Walmart offers unique healthcare solutions
BENTONVILLE, Ark. —With major changes looming for the nation’s healthcare system, recent actions by Walmart suggest the company intends to prepare for the uncertainty of health care’s future by helping define it through cost reduction and efficiency initiatives.
Two recent examples stand out, with one involving a novel prescription drug-pricing arrangement with heavy equipment manufacturer Caterpillar, and the other a Sam’s Club undertaking to accelerate physician adoption of electronic medical records.
The Caterpillar pricing initiative is only a pilot program, but it already has captured the attention of pharmacy benefit managers and major employers due to the potential to reduce prescription drug costs. Meanwhile, Sam’s Club worked with software developer eClinicalWorks and Dell to create a turnkey electronic medical records solution for physicians that soon will be available in all 50 states.
Both initiatives address the issue of healthcare cost and efficiency from different angles, and illustrate how Walmart has emerged as an unlikely innovator in the world of health care. The arrangement with Caterpillar, which was initiated by Caterpillar last September, is noteworthy because it could prove disruptive to the PBM if more employers adopt the so-called “cost plus” pricing model that is central to the arrangement with Walmart.
According to Caterpillar, there is between 10% and 20% waste in the prescription drug supply chain that is complex, confusing and inefficient. In fact, Caterpillar grew interested in pursuing a new pricing model after its prescription drug expenditures rose an average of 14% annually from 1996 to 2004. The company began to more actively manage drug spending in 2005 by focusing on generic usage, formulary and supply chain management. But then it decided to go a step beyond and work directly with a major pharmacy, bypassing normal PBM pricing processes.
According to a presentation last month by executives from Walmart and Caterpillar and the Pharmacy Benefit Management Association, both companies would like to see broader adoption of the cost plus model. The model calculates the price Caterpillar pays for a drug by using the real price that Walmart pays for a drug as a basis to determine the final cost to the payer, as opposed to the industry practice of a discount off of the average wholesale price. Although the pilot program isn’t due to end until January 2010, it would appear to be heading toward a more permanent arrangement, considering the companies are participating in joint presentations and industry events. They also have indicated that metrics regarding cost savings and utilization rates are being met or exceeded.
While Walmart’s pharmacy executives were busy creating an alternative to the traditional PBM model, the company’s Sam’s Club division addressed the issue of electronic medical records through a partnership with eClinicalWorks and Dell. The comprehensive package, which includes EMR and practice management software and hardware, is available for a small practice of one to three providers. For a three-provider practice, it will cost less than $25,000 for the first provider and up to $10,000 for each additional provider.
For that price, eClinicalWorks provides physicians with 12 weeks of project management, data center support, e-prescribing integration and comprehensive primary care and specialty-specific templates with decision support. In addition, the eClinicalWorks staff provides five days of on-site training, free unlimited online Webinars and eClinicalWorks software support for this first year. The package hardware components include three Dell OptiPlex desktops, one Latitude XT convertible tablet, one fax server, one laser printer and applicable switches.
Although the benefits of such systems—improved care, reduced errors, less paperwork—are well documented, adoption among practitioners has been slow due to the cost and complexity associated with converting a paper-based system to an electronic one.
“We have thousands of members in the medical field today that buy products and services at Sam’s Club to help them run their businesses, and they tell us that cost is a significant barrier to adopting electronic medical records,” said Charles Redfield, SVP at Sam’s Club.
The cost barrier also has been addressed by the fact that the American Recovery and Reinvestment Act of 2009 contains funding that allows the Centers for Medicare and Medicaid Services to pay physicians $44,000 to $64,000 over five years, beginning in 2011, if they deploy and make meaningful use of certified EMRs.