who did get picked toiled for long hours for meager wages, with no guarantee that they would have work the next day. Similarly, dockworkers back then had little idea of who their real boss was, beyond the foreman who would or would not pick them in the morning.

    “What got rid of the shape-up on the docks was workers organizing a legally questionable, incredibly risky strike, one that shut down ports up and down the West Coast, and much of the city of San Francisco for several days in July 1934. It wasn’t legal compulsion that brought the shipping magnates to the bargaining table; it was the disruptive threat to their bottom line that the workers’ risky gamble represented that did the trick.”

    Today, WalMart workers across the nation are taking this huge risk– at a time when unemployment remains close to a historic high.

    I’m all in favor of using centers of medical excellence to provide better care for workers– as Atul Gawande described in his most recent New Yorker piece
    (Big Med).

    For WalMart this is clearly good PR. .But it woudl be nice if corporations could go beyond showy PR to actually create jobs that pay a living wage plus reasonable benefits.

  3. Peter1 says:

    Obviously Walmart is using it’s size to negotiate lower prices, but how will those institutions with Walmart contracts now price their services to individuals, uninsured and smaller groups to regain profit levels – more so called cost shifting?

    Another aspect to this is do employees have to take Walmart’s choice of surgeons in any given institution? I wonder how the Republicans “patient centered and driven” health care fits into the corporate – use our’s or nothing trend? I bet freedom ends at the workplace door.

  4. Maggi:

    I honestly don’t know whether the assertions presented in your diatribe against Walmart’s employment practices are true. I haven’t researched them, nor do I think they are directly relevant – at least for the purposes of my post – to Walmart’s benefits team making efforts to introduce market forces into health care. As much as this might astound you, I was interested in the implications of Walmart’s health care maneuvers, and was unaware of the “historic, nation-wide strike, protesting low wages, brutal working conditions and lack of benefits.”

    I do know, though, that quoting unnamed sources is not journalism. If Walmart is treating its employees in an egregious fashion, that’s terrible. Please do the hard work required to make the case, and then I’ll stand with you.

    But I described a positive thing (in my view) that Walmart did for health care, and you responded by arguing that they’re an inhumane, awful organization, and therefore any good is really bad. Could be true. Or not. But we certainly don’t know as a result of your long-winded comment. Maybe you could add a little documented fact to your position.

    An alternative would be to take what I said at face value, and to address Walmart’s employment practices separately.

    don’t see them as directly relevant – at least for the purposes of my post – to the important steps that Walmart has taken on behalf of their employees (associates).

  5. Rob says:

    Brian, I guess your post is not exactly journalism either. You write that “enrolled associates” are entitled to this magnificent health care coverage. I guess if you had done the due diligence you would have researched what percentage of Walmart employees are eligible for such munificence. I guess I wasn’t born yesterday, and realize that the majority of Walmart workers are part time or simply ineligible for any or even “bare bones” health care coverage. I think you dont do very much to engender your own credibility and demonstrate a championship level of naivete if you hold Walmart up as being a paradigm of virtue when it comes to the well being of its employees. Before lashing out at others maybe you should look at the one sidedness and deficiencies inherent in your own article.

  6. Rob,

    I have never laid claim to being a professional journalist, While Walmart’s human resource management practices are a legitimate point of inquiry – and I provide a link in my 2nd sentence to a Wikipedia article summarizing criticism of Walmart in this area – my article had nothing to do with whether Walmart’s health coverage extended to the majority of their employees or whether they are socially progressive employer. Instead, it was about Walmart’s development of a benefits strategy that leverages market forces in a new way, encouraging better quality care at lower cost, and potentially opening the door for similar actions by employer purchasers around the country.

    As readers of this blog know, I have a long record of writing and speaking about social injustice. I have never held Walmart up as “being a paradigm [I guess you were born yesterday, and meant "paragon"] of virtue when it comes to the well-being of its employees,” nor do I think that their employee benefit practices are unique. Little is black and white in the real world. As this article describes, Walmart has been been a leader in important ways that deserve attention and praise, just as their flaws and some of their practices may justify criticism.

    BTW, a 2011 NY Times article – see http://www.nytimes.com/2011/10/21/business/wal-mart-cuts-some-health-care-benefits.html – reported that, in 2009, 52 percent of Walmart’s employees received coverage, up from about 44% in 2005, but the number has presumably declined again as health care costs continued to rise and they tightened their eligibility requirements.

    Finally, individuals who insist that corporations should be beacons of social progress are bound to be disappointed, especially in a nation with a shameful policy history on health care coverage. In this country, businesses are dedicated to market success and making money, not social welfare. We can hardly hold them to a higher standard than the law of the land which, presumably, we’re all responsible for.

    • BobbyG says:

      “Finally, individuals who insist that corporations should be beacons of social progress are bound to be disappointed”
      __

      Straw man.

      The aggregate moral purpose of markets should properly be to advance the human condition, net (which includes not fouling the nest)– maddeningly difficult to achieve ongoing as it may be. Markets properly exist to serve humanity, not the other way around. That this requires rational regulation ought be self-evident. That such is a never-ending pain in the ass ought also be self-evident.

      If you disavow that, you are disavowing our system of law. It has been a long, painful climb up out of the Tooth and Claw muck.

      See Gresham’s Dynamic, for one thing. A Winners vs Losers economy will not sustain. How many times must we re-learn that lesson?

      Corollary: Not all markets are equally morally consequential. Markets for cheap trinkets and crass entertainments can come and go without appreciable socioeconomic/moral impact. The “markets” in health care or other life necessities are quite another matter at core.

      We continue to live through the adverse upshot of an inadequately regulated financial sector.

      http://bgladd.blogspot.com/2008/12/tranche-warfare.html

      Short memories are a bane. They simply re-enable the rapacious.

      I, for one, will continue to insist that corporations be beacons of social progress, notwithstanding that I will be guaranteed of my numerous disappointments. Settling for a net win/win would suffice for me. Declaring “stymie” in the face of the difficulties of the requisite hard work ahead is no excuse for making excuses.

  7. Brian,
    Your last paragraph is exactly why corporations should have nothing to do with health care. People should not be forced to buy health care from the “company store” and corporations should certainly not be empowered to forge a new paradigm :-) of excellent health care for the usual suspects and bleak prospects for the other half (or perhaps 47%). We cannot, we should not, solve the health care puzzle for some but not others, and/or create qualitatively diverging solutions.

  8. Margalit,

    You get no argument from me. I don’t think anyone would accuse me of having designed or advocated for the system we currently have, and I don’t labor under the delusion that it is the best model. My interest is trying to produce the best result within the system we have been saddled with, with the knowledge that it is driven through influence by and for the special interest. In this environment, then, the question is how to mobilize employers’ enlightened self-interest in ways that serve the common interest.

    My argument is that Walmart’s leveraging of its own position to encourage health care market forces is a positive step for us all. Objections based on a distaste for Walmart’s larger business model strike me as unpragmatic, indulgent and, worse, missing the point.

    B

    • Peter1 says:

      “Instead, it was about Walmart’s development of a benefits strategy that leverages market forces in a new way, encouraging better quality care at lower cost, and potentially opening the door for similar actions by employer purchasers around the country.”

      Brian, what do you attribute this “leverage” from – providing these health institutions higher volumes? Or, filling in surgery gaps that otherwise would go unfilled? Why does Walmart have this extra leverage over large insurance companies who are, as part of their purpose/benefit to insured, supposed to negotiate the lowest price?

      • civisisus says:

        Peter,

        Walmart couldn’t give a fig about leveraging insurers. WMT self-funds their health benefits. That is, they’re paying the bills, and (probably) simply hiring an insurer’s health paperwork-processing genies to handle their administrative processes. Every health insurer could go out of business tomorrow, and WMT’s health benefits could go on practically without a hitch.

        What they are doing (as Brian has already clearly summarized for you) is evaluating data on the health and financial consequences of the employee health services they pay some or all of the bills for, and concluding that they should probably do what they can where appropriate to encourage employees to obtain services from the clinicians and institutions whose results are superior.

        These determinations are not made by their accountants. If their accountants were in charge of their health benefits decisions, WMT might well decide not to offer any health benefits at all. Accounting conventions are hostile to intelligent health benefits strategy and execution.

        The activities of all institutions – not merely large profitmaking institutions – impinge on their members’ behavior, and are frequently roughest on their most vulnerable people.

        I’m troubled when thoughtful people insinuate that there now exists some other, presumably eternally beneficent forms of social organization that would magically resolve the tensions inherent between individuals and institutions on matters pertaining to their health, or any other issues for that matter. That sort of conviction is as deleterious for productive dialogue as the belief that Earth was formed just a few thousand years ago. Organizations formed by humans will always – always – pinch, and too frequently squash, some numbers of their constituents. We can always do better (pinching and squashing fewer people), and should strive to do that. But to proceed from an unsubstantiated belief that some forms are dependably superior to others in most if not all instances quells useful conversation about the subject at hand.

        • Peter1 says:

          civisisus, I know Walmart is self funded, I was asking what gives them supposedly greater market power than large insurers who are supposed to be negotiating for their members – or at least that’s what they try to sell?

          “These determinations are not made by their accountants.”

          Really! You think Walmart doesn’t consult their bottom line in these decisions?

          http://www.nytimes.com/2011/10/21/business/wal-mart-cuts-some-health-care-benefits.html?pagewanted=all

          I wonder how this decision was based on “superior results”?

          I don’t accept Walmart’s actions at face value or from their press releases. I’ll suspend my awe until I get more information to get to the real story.

  9. Maggie Mahar says:

    Brian–

    You say that you are only interested in this one aspect of WalMart’s policy on health care, but even this seemingly benign policy is, in fact, designed primarily to save WalMart money. As Modern HealthCare points out WalMart is :betting” in many cases patients who think they need heart surgery, spine surgery or transplant surgery (because their doctor told them they did)
    will discover once they get to Mayo that in fact, they don’t need surgery after all
    “http://www.modernhealthcare.com/article/20121020/MAGAZINE/310209974#ixzz29qr9iNFa
    ?trk=tyn
    .
    Why isin’t WalMart sending patients with brain tumors to Centers of Excellence? How about patients who need neurosurgery? How about mothers
    facing a difficult, potentially dangerous delivery? How about infants who need complicated operations to correct birth defects? None of them are being sent to Mayo, all expenses paid, because WalMart knows that it’s very unlikely that Mayo will tell them they don’t need the surgery.
    But I’m getting ahead of myself. (For more on this aspect of WalMart’s new program, scroll down in this comment. )

    First let me address your criticism of my original comment. You suggest that what I wrote was a personal “diatribe” and indicate that you didn’t have time to verify what I said about the nationwide strike.

    Note the quotations marks around what I wrote;
    They indicates that I was quoting newspaper sources. This was not my
    personal “diatribe.”

    I assumed that you were aware of the WalMar workerst strike. It has been widely reproted. (See links below.)

    And the strike is not just about pay , but the whole package, including benefits.
    As Daily Finance puts it: “Walmart (WMT) employees across the country are picketing their employer right now, asking to be paid living wages and to be given decent health care coverage.” http://www.dailyfinance.com/2012/10/17/walmart-strike-henry-ford-wages/
    “as many as 80% of workers in Wal-Mart stores use food stamps,” according to Daily Kos. All told, according to Daily Kos, “Wal-Mart’s employees receive $2.66 billion in government help every year.” (same source)

    : For years, Walmart has been accused of: underpaying employees, exposing them to horrible working conditions, and failiing to provide decent heatlhcare benefits.

    On health benefits, many Wal-Mart employees cannot afford the health care benefits that WalMart offers. Last October, the New York Times reported:
    “In 2009, Wal-Mart said 52 percent of its employees obtained health coverage through it, but on Thursday it declined to give the percentage.
    URL http://www.nytimes.com/2011/10/21/business/wal-mart-cuts-some-health-care-benefits.html?_r=3&pagewanted=1&hp
    Meanwhile, the Times reported, “is substantially rolling back coverage for part-time workers and significantly raising premiums for many full-time staff.. . .

    “In Wal-Mart’s 2012 health offerings, premiums will increase for some plans by more than 40 percent, although many of their workers pay relatively low premiums in comparison to more generous plans offered by other employers. But many Wal-Mart employees complain that their low premiums are accompanied by high deductibles that sometimes exceed 20 percent of their annual pay.” (*NYT story)
    Barbara Collins, a sales associate at the Wal-Mart in Placerville, Calif., said he big concern, she said, was that her deductible would jump to $5,000 a year, from $1,000 — a daunting amount considering she earns $19,000 a year.” (NYT story)
    “About 42 percent of large employers offer benefits to part-time employers, according to the 2011 survey by the Kaiser Family Foundation, which tracks changes in benefits” But as of October 2011:
    “Wal-Mart, the nation’s largest private employer, told its employees this week that all future part-time employees who work less than 24 hours a week on average will no longer qualify for any of the company’s health insurance plans.
    In addition, any new employees who average 24 hours to 33 hours a week will no longer be able to include a spouse as part of their health care plan. (NYT)
    http://www.nytimes.com/2011/10/21/business/wal-mart-cuts-some-health-care-benefits.html?_r=4&pagewanted=1&hp&

    Given WalMart’s profits, it is not at all clear why it can’t do what 42% of large corporations do. . .
    “WalMart Moves Health Care Forward Again” doesn’t seem to fit the WalMart the Times is describing.

    On the strike– Brian,I am sorry that I didn’t provide links to all of the evidence in my comment .
    Here is the documentation you were looking for:
    – New York Times ” Protests against Wal-Mart expanded on Tuesday, spreading to 28 stores in 12 states . . . Colby Harris, who earns $8.90 an hour after three years at a Walmart in Lancaster, Tex., said, “We’re protesting because we want better working conditions and better wages and because we want them to stop retaliating against associates who exercise their right to talk about what’s going on in their stores.”
    http://www.nytimes.com/2012/10/10/business/organizers-say-wal-mart-labor-protests-spread.html?_r=1&

    – ABC News: http://abcnews.go.com/blogs/business/2012/10/ca-walmart-employees-strike-to-protest-treatment-working-conditions/
    Another ABC News story “Wal-Mart Workers Threaten to Walk Off the Job ON Black Friday” (day after Thanksgiving, biggest shopping day of the year) http://www.abc57.com/video/Wal-Mart-employees-threatening-to-walk-off-the-job-on-Black-Friday-173944621.html

    –Forbes (The first-ever strike by Walmart workers took place October 9, as workers in 12 cities walked off their jobs”) http://www.forbes.com/sites/lauraheller/2012/10/12/walmart-workers-threaten-black-friday-walkout/
    –CNBC WalMart Workers Strike http://www.cnbc.com/id/49302978

    –Huffington Post “Workers Threaten To ‘Take Action’ On Retailer’s Busiest Day’ (Black Friday, the day after Thanksgiving )
    http://www.huffingtonpost.com/2012/10/10/walmart-workers-black-friday-strike_n_1954782.html?utm_hp_ref=business”’
    –The Nation “Walmart workers Walk Out” http://www.thenation.com/article/170653/walmart-workers-walk-out#
    “In October, for the first time in Walmart’s five-decade history, workers walked out of stores in Dallas, Miami, Washington, greater Los Angeles and elsewhere.
    Also Hundreds of people gathered at a major Walmart distribution center Monday in Elwood, Illinois, to stand in solidarity with workers who have been on strike since mid-September in response to unsafe working conditions and unfair wages.

    “No one should come to work and endure extreme temperatures, inhale dust and chemical residue, and lift thousands of boxes weighing up to 250 lbs with no support. Workers never know how long the work day will be—sometimes its two hours, sometimes its 16 hours. Injuries are common, as is discrimination against women and illegal retaliation against workers who speak up for better treatment,” Warehouse Workers for Justice states on its official website.” http://www.thenation.com/blog/170274/riot-police-arrest-peaceful-protesters-rally-striking-walmart-workers

    Brian, I don’t know how you could have been unaware of the strike.

    Also,one wonders why is WalMart sending patients to Centers of Excellence for heart surgery, spine surgery and transplants, but not for brain surgery if they have a brain tumor, or a masectomy if they have breast cancer?

    According to Modern HealthCare, WalMart offering free surgery to some wokerrs because it is ” betting that some workers who qualify to travel at the company’s expense for heart and spine surgery may not need it after all. “http://www.modernhealthcare.com/article/20121020/MAGAZINE/310209974#ixzz29qr9iNFa
    ?trk=tyn
    We know that about half of all angioplastiesare not effective and .
    “”A January Archives of Internal Medicine review reported multiple studies that found overuse of coronary artery bypass surgery, a procedure included in the Wal-Mart program”– Modern Healthcare) In addition, spine surgeries for lower back pain also often do no good–and may do harm.
    Finally, WalMart sends patients who need transplants to Mayo , where again, they may be told they don’t need the procedure. Modern Healthcare explains:
    “Surgeons at the Mayo Clinic find that some patients can avoid or delay transplants, which can be less invasive and less expensive, said Dr. Charles Rosen, a transplant surgeon and chair of the division of transplant surgery for the Mayo Clinic. Rosen is also Mayo’s associate medical director for contracting and payer relations.”

    So no doubt, Modern HealthCare is right, many of these patients will be sent home. I once talked to a former insurance executive who told me that his company also sent wokers to top medical centers around the country, including Mayo, at the insurers’ expense where they knew the patient would be told that he didn’t need the operation. Paying their travel expenses was cheaper than letting them go through with the operation at a local hospital.

    We all agree that eliminating unnecessary surgeries is a good thing. But if WalMart is interested in promoting more efficient medicine– higher quality at a lower cost– why not send them to Centers of Excellence for neurosurgery–also “complex and high cost”? The answer is that it is much less likely that the patient will be told that he doesn’t ‘t need the operation. So for WalMart the savings would not be as great.

    This is all about getting a “second opinion at the selected hospitals that may rule out the need for surgery, officials said.
    http://www.modernhealthcare.com/article/20121020/MAGAZINE/310209974#ixzz29oYwJCWd
    ?trk=tynt

    Finally, Peter 1 asks a very good question: If an employee wants to have his heart surgery at a local hospital will WalMart pay for it? Or is he forced to go to
    one of the large medical centers of excellence who have made an argreement with WalMart to offer second opinions, and weed out surgeries they think
    are unnecessary. (No doubt many are, but there are also many grey areas–particuarly when it comes to transplants.)

  10. Maggie Mahar says:

    Civisius:

    You write:
    “Your remarks indicate that you don’t know enough about self-funding of health benefits to comment authoritatively.”
    Evidence? Or is this just an attempt to undermine my credibility?

    Just the other day I discussed the rules about health insurance with Professort Timothy Jost, a highly regarded law professor who specializes in health care law and constitutional law. (See his regular columns on HealthAffairs.com)

    He confimed what I already knew: when a corporation self-insures, it cannot
    offer better (richer) health benefits to executives than it offers to the rest of its employees. If memory serves, this law was passed in the 1990s. I was at Dow Jones at the time. They self-insured. They were no longer able to offer
    special health benefits to execs.

  11. Maggie Mahar says:

    Peter 1-

    You raise some very good questions.
    I plan to write a post about WalMart’s iniiative on HealthBeatblog.com (www.healthbeatblog.com) and will pursue some of them. .

    I think you would find the Modern HealthCare article that I cite in my reply to Brian interesting. (At the moment that comment is still awaiting moderation. I wrote it earlier today.)

    It suggests that WalMart is focusing on these particular procedures (heart surgery, spine surgery and transplants) because it knows that in many cases,
    the large medical center will tell the patient he doesn’t reallly need the surgery.
    Paying for his plane ticket and hotel is much less expensive than paying for the surgery at a local hospital.

    Meanwhile Mayo, et. al. are paid for rendering a second opinion– and they get good publicity as “Centers of Excellence” in all of the newspaper stories about Wal-Mart’s new intiative. (Also very good PR for WalMart, especially given its labor problems.)

    The Centers of Excellence understand that WalMart is sending this employees for a second opinoin, and that it hopes that the hosptails will tell the employees “Your doctor was mistaken. You don’t need this operation.It won’t help you-”-or “the risks outweigh the potential benefits.”

    Often, this is no doubt true. But, especially in the case of organ transplants, there arer many grey areas. Because they are being paid by WalMart do these Centers of Excellence tend to lean toward giving the opinoin WalMart wants to hear? I hope not. Very, very few doctors would knowingly do that. But in these grey areas of medicine, decisions are very difficult.

    If I was one of these employees, and had been told an organ transplant could save my life, I would be inclined to want a thrid opinion from a medical center that is not being paid by WalMart.

  12. Peter 1,

    I believe that if you talked to Walmart’s benefits team, you would find that they want their patients to receive better care and less overtreatment at lower cost than they’re likely to get at a community hospital. Walmart didn’t get to be who they are by being shrinking violets. Health benefits are a major expense for them as they are for every firm, and so they have mounted an aggressive effort to orchestrate better value.

    I don’t subscribe to the idea that most insurance companies want health care to cost less. Fully insured plans make a percentage of total cost, and so have every incentive for health care to cost more. You can see this in practices like continuing to pay primary care physicians less and less for office visits, which increases the incentive to refer any patient presenting with complexity. My firm routinely buys products/services – e.g., generic drugs advanced images, dialysis, pain management, physical therapy – at a fraction of what my clients pay through the health plan, which wouldn’t be possible if the health plans were aggressively managing cost.

    Maggie’s assertion that the Centers of Excellence that are paid by Walmart may be willing to spin diagnoses and treatment away from appropriateness and toward reduced cost not only borders on preposterous, but it is impractical. Organizations like Cleveland and Mayo are not about to take on unnecessary liability and risk their reputations for Walmart’s business, and the Walmart benefits team members that I’ve known are ethical, top flight professionals. My experience in this arena is that things are as they appear to be, and not the basis for conspiracy theories.

    • Peter1 says:

      “I don’t subscribe to the idea that most insurance companies want health care to cost less.”

      Certainly history and our present position tells us that, but “death panels” doesn’t push the conversation forward either, even though it could be used in the Walmart situation where a third party is trying to add an element of sanity.

      Maggie, I might believe that Walmart would want a die-sooner opinion, but it’s a long stretch for me to believe that these institutions would play that game, and risk sure exposure – on this I’m with Brian.

  13. BobbyG,

    You have presented an optimistic perspective, not a truth. While I wish that it were true, the discipline of lobbying, in which public policy is shaped to benefit special interests at the expense of the common interest, is an institutional betrayal of your point of view. Jared Diamond’s Collapse is a particularly poignant explication of this problem.

    • BobbyG says:

      It’s a moral assertion based on logic. What is “truth” if not that? Should we just give up on all “oughts” in deference to what “is”?

      Is it the case that there are no “self-evident” truths? That the Founders got that one wrong?

      That we should simply accept the rule of the ethos of asymmetric power relations.

      Not that I disagree with your points about the way things work.

      Yeah, “Collapse.” Read that long ago. See also “Debt: the first 5,000 years,” and “This Time is Different,” to cite just two more.

      http://BoilTheFrogsSlowly.blogspot.com

  14. Brian,
    Are you certain that your following statement is correct?

    “My argument is that Walmart’s leveraging of its own position to encourage health care market forces is a positive step for us all.”

    Are those market forces really a good thing for us? So let’s say I’m one of the few fortunate “associates” that are covered by this Walmart initiative, and let’s say I live in St. Louis and let’s say I have heart disease and my cardiologist of many years, who practices at the local center of excellence (quite excellent by all national measures), says that we are at a point where surgery is needed. Now I’d have to go to rural Springfield to get my surgery from a bunch of strangers? Being a Walmart “associate” chances are I can’t afford the copay (which will probably experience a sudden growth spurt in the near future), so there goes all my “empowerment/engagement/centeredness/continuity/choice” you name it, down the drain.
    Is this really and truly a good solution? Or does it just look like a good solution, with unintended consequences to be considered later? And I can think of a handful of those right now, and I’m sure you can too.

  15. Margalit,

    You laid out a narrowly defined scenario that is, in general, more unlikely than likely. What are the odds that the local interventional cardiologist is likely to be a far better surgeon than is available at Mayo or Cleveland, and that is on the plan. But if that’s the case, as you say, the patient can still access him/her by paying the co-pay, though I agree that this is an onerous option financially for most Walmart employees.

    Health plan benefits, like laws, are developed as policy rather than for anecdotal circumstances. We can always concoct hypothetical situations in which the patient would be better served by local physicians. But the fact remains that COE organizations like Mayo, Geisinger and Scott & White have stellar reputations for quality and lower cost. Having institutions like this as your default is hardly a hardship.

    Walmart has made a calculated decision here that if it steers patients in this direction, they will get generally excellent care and the overall costs will be less. In a system where employers DO, like it or not, call the shots on health care options, this seems like a pretty good one to me.

    And it suddenly creates serious incentives for health systems around the country to wake up, reconsider their egregious unit pricing and generally spotty quality efforts, and know that health care has become a market in which they have to compete or fail.

    To my mind, this is why the Walmart maneuver is important.

    Hope this helps.

    That said,

  16. Barry Carol says:

    Brian –

    I agree that both Wal-Mart and Lowe’s are doing a good thing here. Expensive procedures like heart surgery, hip and knee replacements and the like lend themselves to both bundled pricing and quality assessment. Quality, in this context, encompasses everything from infection rates to 30 day hospital readmission rates to longer term survival rates and the need for repeat procedures. This data is not hard for hospitals to accumulate. What’s needed is both price (contract reimbursement rates) and quality transparency to make it easier for both the public at large and referring doctors to more easily identify the best places to get these procedures performed even if it’s not in the patient’s immediate area.

    As for Wal-Mart’s employment practices, I get a little tired of hearing liberals beat up the company when they continue to shop there to get the low prices. If they were willing to pay 20% or 30% more for the same merchandise at the local mom and pop, since driven out of business, Wal-Mart would be a tiny fraction of its current size. By the same token, we could require restaurants to pay their waiters and waitresses the full minimum wage and provide health benefits as well. They would probably have to double their menu prices and people would drastically cut back on eating out as they do in Europe so the restaurant sector would shrink dramatically as a result. Or, we could have a healthcare system financed by taxes like in Germany and France and the typical middle class family would pay 50% of its income in taxes. Sure, we could raise taxes on rich people, especially on their investment income, but there aren’t nearly enough of them to come anywhere close to paying the bill. At the end of the day, most full time working people under the age of 65 are going to get their insurance through an employer. We should strive to maximize value from the system we have and are likely to continue to have. Wal-Mart’s efforts are a helpful step in the right direction.

    • Peter1 says:

      “They would probably have to double their menu prices and people would drastically cut back on eating out as they do in Europe so the restaurant sector would shrink dramatically as a result. Or, we could have a healthcare system financed by taxes like in Germany and France and the typical middle class family would pay 50% of its income in taxes. Sure, we could raise taxes on rich people, especially on their investment income, but there aren’t nearly enough of them to come anywhere close to paying
      the bill.”

      It’s nice to know we’ve created the perfect heath care system Barry.

      By the way do Europeans really eat out less and if so is it because restaurants have to charge double to provide health care to workers?

      My recent trip to the Baltic states showed a pretty vibrant restaurant crowd, sans tourists, and a pretty good life style (given the number of Audis, Benz, BMWs and fashionistas) even with your claimed 50% tax rate.

  17. Brian,
    The Walmart maneuver, if successful, and if adopted by more purchasers, will eventually hollow out community health care.
    If you systematically herd populations to remote mega-centers, operating on volume, there is no way a small local hospital can compete and keep its doors open. This may be looked at as a good thing (by Christensen disciples in particular), but when care is needed immediately or when patients are too sick to travel, there will be no local expertise to provide that care and people will die.
    Ironically, this model is very much in line with the Walmart business model in general, and it will most likely have the same long term effect on communities and health care as Walmart itself had on communities and retail.

  18. Barry Carol says:

    Margalit –

    I think you’re way too pessimistic in your assessment. While most people would prefer to have major surgery close to home, there are several important issues here.

    First, patients should want surgeons who do a sufficient number of these procedures each year to be well down the learning curve and the same goes for the rest of the team in the operating room. Organ transplants in particular should probably only be done at regional centers of excellence. Second, there are surprisingly few economies of scale in the hospital business. The larger systems may have an advantage in purchasing medical devices and other supplies and they may have an easier time accessing capital, but labor costs are likely to be comparable for all hospitals based on the market for medical worker wages in each region. Third, with price and quality transparency as I alluded to in my last comment, the higher cost hospitals will know that they need to lower their costs and their prices to remain competitive and will find ways to do so or steadily lose business.

    Rural hospitals have always been higher cost because their occupancy rates are significantly lower on average than hospitals in urban and suburban locations. Standard Medicare and Medicaid are not likely to embrace this COE approach for their patients. More routine surgical procedures like appendectomies and gall bladder removal are likely to continue to be performed locally. Most cancer treatment can be handled competently in a community setting. Most importantly, advances in efficiencies pioneered by the centers of excellence will be publicized and can be copied by other hospitals.

    I remember reading a few years ago a quality assessment of 54 cardiothoracic surgeons then practicing in the Boston area. They were rated one two or three stars based on the overall quality of their outcomes with three stars being the best. Of the 54 surgeons, 52 received two stars, one got one star and one got three stars. In other words, virtually all of them were solidly competent. The key factors that would drive efficiency of performing surgical procedures in a hospital are well established processes and procedures including good care coordination, competent surgeons and other operating room staff and high percentage utilization of the expensive fixed assets, especially operating rooms, recovery rooms and patient rooms. At the same time, the centers of excellence also have to cover the cost of flying the patient and a family member to their city and back home and put a family member up in a hotel room and feed them for the length of the hospital stay. A local facility does not incur those costs.

  19. Barry Carol says:

    Peter1 –

    I never said the U.S. healthcare system was perfect. I said it’s what we have and is the framework we are likely to have to work within for the foreseeable future.

    The last couple of times I went to Europe (Scandinavia and Switzerland), meals in ordinary family oriented restaurants were easily double what they would cost in NYC which is itself an expensive city. If you factor in much higher wages in Europe partially offset by much less tipping but add in the cost of health insurance plus the value added tax which averages 20% across Europe but can reach 25% in some countries including Denmark, restaurants much charge much higher prices than their U.S. counterparts.

    Our tour guide in Switzerland told us that when most middle class people go out to eat, they often just go for the main course and then return someone’s home for dessert and coffee because those are especially expensive in restaurants.

    Europeans also live in much smaller homes than Americans do. With gasoline at $7-$9 per gallon, they drive much smaller cars out of necessity and, where possible, lots of people ride bicycles or mopeds to work. I saw thousands of people riding bikes to work in Copenhagen but that was during the summer. I don’t know what they do in the winter.

    In fairness, most Europeans appreciate their social safety net and they’re willing to pay high taxes to support it and make other tradeoffs including the size of their homes and cars. Americans are just not prepared to make the same tradeoffs as far as I can tell and President Obama’s implication that Americans can have a European style safety net if we just raise taxes on the rich is both disingenuous and just plain wrong.

    • Peter1 says:

      Barry, the recent OECD list of the top 10 of the “Happiest” countries in the world are: 1. Denmark 2. Norway 3. Netherlands 4. Switzerland 5. Austria
      6. Israel 7. Finland 8. Australia 9. Canada 10. Sweden

      All their restaurants are probably more expensive than U.S. and taxes higher as well. Not too surprisingly they all have some form of government provided/controlled health care, also provided to restaurant servers.

  20. Maggie Mahar says:

    Brian & Bobby G.–

    Brian–

    While I have misgvings about your post, I’m glad to see that it has generated some ecxellent comments.

    Bobby G.–
    Just saw your Oct 20 comment (11:45 a.m.) — Great comment.

    (Could I persuade you to comment on HealthBeatblog.com? (www.healthbeatblog.com) We have a fair number of v. insightful readers commenting. Not all are liberals.Barry Carol, who you will find on this thread, also comments on HealthBeat.
    But we have no trolls, no personal insults, and often, the discussion is illuminating.)

    Going back to your comment here. It begins:
    : “Finally, individuals who insist that corporations should be beacons of social progress are bound to be disappointed”

    “Straw man.

    “The aggregate moral purpose of markets should properly be to advance the human condition, net (which includes not fouling the nest)– maddeningly difficult to achieve ongoing as it may be. Markets properly exist to serve humanity, not the other way around. That this requires rational regulation ought be self-evident. That such is a never-ending pain in the ass ought also be self-evident.

    “If you disavow that, you are disavowing our system of law. It has been a long, painful climb up out of the Tooth and Claw muck.

    “See Gresham’s Dynamic, for one thing. A Winners vs Losers economy will not sustain. How many times must we re-learn that lesson?

    “Corollary: Not all markets are equally morally consequential. Markets for cheap trinkets and crass entertainments can come and go without appreciable socioeconomic/moral impact. The “markets” in health care or other life necessities are quite another matter at core.”

    Al very true.

    Biobby G.– I
    I suspect that I didn’t see your comment earlier because it was stuck in
    “awaiting moderation.” This happens to many longer, in-depth comments.

    Nine hours ago, I posted a reply to Brian response to my first comment . It”s still “awaiting moderation.”

  21. Barry,
    I don’t know what centers of excellence are. If all complex surgeries are diverted to one mega-center, that’s where all the expertise will come to reside and if you have an emergency and someone needs to “fix” something right here, right now, there will be nobody competent enough to do it unless you happen to have your emergency in close proximity to a mega-center.
    And are we 100% sure that all of us will have our flights and 5 star hotels covered to get our spine fusions, or are there “certain” folks not considered in this grand plan at all?
    Health care is local for a good reason, and sucking out all medical expertise from the community is a very short sighted strategy.

  22. Barry Carol says:

    Peter1 –

    I would also add that, while I haven’t studied it, I suspect that the number of fast food restaurants in Western Europe where both McDonald’s and Burger King are well established, is, probably much lower per 100,000 people than in the U.S. Another factor adding to much higher menu prices in Europe is that real estate is, on average, considerably more expensive than in the U.S. which means store rent per square foot is higher as well.

  23. rbaer says:

    I have to side with Brian and with Barry (even though today the former appears quite testy and the later writes an unusual (for him, that is) rant about Europeans paying too much taxes – as a side note, one always has to remember that those Europeans, as a general rule, pay more AND get more, have more financial safety and more upward mobility, although I am unable to tell how sustainable this is for all EU countries given debt crisis and demographic problems/overaging). And by the way, not too many liberals really shop regularly at walmart, from my experience.

    While this is likely the right thing to do both for walmart and (some of) its employees , it raises the questions of why corporations should make these decisions at all. What about all the people working for a company not interested in presumably wise HC decisions? Insurance agencies/funds (or any payor, for that matter) should pursue good providers and value for all covered individuals, with the help of licensing agencies. For instance, hospitals should not do elective or semi elective complex surgeries in low numbers if better qualified centers could be reached (or, through centralisation, soon established) with a 1-2 hour car ride.

    And it is absolutely true that overtreatment (of the insured) is a huge problem in the US, causing huge bills and not infrequently secondary disability. If a collective of usually highly qualified and salaried physicians can make a dent, it’s definitely an improvement. But other approaches might be possible as soon as more people in the general population and politics become aware of the problem. As long as republicans yell “death panels” as soon as the democrats make tepid efforts to work for rational care delivery, progress will be impossible.

    • Peter1 says:

      “While this is likely the right thing to do both for walmart and (some of) its employees , it raises the questions of why corporations should make these decisions at all. What about all the people working for a company not interested in presumably wise HC decisions? ”

      rbaer, I think this is the crux of the question here in the U.S. We don’t accept that our corporations’ employees and family members are the only ones with access to quality education, yet we allow health care disparity based on employer.

      Access to upward mobility is both education AND health care.

  24. Barry Carol says:

    Margalit –

    Centers of Excellence will not achieve dominant market share for things like hip and knee replacements and heart surgery. As I said before, though, organ transplants should probably be limited to a fairly small number of regional hospitals that do enough procedures to ensure competence and quality.

    For surgical procedures other than transplants, plenty of hospitals and doctors can provide competitive quality and outcomes. What they also need to do is to provide a competitive price. The Cleveland Clinic, by contrast, is offering competitive prices for patients it would not otherwise treat because it has excess capacity in its home market which isn’t growing. For patients within its home market, its prices are astronomical due to its local market power. What happens when it fills its current excess capacity? It’s not going to continue to price new business based on marginal costs.

    I make these comments based experience in the retail sector. Wal-Mart offers somewhat lower prices and now does over $200 billion per year in sales of items typically sold in supermarkets. Yet, while some supermarkets have closed in recent years, 35,000 of them are still in business across the country. Home Depot and Lowe’s are leaders in the home improvement business. Yet, 15,000 – 20,000 small hardware stores and thousands of lumber yards are still competing effectively because plenty of people will pay at least 10% more for better service and greater convenience. Walgreens and CVS are leaders in drug retailing. Yet 18,000 – 20,000 independent drug stores are still around and competing effectively. Many offer home delivery which the big chains generally don’t. The pharmacist may also own the store and a family member may also be working there as well. So, what for the big chains is store rent and store labor is family income for the independent store. There’s more than one way to compete effectively.

  25. Maggie Mahar says:

    I replied to Brian’s initial reply to my comments 10 hours ago.

    My comment is still “awaiting moderation.”

    I’m puzzled.

  26. Maggie (and others),

    Thanks for the citations. As I stated yesterday, my interest in writing this column was not related to the controversy over Walmart’s employment practices, but to illustrate Walmart’s innovative, market-driven approach to obtaining better care at lower cost for its employees.

    While I believe that America’s failure to provide affordable universal access to comprehensive health care is a national disgrace, to my knowledge corporations are not legally required to offer health coverage, and many do so only because of its value as a human resource recruitment/retention tool. Firms that recruit from the least skilled and most available segments of society are under the least pressure to offer robust health benefits, That said, they must abide by many other laws designed to protect workers. These are the harsh truths of employer-sponsored coverage in the US.

    I support all workers who aspire for fair working conditions and a decent living wage. Further, Americans should be adamant that all employers adhere to the laws governing fair labor practices, That said, Walmart and many other large firms are well within their legal rights to manage their employees’ health benefits as they like.

    I have known people on the Walmart benefits team and have watched their program for years, and I don’t believe that the conspiracy theorists are correct here. As I described in my column, a key feature of Walmart’s COE program is that the physicians are salaried, and so, unlike many/most community health systems, have no financial incentive to deliver unnecessary care. Nor is there an incentive to deny necessary care. The protocols are transparent, and a range of outcome metrics, including the ability to coordinate care with local physicians and services, are incorporated. This is a better approach that should produce better outcomes at lower cost, and that could raise the performance bar across markets.

    As to Maggie’s question about why other procedures aren’t included, it is important to remember that this is a new program with necessarily narrow parameters. If the results are compelling to Walmart’s benefits managers, then it will undoubtedly be expanded.

  27. Barry Carol says:

    “We all agree that eliminating unnecessary surgeries is a good thing. But if WalMart is interested in promoting more efficient medicine– higher quality at a lower cost– why not send them to Centers of Excellence for neurosurgery–also “complex and high cost”? The answer is that it is much less likely that the patient will be told that he doesn’t ‘t need the operation. So for WalMart the savings would not be as great.”

    Maggie –

    Why does highly regarded Geisinger Health System offer bundled pricing and, in effect, a warranty on their work for heart surgery but they don’t offer it for hip and knee replacements, back surgery or neurosurgery? Maybe it’s because they haven’t yet developed a good streamlined standardized process for those procedures. Or, maybe it’s because they can’t get the surgeons to agree on which devices to use and which approach to take. For heart surgery, it’s grafts from the patient’s leg and/or arm that are used to bypass the artery blockages. There are no devices needed.

    Back to Wal-Mart, as Brian noted, it’s a new program and the company may be feeling its way and will expand the effort if the current program is successful and if it can find centers of excellence that will provide competitive bundled prices for other procedures. Also, as Brian noted, I doubt that any good medical center is going to risk its reputation by telling Wal-Mart what it thinks the company wants to hear rather than the hospital’s best medical opinion.

    Separately, it’s also important to note that Wal-Mart competes in an industry where low wages are the norm. Work flows are uneven and it’s necessary to employ a lot of part time workers to adequately staff the stores on peak days and at peak hours. Its most direct competitors are Target and K-Mart. I doubt those companies’ health insurance offerings are much better than Wal-Mart’s.

    The old line supermarkets offer better pay and benefits because of unionization but that’s part of why they can’t compete with Wal-Mart on price as effectively as they would like to. Costco offers good pay and benefits but it’s a completely different business model. It only stocks a tiny fraction of the items that Wal-Mart carries and many of those are not stocked all the time. It requires far less labor per dollar of sales. Whole Foods has a younger work force and charges much higher prices for its upper end offerings. Starbucks offers better benefits but also charges very high prices for its coffee and snacks.

    Your implicit suggestion that Wal-Mart’s business practices are exploitive at best and downright evil at worst is unfortunate to put it kindly. Nobody is being forced to work at Wal-Mart. If it’s so horrible, quit and get a job someplace else or don’t apply to work there in the first place.

  28. Barry Carol says:

    Peter1 –

    Happiness is a highly subjective concept and there is a huge variation in how different individuals would define and assess it. I think it’s a combination of circumstances, values and expectations. You can find people that appear to have it all yet are miserable and others who don’t seem to have much but are quite content.

    If we could somehow impose a European style broad safety net on the United States along with the much higher taxes needed to finance it, it’s an open question as to how many more or fewer Americans would consider themselves happy than before. Europeans embrace concepts like solidarity, collectivism and socialism. Americans generally don’t. We’re more materialistic. We’re more willing to take risks in business. I don’t see nearly as much innovation coming out of Europe or Asia though the Chinese in particular are very good at misappropriating intellectual property and copying what others have developed and using dirt cheap labor to sell products for less than they can be produced for in more developed countries.

    I would like to see the currently uninsured have health insurance that they can count on and that would pay doctors and hospitals enough so providers would be willing to accept the insurance. However, it’s likely to cost an incremental $150-$200 billion per year to make that happen on top of the massive deficits we’re already racking up at the federal level. Meanwhile, the Obama folks are trying to tell us that all we have to do is raise taxes on the top 2% of the income distribution and everyone else can have a free ride. As Joe Biden might say, it’s malarkey and I think they know it.

  29. Maggie Mahar says:

    Brian & Barry

    Brian:You write: “Maggie’s assertion that the Centers of Excellence that are paid by Walmart may be willing to spin diagnoses and treatment away from appropriateness and toward reduced cost not only borders on preposterous, but it is impractical.”

    No where did I assert that doctors at Centers of Excellence “spin diagnosis.”

    Brian, I don’t know why you feel a need to distort the truth–or attack me–; it doesn’t strengthen your argument, it merely undermines your credibility.

    The thesis that many of these Centers of Excellence will tell patients that they dont’ need these operations )is not mine. As I indicated this is what Modern HealthCare (which is not a particuarly liberal publication) points out.

    Modern HealthCare’s story begins:

    “Wal-Mart Stores is betting that some workers who qualify to travel at the company’s expense for heart and spine surgery may not need it after all.

    “The retail giant announced this month it would pay for workers to travel for certain heart and spine surgeries to selected hospitals that Wal-Mart identified as high-quality. . . .

    “Workers will get a second opinion at the selected hospitals that may rule out the need for surgery, officials said.

    “The effort, said Wal-Mart spokesman Randy Hargrove, seeks to avoid unnecessary care, as well as preventable complications, by giving workers access to hospitals that specialize in certain procedures. “No one wants to have surgery if they don’t have to,” he said. . . .

    The story ends:

    “Dr. Alan Scarrow, president of Mercy Clinic Springfield, said the Missouri hospital is also in talks with other employers. . .

    “Scarrow said Wal-Mart is looking to hospitals included in the program to avoid unnecessary surgeries. “Patients come to us for essentially a second opinion,” he said.

    “Mercy Clinic offered to screen Wal-Mart employees using telemedicine in an effort to avoid unnecessary travel, but the company said it preferred patients meet with physicians in person, Scarrow said. Ultimately, he said, the cost of airfare is far less than the cost of an unnecessary heart or spine surgery.

    “If they fly somebody out and we say, ‘Look, this isn’t appropriate, you don’t need surgery,’ that cost savings could buy a lot of plane tickets,” he said. ”

    Brian– Note that WalMart executives and an executive at one of the Centers of Excellence is making it clear that a primary goal of the program is to “rule out the need for surgery.” This is what makes it so cost-effective for WalMart.
    A secondary goal is to give patients access to surgery at hosptials that follow evidence-based guidelines and where they are less likely to fall victim to
    complications.

    My question: why, then, not send patients who definitely need surgery to these
    Centers of Excellence? Why focus only on surgeries that we know often will be ruled out?
    We’lll see if WalMart expands the program to include other surgeries.
    But the former insurance executive who I talked to (and who wanted to hire me) emphasized that his company paid to fly patients to centers of excellence when they thought they would likely be told they didn’t need surgery, not to give them a better shot at higher-quality care without complications.
    The former insurance excec was legit– a friend of Nortin Hadlers. I didn’t take the job.
    http://www.modernhealthcare.com/article/20121020/MAGAZINE/310209974#ixzz29wt9nvOO
    ?trk=tynt ”

    Finally, after expressing concern and sympathy for WalMart’s workers, you write: “Your implicit suggestion that Wal-Mart’s business practices are exploitive at best and downright evil at worst is unfortunate to put it kindly. Nobody is being forced to work at Wal-Mart. If it’s so horrible, quit and get a job someplace else or don’t apply to work there in the first place?”

    The answer: UNEMPLOYMENT. People need to eat, and feed their famlies.
    Wal-Mart knows this, and thus, knows that it doesn’t have to provide affordable health care to most of its workers. Given their incomes, $10,000 deductibles are ridiculous. They can’t afford to use the insurance.

    Barry-As for the notion that these are the operations that WalMart is focusing on because we have standardized ways of doing these procedures that are
    extremely successful, that is true of heart surgery (Geisinger) but not of
    transplants (many different transplants, many different ways of doing them)
    and spine surgery (much controversy there…)

    On the other hand, as Gawande describes in “Big Medicine” we do have a
    standard ized procedure for knee and hip surgery that is extremely successful
    Pepsi sends workers to Johns Hopkns for joint surgery. . .

  30. BobbyG says:

    Good dialogue here on this thread. All of you.

  31. Barry Carol says:

    Maggie –

    I think it’s quite likely that there are numerous centers of excellence around the country that can perform many of these surgical procedures very well with good outcomes and few complications. If Wal-Mart and other employers offer employees and their family members the option of going to a distant center for procedures that are recommended when they’re not necessary with above average frequency, I’m sure the patient who is told by the experts that the surgery isn’t necessary will be delighted. If it is necessary, he will be in very capable hands and, if at the end of the day, the employer saves money, it sounds like a win-win for all concerned to me. The added benefit that we haven’t mentioned so far is that this intra-country medical tourism approach also helps to create countervailing power against well known academic medical centers that exploit their local or regional market power to charge insurers excessively high prices. For procedures that medical tourism does not save enough money for the employer to make it worth the effort, a combination of price and quality transparency coupled with tiered insurance networks are also potentially effective ways to create countervailing power against the high priced hospitals.

    One negative cost trend going on in healthcare is the consolidation of hospitals into larger systems to enhance their market power against insurance companies. Also, as they buy up independent labs and imaging centers, they are often able to charge much higher prices for the same work that the labs and imaging centers were performing well for less money when they were independent. When the hospitals aren’t killing us with infections, they’re killing us financially unless we can find ways to create enough countervailing power to push back effectively and either force them to lower their prices or redirect business to other nearby or distant institutions that will provide high quality care for substantially less money. Hospital market dominance cannot be allowed to stand if we expect to bend the medical cost growth curve anytime soon.

  32. Brian & Barry,
    As hard as you are trying to compartmentalize Walmart’s actions, I would suggest that this is impossible to do. Walmart’s actions are all driven by one and only one goal – maximize profits. Walmart’s employment practices are, and always have been deplorable, and Barry, Sam’s Club operates on the same model as Costco. Do you think Sam’s Club employees have different pay or different health coverage?

    Walmart has triggered a vicious race to the bottom in every community where it built a store: cheaper prices -> lower wages -> nobody can afford to shop anywhere else -> competition destroyed -> no other jobs -> even lower wages -> Poverty and a hollowed out community.

    They are bringing this innovation with slight modifications to health care and the only question to ask is how does Walmart make money from it, because just like the garbage sold in their stores is not benefiting anybody, this “maneuver” is not going to make anyone better off, except Walmart.

    And since nobody is asking this, how did some hospital in rural Missouri become a center of excellence? Have you ever tried to book a flight to Springfield, MO? My original hypothetical example Brian, was for a reason.

    I am sure doctors at Mayo are not going to compromise their professional integrity on behalf of Walmart, and it has absolutely nothing to do with them being salaried, but I would like to see the fine print on the requirements for qualifying to be flown (or driven to MO) to one of those mega-centers. Are medical records reviewed by Walmart before “qualifying” the most likely flying candidates?
    How many transplants did Walmart pay for in the last year? And if they did, how many of those were performed on cashiers and stockroom “associates”?

  33. Barry Carol says:

    Margalit –

    As I said before, retailing is, for the most part, a low wage industry characterized by high employee turnover. Some people start on the sales floor and work their way up into management and go on to have very successful careers. Others decide it’s not for them and move on. A job that pays $9 or $10 per hour with skimpy benefits and tough working conditions doesn’t strike me as a hard act to follow. I don’t think people take these jobs expecting to spend their lives there nor to they expect the starting wage to be enough to support a family. We have Wal-Mart around here and most other retailers both large and small seem to be doing fine thank you. Exceptions include K-Mart and Sears but they were struggling long before Wal-Mart entered the local market. Best Buy is struggling because of competition from online retailing but that’s a whole different story. Wal-Mart’s key competitive advantages are its buying power and its information systems driven logistics expertise. If people don’t like the products or the service or the prices, they don’t have to shop there and if they don’t like the wages and working conditions, they don’t have to work there current high unemployment rates notwithstanding.

    Lowe’s and Pepsi are doing similar things to what Wal-Mart is doing on the healthcare front. Safeway is trying to steer patients to the most cost-effective providers in the area around its CA headquarters. To the extent that they are successful, employees benefit as do customers and even shareholders. I don’t see anything wrong with that. What’s the alternative? Go wherever you like regardless of cost or quality? Don’t even ask about the cost because the employer or the insurer is just supposed to pay the bill without question? Healthcare costs are out of control and are unsustainable. We need more efforts to break that trend not fewer. Even if Wal-Mart is the worst employer in corporate history, what they’re trying to do in healthcare should be applauded in my opinion.

  34. Barry,
    When you are poor and uneducated your choices of where to work and where to shop are much different than you imagine.

    What Walmart has done so far is to publish a lovely press release implying that Walmart employees will now get health care from some of the best brand names in medicine. How many Walmart employees will actually get anything done at these famous places remains to be seen.
    I would venture a guess that following this grand press release there will be many additional contracts signed that do not warrant any publicity.

    As you very well know, cost-effectiveness has a numerator and a denominator and value can be driven up in a number of ways. If we drive value up the Walmart way and if enough large purchasers join the profitable Walmart way, centers of true excellence will be driven out of business, or cut down to boutique size, and will be replaced by mega-centers providing large volume, cheap, good-enough for the masses medicine for all but the very few at the top.

    When these “unintended” consequences become the main stay, and the liberal moaning and groaning begins, folks on the other side of the ideological aisle will probably say what you are now saying about jobs and retail choices, and what a French queen said shortly before being decapitated.

    The alternative is to regulate prices for all those academic centers of true (and expensive) excellence that forgot what their true mission should be, and for everybody else in health care for that matter, because the potential consequences of cheap heart surgery are not the same as those of buying a $2 t-shirt that falls apart first time you wash it.

  35. southern doc says:

    Makes me think of charter schools: the most motivated students/best-insured patients are pulled out of the pool and sent to schools/hospitals that have the ability to select who they educate/who they operate on. Not to mention that there’s already a shortage of good teachers/good surgeons outside of the high income ZIPS that will worsen with this plan.

    Great for the happy few, but bad news for the students and schools/patients and hospitals left behind.

  36. Maggie Mahar says:

    Southern Doc & Bobby G.–

    Southern Doc–

    I realize that often you and I disagree, so I wanted to be sure to say “thank your” for the analogy.

    (I also agree with you about charter schools. My daughter teaches in the public school system in NYC and teaches many low-income kids.)

    No question, there is a shortage of good teachers and good surgeons outside of the high income ziips.

    Bobby G.–

    I agree– this has been a v. good thread.

  37. southern doc says:

    You’re welcome. Feel free to use it!

    One has to assume that, even at reduced rates, Walmart will be paying more than Medicare and Medicaid. This will allow Mayo and the others to bump these low-paying patients onto wait lists, and deal with younger, healthier patients without worrying about re-admission penalties, etc.

  38. Barry Carol says:

    Margalit –

    There is a little bit of common ground here in the area of price regulation. While I’ve never been in favor of government just dictating prices, I do think that for care delivered under emergency conditions, hospitals should not be allowed to charge more than the lesser of some reasonable percentage above Medicare (120% perhaps) or the lowest rate that they accept as full payment from any in network insurer with whom they do business.

    Maggie and southern doc –

    With all due respect, if well regarded but very expensive medical centers in places like NYC, Boston, Washington D.C., Los Angeles, San Francisco, Houston, Chicago, etc. start to lose profitable surgical business to centers outside of their home region, wouldn’t you expect them to respond with lower prices to keep or reacquire the business? Patients would certainly prefer not to have to travel and hospitals know that the sophisticated surgical procedures account for a disproportionate share of their profits.

    Finally, I suspect that as much as 65%-70% of revenue generated by the well known medical centers is for medical, as opposed to surgical, care that community hospitals can probably handle just as well. I’m referring to problems like frequent admissions for patients with congestive heart failure, patients with asthma or COPD, nursing home patients who fall and need to be checked out, pneumonia cases, low risk labor and delivery, common cancer treatments, routine general surgery, etc. This also includes all of the outpatient labs, imaging, colonoscopies and other common procedures that, by definition, need to be scheduled in advance. There is no reason why the expensive big name hospitals can’t be put in an insurer’s non-preferred tier for all of that care while placing them in the preferred tier for the sophisticated surgeries and treatment for rare types of cancer and organ transplants that they really are the best at. At the same time robust price and quality transparency tools should be able to help referring doctors steer patients to the most cost-effective high quality providers.

  39. Referring doctors, Barry?
    If all goes as planned all referring doctors will be “owned” by these hospital systems very very soon. They will refer where they’re told to refer.

    Private insurers have no financial incentive to reduce whatever falls under the MLR and there aren’t enough people covered by large self-insured employers to affect the market. Medicare and Medicaid could try, but I can already hear the screaming, and most of it would be justified.

    I just don’t see an alternative to government stepping in to facilitate fair negotiations and a leveling of the playing field.

  40. Barry Carol says:

    “I just don’t see an alternative to government stepping in to facilitate fair negotiations and a leveling of the playing field.”

    What exactly does that mean and how would it work? The Swiss and German model is that insurers negotiate as a group as do providers so everyone receives the same rate for the same service in a given area. Is that what you have in mind? If so, I don’t know how superior quality and efficiency gets rewarded. It would also require an anti-trust exemption for both insurers and providers.

    “there aren’t enough people covered by large self-insured employers to affect the market”

    Actually, of the 150-160 million people who get their health insurance through an employer, roundly 60% are now in self-funded plans. Full risk, as opposed to fee based members, have been declining for a number of years now as more firms and government entities self-insure. By contrast, Medicare has 48 million people in its program about 25% of whom are in private Medicare Advantage plans. Medicaid has about 55 million people in the various state programs but over half of them are children.

    I think there are more than enough people in self-funded plans to ultimately affect the market. On its most recent conference call, United Health management said that 18% of its hospital contracts now incorporate some form of pay for performance and the concept is starting to gain traction so that this percentage is likely to grow rapidly over the next five years or so. This includes everything from shared savings to bundled pricing to ultimately partial and even full capitation.

    An alternative scenario is that if ACO’s ultimately prove successful, we might wind up with the equivalent of two Kaiser’s in each regional market except for the major cities which might have three or four Kaisers.

    The bottom line is that there is a lot going on in healthcare and health insurance now and the industry landscape is likely to look a lot different in 5-10 years.

  41. Yes, Barry, that’s what I have in mind. Efficiency is rewarded by larger profit margins per service for efficient providers and quality is rewarded by larger volumes, assuming information is widely available.

    I somehow am having a hard time understanding the relentless drive to narrow people’s choices by putting all sorts of corporate constructs in charge of making decisions. It flies in the face of all the patient-centered and consumer empowerment rhetoric., and I for one would appreciate a little honesty brought back into the national conversation on health care.
    Not to mention that gated networks will by definition be better for those who can pay more and I don’t like that either.

    Kaiser is an outlier and I have the same level of discomfort with vertically integrated systems as I have with the British health system. Physicians should be independent enough to serve as effective advocates for their patients, particularly when money is short and greed is looming large.

  42. Barry Carol says:

    Margalit –

    What you describe sounds to me like standard fee for service Medicare for all with a different price setting mechanism than Medicare’s current administered or dictated prices. One thing virtually every expert agrees on is that there is not much hope of controlling costs unless and until we can move away from the fee for service payment model. I also don’t care for the idea of reimbursing a doctor just recently out of residency training at the same rate as a 20 or 30 year veteran or paying an average surgeon the same as a superstar.

    Even the Swiss admit that they don’t have a good handle on the quality of care across their system. They think it’s pretty good but they can’t demonstrate it with reliable data. Lower costs in Europe are also attributable to several important cultural differences as compared to the U.S. First, Europeans are more accepting of death when the time comes. They’re much less likely to demand a full court press even when the prognosis is hopeless. They’re also less litigious so defensive medicine isn’t nearly as big a factor in driving up costs as it is in the U.S. I suspect but can’t prove that there is also less fraud which I would attribute to their culture of solidarity which implies that fraud is stealing from their fellow countrymen not just from insurers or “the government.” Finally, prices per service, test, and procedure are lower, in part, because doctors earn less money than their U.S. counterparts and drug prices are lower because governments are willing to use formularies or reference pricing or both. Also, I suspect that U.S. hospitals have significantly more employees per licensed bed than European hospitals do. Since wages and benefits are, by far, the largest component of hospitals’ cost structure, they have to charge more to break even without even considering the issue of recovering the cost of providing uncompensated care to the uninsured and underinsured.

    • rbaer says:

      “One thing virtually every expert agrees on is that there is not much hope of controlling costs unless and until we can move away from the fee for service payment model.”

      I don’t think I am the only one feeling that the cost explosion can be at least in part controlled by adjusting the medicare fee schedule (and private insurers likely will follow). Not only is it obvious, but it has been empirically demonstrated that certain well paid surgeries are overutilized due to the financial incentives. Pay a surgeon’s hours doing surgery approximately the same as a surgeon – or, say, a rheumatologist – doing a consult (yes, there should be some adjustment for risk and expertise, but consultations are also risky), and patients will be operated based on need and expected benefit. In my specialty, there is an FDA approved injection procedure that is paid about 5 fold as well as seeing patients in office consults – no wonder that this mildly effective therapy is taking off.

      Quality of care and outcome parameters are hard to measure, and while I don’t say it’s impossible to assess them, there will be certainly unintended consequences by all these pay for performance efforts (incl but not limited to doctors cherry picking patients and avoiding higher risk, and even seeing indications for milder disease in younger patients because their outcomes will be likely great). I don’t want to sound naive, but let me stress professionalism: most doctors at least start their carreers by wanting to do the best for their patients and taking pride in their work – I believe that overly uneven financial incentives considerably distort their motivations and medical professionalism in general.

    • I agree with rbaer.
      I have no idea how the “expert” consensus on the evils of fee-for-service came to be, but I would suggest that it is not evidence based and it is theoretical at best, or most likely driven by ulterior motives.

      Since you mentioned Germany and Switzerland above, Barry, and let me add France and to a large extent Canada, obviously lower costs can and are achieved by systems operating with a fee-for-service model.
      The problem lies elsewhere, and that elsewhere may be a bit more uncomfortable for those who profit from health care to address.

  43. Shaylynn Derouchie says:

    It will be interesting to see what happens in the future. I am hopeful that the walmart innitiative will be beneficial for all involved. I am sure people will create something else, especially if they don’t like what Walmart is doing. I was recently posting about creating a Walmart Healthcare system, but I wasn’t literally meaning Walmart owned Healthcare System. I do wonder about walmart buying out all healthcare systems and is this something they financially would want to do? I am thinking they are seeing a market and trying to fill the gap of our current healthcare system.

  44. gaufer ali says:

    yeh, i agree to Walmart things are initiative. I don’t think people go for other alternative.. However it depends up on their individuality Right? Walmart health care system is good but not for all the people who don’t trust their service. They also look for profits in the market view, or they want to help the people really? The Diabetic treatment also .. read here if you want http://slimfaststayfit.com/lose-weight-and-fight-diabetes/ more expensive.. but how would they spend on it?

  45. I was wondering if you ever thought of changing the structure of your blog?
    Its very well written; I love what youve got
    to say. But maybe you could a little more in the way of content so
    people could connect with it better. Youve got an awful lot of text for only
    having one or 2 images. Maybe you could space it out better?

  46. Hello! This is my first comment here so I just wanted to give a quick shout out and tell you I really
    enjoy reading through your articles. Can you recommend any other
    blogs/websites/forums that deal with the same subjects?

    Thank you!

  47. LOL! That was really funny!

  48. LOL! That was really funny!

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