Analysis: Walmart’s provider partnerships address cost reduction, patient experience and outcomes

Walmart is using three strategies to bring its healthcare cost reduction program “home.” But first, a little background. The program, known as the Center of Excellence (COE), involves partnerships with select providers that Walmart identifies as “high value” like Geisinger, Cleveland Clinic and Johns Hopkins to provide joint replacements, spinal surgeries and bariatric surgery, among other episodes of care. 

The partnerships have reduced costs and improved outcomes. The improvement in value — from both the patient and employer’s perspective — comes from three sources. 

Reduced unnecessary utilization. In many instances, when a patient is referred to the COE from a local provider with a diagnosis that requires a procedure, the center’s care team determines there is a clinically more appropriate, less invasive care pathway. 

Cost savings on care delivered. For episodes where surgical intervention is clinically appropriate the total cost of the episode is lower due to reduced complications and appropriate post-acute care setting selection. For example, Walmart’s COE joint replacement cost per case is typically 10-15% less than replacements performed in non-COEs. 

Increased productivity. Patients return to work sooner when they receive care from a COE. Using joint replacement as an example, COE patients return to productivity approximately 1.5 weeks faster than non-COE patients.

However, some have downplayed the potential of Walmart’s Center of Excellence program to impact local health system’s financial performance. When it was first announced, I had one state hospital association executive suggest the impact of losing a “couple of joint cases” a year wasn’t worth worrying about. 

At the time, my counter to that statement was that in an environment where public payers are growing as a share of a hospital’s mix you need to keep all of the profitable cases you can. Also, one can’t assume that Walmart is just going to stop at hips and knees or other elective episodes. Anyone who’s followed Walmart knows that it relentlessly reduces costs (ask P&G or any of its other suppliers). So, it’s no surprise that at a recent conference, Walmart’s Senior Director of U.S. Health Care, Lisa Woods, outlined three new strategies that will impact a larger section of Walmart’s employees. 

1. According to Becker’s Hospital Review, Walmart is “ramping up its telehealth offerings to put associates in touch with high-quality providers for care that is not available in COEs.” Woods noted that patients have returned from COEs to say they didn’t know “healthcare could look like that.” In response, the company adjusted copays for virtual visits from $40 to $4 and has partnered with a third-party referral service so associates can receive second opinions, remotely, from leading experts in the specific condition in question.”
2. Other initiatives include working with a third party to create an imaging network to address MRI and CT scans. “It’s the right machines and the right readers, with negotiated rates,” Woods said. 
3. As for the third development, “Woods couldn’t add specifics, but she said it would “resemble the COE program in reverse: We are taking our associates to good care, why can’t we bring good care into the communities or at least help them figure it out?’”

Takeaway

A couple of thoughts here: 

1. As far as Walmart’s telehealth strategy, anyone want to guess how the referral for specialist services is going to be made if the primary care telehealth provider can’t address the Walmart employee’s issue? My money is on an AI tool using claims data that will steer the patient to a lower-cost provider who practices conservatively. And my guess is, in some markets, this type of virtual tiering could move enough volume to have an impact on financial statements.
2. It’s not surprising that Walmart is targeting radiology given the frequently cited pricing differential between provider-based and freestanding settings and the highly variable quality of images and reads. My guess is they won’t automatically move their business out of provider-based settings in all markets. But if their data suggest the provider-based setting is higher cost and that cost isn’t commensurate with the quality of the imagine and read, the business will go elsewhere. 
3. Given the third item mentioned by Woods is vague, this is purely speculative. But my guess is at least one of the items they’ll address is a maternity bundle or other strategy to address elective C-sections. C-section rates in the United States are higher than in other developed countries. And the risks to both the mother and child of an elective C-section are fairly well documented.