Walmart’s plans to test narrow networks selected on quality could set stage for a shift in employer-sponsored insurance

The retail giant plans a groundbreaking test of narrow networks for its employee health plan that will examine both enrollee acceptance and physician cooperation.

The nation’s largest employer will launch its first selected provider networks in 2021 as part of a groundbreaking initiative that could have ramifications for employer-sponsored health plans that provide coverage for about 155 million Americans.

Walmart health plans, which cover more than 1 million lives, will test curated physician networks in three markets in 2021: Northwest Arkansas, the Orlando-Tampa area and the Dallas area.

The initiative is a big change from Walmart’s traditionally broad PPO networks, and the company hopes the new approach benefits not only their enrollees but also clinicians in those regions. It’s also a move beyond the company’s earlier contracting with accountable care organizations. The biggest effect of the new initiative could come through the first-time availability of comprehensive quality data and scores for individual physicians, including those that don’t qualify for inclusion in the new networks.

It remains to be seen how physicians will respond to the initiative that aims to bring common metrics and transparency to care quality. Many clinicians disagree about which metrics and outcomes should be used.

Building on experience

Lisa Woods, senior director of U.S. strategy and benefits design for Walmart, said the curated networks stem from positive clinical results and employee experiences in its Centers of Excellence (COE) program. In 2013, Walmart began offering employee health plan enrollees care from COEs for an expanding list of treatments that include joint replacement, spine surgery, cancer care and organ transplants.

Despite COE care usually requiring travel, many Walmart enrollees jumped at the option, for which Walmart covered all out-of-pocket costs and travel expenses for the patient and a caregiver, said Amanda Deegan, director of global public policy for Walmart.

“When they came back, they told us they had no idea that healthcare could look like this,” Woods said. “They asked, how can you help us change healthcare in our community?”

The company classifies specified surgeries performed outside of a COE facility as out- of-network care and covers only 50% of the cost in most cases.

The company found striking results from the care provided at the COEs, including:

• Reduced average length of stay (LOS) by half a day for spine surgery and joint replacement
• Reduced spine surgery discharges to SNFs to 6/1000 compared to 49/1000 at non-COE providers
• Shortened time off for spine surgery by almost three weeks
• Shortened time off for joint surgery by a week and half

“We’re seeing all of this data and we know that quality matters,” Woods said. “It absolutely matters. And so that’s the mission that we’re on. And it is our North Star, ensuring that our associates get the very best care.”

That quality focus extended to individual physicians at the COEs. Walmart partnered with a vendor who visited each practice in person to analyze data and interview surgeons. The vetting process included selecting which surgeons at the COEs could operate on their enrollees.

But some of the biggest benefits of the COE initiative came before any surgery. Any patient diagnosed as needing spine or joint surgery by local providers was reassessed at the COE with new imaging and new readings. More than 50% of plan enrollees who had been told by local providers that they needed spine surgery, and 20% previously told they needed hip or knee surgery were found by the COEs not to require those costly, invasive procedures and instead were provided with alternative treatments.

“We were seeing where the associates would go to a COE and the COE would repeat an image or CTs or MRIs and realize [local diagnostics] probably weren’t the right read or not good quality,” Woods said.

The findings led Walmart to focus in 2019 on improving its enrollees’ imaging and the reads of images, which are commonly viewed as not having any variation in quality. That year, Walmart partnered with a vendor to launch imaging COEs for CT and MRIs.

“I can tell you that we are already seeing positive data in six months; we’re seeing a decrease in misdiagnosis, so we are so excited,” Woods said.

Pricing not a focus

The retailer negotiated bundled payments with each of the health systems it selected as COEs and identified 2015-18 cost outcomes in a 2019 Harvard Business Review column, which included:

• 8% higher cost for spine surgery at COEs
• 15% lower cost for joint replacement at COEs

But the company has found longer-term costs for both types of care were lowered by reduced readmissions and shorter LOS.

“Pricing has not been our focus,” Woods said. “Our focus has always been on the quality of care. We always felt that if we had quality of care then we would see downstream savings, which is absolutely what we have seen. So, we don’t go in and try to negotiate deeper discounts. That’s not what this is about. This is about negotiating for the right care.”

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Latest initiative

The three-market curated network aims to build on the COE experience by assessing quality outcomes for local physicians in eight specialties:

1. Primary care
2. Cardiology
3. Gastroenterology
4. Endocrinology
5. Obstetrics
6. Oncology
7. Orthopedics
8. Pulmonology

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Walmart contracted with Embold Health, which has access to de-identified claims data on more than 150 million lives and has developed evidence-based guidelines of care in consultation with academic physicians from leading universities. The local physicians are then screened based on their performance and its effect on appropriateness, effectiveness and costs of care.   

The vendor’s analyses are provided to Walmart, which has the final say on who to include in its curated network.

“What we’re looking at is that they have a demonstrated track record of providing consistent, appropriate and high-quality care,” Deegan said.

Key metrics tracked by Walmart’s quality analyses include obstetricians’ rates of performing c-sections on low-risk patients, which were found to vary by 300% in one local market, Deegan said.

The coming networks were previewed in employees’ 2020 coverage, which included quality information for “featured providers,” Deegan said.

However, the 2021 networks could change as Walmart and its vendor plan ongoing data reviews and changing selections based on the latest results.

“The reality is that we want all of the doctors, if we can, to be on our network list,” Woods said.

Striving for that goal has meant providing the quality assessments to all physicians in the targeted specialties in those three markets, so that they can see how they compare with others and can engage in a dialogue with Walmart and its vendor.

“Part of the reason we like working with [the quality data vendors] is because they are committed to working with providers to be better,” Woods said.

Deegan said the physician discussions have included some pushback on the data.

On the data, we hear, “Well, I don’t believe this data,” Deegan said. Walmart’s response has been, “Well, OK, let’s walk through it,” Deegan said. “This is what we’ve seen.”

Although the quality reporting program has been well-received by Walmart’s enrollees, Deegan said the physician response has been “a mixed bag.” 

The narrow network challenge

Getting enrollees to select the narrower network, instead of the traditional, broad Blue Network the company also will offer in those markets, may prove Walmart’s biggest challenge.

“I recognize that employers are concerned about that,” Woods said about employee resistance to narrow networks. “From a communication perspective, when we share that we are focused on quality and that’s what’s most important here, most associates — as we’ve seen from the experience in our [COE] program — are very appreciative of the opportunity,” Woods said.

The challenge stems from the common perception of U.S. healthcare consumers that more care is equivalent to high-quality care, but growing amounts of evidence indicate quality results often decrease with more — and more aggressive — medical interventions, Woods said.

“I truly believe that we are on the tipping point of seeing a movement where quality will become very much more a focus,” Woods said. “And we’re seeing it within our own company.”

The company is now formulating the way that it will pitch the new network to its enrollees. And a key part of its potential appeal will lay in its ease of use, which Walmart hopes to help, in part, with an app that provides ongoing communication based on the enrollee’s changing healthcare needs.

“We are trying to create change, we are trying to get our associates to the highest quality, but I will not tell you that we have everything figured out, and we’re still working on it,” Woods said. “That’s exactly what I would have told you when we started COEs.”

The Walmart network pilot

Employee plan enrollees in 2021 will have the option of selecting a “curated network” in three pilot markets. Some of the details are:

• Including physicians in eight specialties. (See list above.)
• Selecting physicians for the network based on quality analysis by a Walmart vendor
• Providing quality assessments to all physicians reviewed, whether or not selected for the network
• Performing ongoing analysis of clinical results to remove or add physicians to the network
• Encouraging dialogue with market physicians to correct data and evaluate how both the analysis and physicians can improve

About Lisa Woods

Lisa Woods, senior director of U.S. strategy and benefits design for Walmart, has been with the company for 30 years. Career highlights for Woods include:

• Leading the implementation of the company’s Centers of Excellence program
• Helping develop narrow network plans, including direct contracting with ACOs
• Involvement in other healthcare-related organizations, including serving as board chair for the Pacific Business Group on Health, board vice president for the Council of Employee Benefits, committee member for the National Business Group on Health and committee member of the Catalyst for Payment Reform.

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Will healthcare providers measure up if Walmart’s quality screeners knock?

The vendor screening physicians for Walmart’s coming curated networks will test a groundbreaking move to apply value tests to a broad range of physicians in several markets.

Walmart’s three-market test of high-quality narrow networks is set to launch in 2021, and much of the initiative rests on the work of Embold Health.

The vendor is crunching value data on all of the physicians in eight specialties within those three markets to determine which clinicians will be offered a slot in the retailer’s new network.

Daniel Stein, MD, the CEO of Embold Health, hopes his Walmart provider networks help physicians both within and outside the networks.

“At a high level, what we do is use analytics to identify those providers that consistently deliver healthcare that is both high-quality and medically appropriate and doing it at a reasonable cost,”  Stein said.

The company used a Blue Cross Blue Shield database of more than 150 million de-identified claims to assess physicians based on:

• Appropriateness of care, medically necessary care and the right care
• Outcomes from services provided, process-based quality measurement and adherence to the latest guidelines from professional societies and research
• Care delivered at reasonable cost and total cost of care

The company examines hospital data only to the extent that it affects the quality outcomes of clinicians who practice in such locations, such as surgeons’ readmission rates.

However, the vendor also has contracted with health systems to assess care variation among their employed clinicians.

“We generally find that there is a fair amount of variation within health systems,” Stein said. “In many ways, there is just as much opportunity for quality improvement and unnecessary care reduction within systems as there is across systems.”

The company does not release its annual revenues or number of clients, but Stein said it provides clinical quality assessments to employers in multiple regions of the country.

“There’s a tremendous desire in the employer community to focus on quality and help their employees access high-quality care and just to improve quality,” Stein said.

Stein noted that although the company does provide Walmart and other clients information about clinicians’ performance on the total cost of care, their clients are much more focused on the effectiveness and appropriateness of care.

“They know, and data bears out, that when care is more appropriate that also leads to better care,” Stein said.

Clinician responses

The company provides its quality assessments to all of the physicians it examines regardless of whether they are deemed sufficiently high quality for their employer-clients. The company then reaches out to the clinicians to explain the data, learn about any mistakes included in the quality assessment and get feedback on ways to improve the process.

“We think both steps are important to help [physicians] get better and to improve our process,” Stein said.

Those conversations also have included discussions with physicians who the company determined had lower-quality care.

“What we find from most providers is a genuine interest in improving, [in] delivering higher-quality, medically appropriate care,” Stein said.

But that natural desire has long been frustrated by the lack of feedback most physicians receive on how they practice.

The company is providing Walmart with ongoing tracking of clinicians’ results in the test markets, so that those who improve can be added to the network in the future.

To account for patient factors that are outside physician control but that can affect clinical outcomes, like social determinants of health, Embold uses both a clinical complexity risk adjustment (based on factors such as the practice’s share of sicker patients) and an adjustment for social determinants created by the Agency for Healthcare Research and Quality.

Stein warned providers that want to join Embold-cleared networks in the future to understand employers’ increased quality focus will require very different conversations than they typically have had with third-party administrators when creating plan networks.

“This focus on high-quality, medically appropriate [care] and reasonable cost is something employers care deeply about,” Stein said. “They also care about it in working with the provider community on improvement.”

Will employees choose the network?

Stein was confident enrollees in the Walmart employee plan and at other employers will embrace such “curated networks,” despite their traditional resistance to narrow networks.

His confidence stems from Embold’s ability to fill the “information vacuum” many find when seeking a clinician.

“In our conversations with employees, there is an active hunger; they want to know not just price, but they want to know quality,” Stein said.