Walmart's Approach to Health Insurance

My most recent post generated many questions, mainly about my definition of “value” in healthcare purchasing. My definition of value is the highest quality of care provided in the most efficient manner, i.e. not too much care, not too little care, delivered in a “lean” way and paid for in a mutually satisfying way. Walmart’s Centers of Excellence Program (COE) is the closest model we have. In the COE program, Walmart has selected clinics and hospitals that do a superior job of diagnosing high-cost cases and providing the best treatment plan, not the treatment plan that generates the most profit to the provider but the one that is best for the patients sent their way. This program has been very successful for Walmart, but it has been especially so for the company's associates (employees) and their covered family members. In Walmart’s benefit plans, a small number of covered lives account for a huge share of healthcare plan expenses. The company provides incentives for our associates and their covered family members to use our COEs. Eliminating fee-for-service was a big part of my previous post. Walmart’s COEs are not paid fee-for-service. Rather, the company has negotiated global fees, one flat fee for an episode of care for all surgery, testing, anesthesiology, hospital costs, etc. This is an alternative to fee-for-service, and it is working quite well. I urge other self-insured companies to find similar ways to bypass fee-for-service payments. Again, the time to act is now. If you feel your company cannot successfully negotiate direct deals with first-class providers like the ones we use, there are aggregators who can do that for you for fairly modest fees. This piece was written with Sally Wellborn, senior vice president of benefits at Walmart.