Centering on Excellence

Fed up with wildly varying prices, a growing number of employers are turning to best-of-breed healthcare facilities for their employees' needs.

Thursday, April 4, 2013
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It was only 145 miles, but for longtime Kroger Co. employee Charles Stovall, the journey to Portland, Ore., was the trip of a lifetime.

Not long ago, doctors told Stovall -- a Vietnam-era Army veteran who's suffered through a long list of medical ailments in recent years -- that the only way he would regain the sensation he was losing in his legs would be to undergo expensive and complex spinal fusion surgery. Shortly after he got this news, Kroger -- the Cincinnati-based supermarket giant where Stovall has worked since the 1990s, most recently in inventory control -- told him that under a new program, it would pay all or most of the costs associated with the surgery, but under one condition. Stovall would need to travel two-and-a-half hours from his Olympia, Wash., home to have the operation performed at one of Kroger's approved medical centers, such as the Oregon Health and Science University in Portland.

For Stovall, that seemed like too good a deal to pass up. Eight weeks later, he was raving about the experience.

"It got rid of the pain -- I could feel my toes, the heels where I had no feeling at all," says Stovall, speaking from a rehabilitation center back in his hometown of Olympia. So far, he says, all his expenses have been covered -- including some follow-up work that may be necessary for lingering pain in his left knee -- and that's not all. Under Kroger's one-year-old Center of Excellence initiative, his insurance also paid for the rental car and Stovall's travel to Portland and put his brother up in a nearby hotel during his eight-day hospital stay.

Some would call Stovall's recent experience "medical tourism," while many employers have branded them as Centers of Excellence programs, to emphasize the world-class medical care available at the selected hospitals in their programs. Over the last few years, human resource executives are increasingly looking at setting up healthcare initiatives similar to the one at Kroger.

By establishing a small network of top-line providers for certain expensive, scheduled procedures, some industry leaders believe that what started as an outside-of-the-box idea -- to offer employees better medical outcomes yet at a lower cost to both the patient and the employer, through travel -- may soon become an important piece to solving the healthcare puzzle in America.

"If you go to a quality place, you're going to have fewer complications and better outcomes, and return to work faster," says Terry White, the president of Denver-based BridgeHealth Medical, one of a growing number of companies that identifies high-quality, cost-efficient medical centers on behalf of employers and health plans.

Wal-Mart Makes a Move

In establishing its program for spinal-fusion surgery cases, Kroger joined top American companies such as Lowe's, Wal-Mart, Boeing, PepsiCo and a number of others in giving its workers a type of Centers of Excellence plan (Kroger's program was among those profiled in a story late last year by the Los Angeles Times).

"Our goal is for Kroger's workforce to be the healthiest in our industry, and we're taking purposeful steps to move toward that goal," says Kathleen Barclay, Kroger's senior vice president of human resources.

Currently, there are significant variations among the programs offered by different companies in the number of procedures that are covered, the number of medical centers involved -- and thus the distance an employee might have to travel.

Many programs started on a relatively small, trial basis. In the case of Kroger, the company launched its effort in January 2012, giving its roughly 60,000 insured associates and their dependents -- 130,000 people in all -- an option for hip, knee or spinal fusion surgery at one of 19 designated medical centers across the country. Some 36 employees took advantage of the program last year; the workers not only got a higher rate of reimbursement for the operation (up to 90 percent), but importantly, Kroger saved money, too. Those 36 procedures cost $30,000, on average -- a savings of roughly 25 percent, or $10,000, over what they would cost at non-Centers of Excellence facilities, even with the cost of travel factored in, says Theresa Monti, Kroger's vice president of employee benefits.

Kroger expects the number of employees participating in the program to grow. "The program is new and different, and will take time for people to embrace," says Monti. "We expect the number of procedures to grow as more of our associates learn the benefits of the Centers of Excellence concept, and it becomes a more common practice." 

Experts think the use of medical-travel programs may explode in the wake of Wal-Mart's decision this January to offer all employees and dependents enrolled in one of its health plans with no-cost heart, spine and transplant surgeries at six major hospital systems from coast to coast, with free travel and lodging included. The company employs a whopping 1.1 million people and nearly one out of every 100 Americans with health coverage is a Wal-Mart employee or a dependent of one -- and so many other large employers follow its lead.

Randy Hargrove, a Wal-Mart spokesman, says that while the world's largest retailer certainly expects to lower its own healthcare costs by launching the program, "the key is that this program will reduce our associates' medical costs so that they won't have to pay anything out of pocket."

At Wal-Mart, as in the other, more established Centers of Excellence programs, employees or family members retain the option of using a hometown doctor and hospital that's not in the system -- but the insured will then have to pay more out of pocket.

Varying Prices, Rising Frustration

Experts agree that these programs grew out of employers' frustration over getting the bill for big-ticket surgeries and learning that the overall cost could fluctuate wildly, especially if quality issues required a patient to return to the hospital or require more extensive follow-up care than usual. For example, some health plans discovered that one patient's tab for hip-replacement surgery could run as high as $110,000, while another's might be as low as $15,000. A number of factors are behind these discrepancies in cost, such as the varying lengths of time some hospitals require patients to stay and higher rates of complications at some hospitals, requiring patients to be re-admitted.

BridgeHealth's White says that, not only are some procedures wildly expensive, but some of them -- at least one out of three, according to studies by Dartmouth College and the Rand Corp. -- aren't even necessary. Health plans initially went after this problem in the 1990s by requiring more second opinions or pre-authorizations, says White, but this proved largely ineffective. For example, patients usually sought second opinions for doctors in the same community or the same health system, who were often hesitant to contradict a colleague.

Around this time, stories began to circulate in the media about international medical tourism -- typically, patients with no health coverage finding that the savings from getting a procedure performed in a developing nation such as India greatly outstripped the extra cost of getting there. Some savings-seeking health plan administrators wondered if there was some way that employers could reap the same kind of savings.

Peter Hayes, now a health-benefits consultant, was overseeing employee medical benefits for the Hannaford Bros. Cos., a grocery store chain based in Scarborough, Maine, in the 1990s when soaring medical bills -- especially for a small number of very costly procedures -- led the company to become the first large firm to experiment with medical travel. Hayes says Hannaford initially targeted hip replacements because, with a large workforce of aging baby boomers, more workers were getting the procedure -- and the firm found that costs varied wildly among hospitals.

About 15 years ago, Hayes says, the firm contracted with a hospital in Singapore to perform hip replacements at a fixed price of $10,000 -- which was so much lower than what any U.S. hospital charged that it was well worth paying the employee's travel costs. But the Singapore arrangement only lasted about one year because, it turns out, the arrival of competition caused a medical center in Maine to decide to match that previously unattainable lower fee.

Hayes says that, as Hannaford expanded the program to cover a dozen or so medical procedures -- paying deductibles and any travel expenses, including a hotel room for a companion, for employees who went to a company-approved medical center -- it learned several valuable lessons. First, through focus groups and then through the experiences of its workers, the grocery chain learned that employees were most concerned about receiving the best-possible medical care -- so that they didn't mind the travel in order to get a better outcome.

But Hannaford also learned that -- just as company executives had hoped -- negotiating lower costs for big-ticket surgeries from knee- and hip-replacements to cardiac surgery to maternity stays led to considerable cost savings. Just by making such large reductions in the cost of these procedures -- averaging about 40 percent per operation -- the company was able to reduce its overall yearly expenditures by 4 percent, a substantial savings in the low-margin supermarket industry.

"It's all in how you communicate it," Hayes says of the Hannaford program, which continues to this day. "We didn't take away any benefits -- if you wanted to, you could still go to your local hospital, with the co-pay. But if you want to go to these places, we gave you an incentive to get better care. It was in all of our best interests."

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Neil Smithline, a physician consultant for New York-based Mercer, says over the last decade, so-called Centers of Excellence programs have actually evolved into three variations. In some, most notably Lowe's 2010 agreement with the Cleveland Clinic to provide heart surgery for its insured workers, a large firm seeks out one top-flight nationally renowned medical center. But other employers, such as Wal-Mart, have modified that model to offer a network of five or six regional centers, in an effort to reduce worker travel as well as the associated costs.

Still others offer a bigger network that may give employees more choices closer to home but which may not reduce costs quite as much. Smithline adds that the early adopters were focused intently on finding the best doctors and hospitals for their programs, but they discovered that a truly successful program for employees requires paying more attention to getting the travel amenities just right, such as finding top-quality but convenient hotels near the hospital for the patient's companion.

"If the companion is having an anxious time, that anxiety gets transferred right back to the patient," he says. Some programs have established a kind of concierge program to make the experience more pleasant by handling issues such as scheduling a return flight, since it's not known at first when the patient will be released from the medical center.

Smithline believes there will still be additional improvements in the medical-travel idea. He says a big issue is finding the right scale -- the larger networks may include medical centers where there's big drop-off in quality among individual doctors -- but that the overall concept has proven quite popular with patients.

"[The program] makes a statement to the employees, that the employer will fly you 300 miles and, as a benefit, have one of the nation's top surgeons take care of you . . . these are often people making $25,000 to $30,000 a year," he says.

The early successes of companies that have tried some kind of medical-travel program have given rise to a new industry of consulting firms -- including BridgeHealth and Castlight Health -- that help HR leaders create their own networks of high-quality, lower cost medical centers by pouring over mountains of public data regarding length of patient stays, mortality rates and other factors.

Dr. Dena Bravata is the chief medical officer of San Franscisco-based Castlight Health, a nearly five-year-old firm that promises healthcare transparency on cost and quality issues. Bravata says her firm has developed a detailed set of metrics to learn which hospitals have a low infection rate or a smaller set of patients who need to be readmitted. 

In some cases, the consultant looked at existing Centers of Excellence networks and learned that some of the centers on the list were overrated; for one client who'd built a broad network, they discovered between 14 and 22 of the hospitals actually ranked in the bottom 5 percent for surgical safety.

"The employees were confused and upset that these facilities were designated as Centers of Excellence and performed poorly on public-safety metrics," Bravata says. "The happy end of the story is that the employer and the health plan removed some of those worst-performing facilities."

Kroger hopes it's found a happy medium in its mid-sized network of 19 medical centers -- none more than a few hundred miles from its employees. Monti says the retailer spent more than a year working with its third-party administrator, Anthem Blue Cross and Blue Shield, to whittle down an initially large number of hospitals in an existing Blue Cross program.

"We wanted to narrow their network even further to help guide our patients to the 'best of the best,' " says Monti.

Kroger used additional sets of performance metrics to determine the absolute top performers, including WebMD hospital quality data, U.S. News and World Report's Top 100 hospital lists for specific procedures and a quality metric from Thomson Reuters, as well as advice from its consultant, Mercer.

With a perfect track record after one year of the program, Monti says Kroger is looking at other procedures to include.

"It takes a lot of coordination, and we worked hard to make it possible," she says. "We wanted to make sure that we found facilities that did it right the first time, so that there aren't any readmissions, there aren't any hospital errors, so that everything goes as smoothly as possible."


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