Tag Archives: centers of excellence

Open Letter to Bezos, Buffett and Dimon

I applaud your announcement of a an organization designed to tackle what we believe is the greatest immediate threat to America — our status quo healthcare system. I have sent your healthcare leaders the new edition of my book, The CEO’s Guide to Restoring the American Dream – How to Deliver World Class Health Care to Your Employees at Half the Cost. This book draws on my decades as an insider in healthcare, first as an Accenture consultant working inside dozens of hospitals, followed by founding Microsoft’s $2 billion-plus healthcare platform business and more recently as a healthtech CEO (WebMD acquired my company). Since my departure from WebMD, my life’s work has been to find real-life, practical solutions to the root causes of our healthcare system’s dysfunction. Through this, I’ve found microcosms of employers everywhere that have already tackled the most challenging problems, restoring for them and their employees the American Dream that healthcare has stolen.

The great news is that every fix to healthcare’s structural problems has been invented, proven and modestly scaled. With your large employee base and bully pulpit, you are in a unique position to massively scale these fixes.

The wisest employers have found that the best way to slash healthcare costs is to improve benefits. We’ve found no company that has a better benefits package than Rosen Hotels, which spends 55% less per capita on health benefits than a typical company despite having a challenging workforce. For example, 56% of their employees’ pregnancies are categorized as high risk. I highlighted Rosen in my TEDx talk. They’ve invested money that otherwise would have been squandered in healthcare to provide free college to their employees, employees’ children and residents of a nearby neighborhood. Crime in that neighborhood plummeted 62%, and high school graduation rates soared from 45% to nearly 100%. The CEO’s Guide provides more details on what Rosen and many other smart employers are doing. For example, Pittsburgh-area schools, with a superior benefits plan, are spending 40% less than typical schools.

See also: 3 Innovation Lessons From Jeff Bezos  

There are many options to directly improve your employees’ health benefits while slashing costs. Hundreds of us have contributed to the Health Rosetta, which provides a blueprint for how to purchase healthcare services wisely. The Health Rosetta’s foundation is a set of guiding principles that leading thinkers ranging from Esther Dyson to Bill Gates have contributed to. If I were in your shoes, I’d start in the following places:

My book can be found on Amazon or downloaded for free.

  1. Send employees to Centers of Excellence for high-cost/complexity procedures: Typically, 6% to 8% of your employees consume 80% of spending in a given year. Large employers such as Lowes, Pepsico and Walmart have found stunning levels of misdiagnosis (25% to 67%) and overtreatment at low-value centers. For example, 40% of planned organ transplants diagnosed at community hospitals were deemed medically unnecessary after a second opinion from a high-value center such as the Mayo Clinic. Starbucks and Virginia Mason found that 90% of spinal procedures didn’t help at all and that the problems would have been better addressed via physical therapy. A large tire maker put in a proper musculoskeletal program for their employees and has already created nearly 2% of positive EBITA impact. One of the foremost experts in employer benefits, Brian Klepper, estimates that 2% of the entire U.S. economy is tied up in non-evidence-based, non-value-adding musculoskeletal procedures. [See Chapter 12 for more.]
  2. Lead the employer movement to avoid opioid overuse: Every addict needs an enabler. Having deeply studied the underlying drivers of the opioid crisis, I found that employers are the key (unwitting) enabler of the opioid crisis on 11 of the 12 major drivers. The overwhelming majority of those with opioid overuse disorders followed doctors orders, and their drugs were paid for by employers. Unlike other great public health crises, the opioid crisis can’t be solved without significant employer action. You can save money and keep your employees and dependents out of harm’s way by adopting a smart benefits approach. [See Chapter 20 for more.]
  3. Root out widespread criminal fraud: The Economist has called healthcare fraud the $272 billion swindle. More than 150 million health records have been hacked and are available for sale on the dark web. At a meeting with former HHS Secretary Tommy Thompson, I heard the stunning levels of fraud. One Fortune 250 company had more than 500,000 claims that were fraudulent (e.g., claims run 25 times and multiple claims for once-in-a-lifetime procedures such as a hysterectomy). In that room, one of the risk management practice leaders from a Big Four firm called the related ERISA fiduciary risk the largest undisclosed risk he’d seen in his career. The industry hasn’t adopted modern payment integrity software/algorithms for this readily fixable problem. [See Chapter 7 and 19 for more.]
  4. Ensure employees receive the highest-value drugs: Employers such as Caterpillar have taken matters into their own hands as the pharmaceutical supply chain has become rife with hard-to-follow rebates and other tactics designed to redistribute your profits to them. Caterpillar hasn’t seen healthcare spending increases in 10 years, primarily due to getting their pharmaceutical spending under control. [See Chapter 18 for more.]
  5. Establish value-based primary care foundation: As IBM found in a worldwide analysis of their $2 billion healthcare spending, it’s not possible to have a high-performance healthcare system without a proper primary care system in place. More than 90% of what people enter the healthcare system for can be addressed in a high-performance primary care setting (rare in the U.S.). Sadly, most U.S. primary care is like milk in the back of the store to get you to other high-margin and often low-value services. Not only can proper primary care go upstream to address issues before they flare up, it can help their patients navigate complex medical conditions. In fact, Amazon just hired Dr. Marty Levine, who was my parents’ doctor in a great Medicare Advantage program. Levine and his team have been invaluable in helping us navigate my father’s Parkinson’s journey. Based on what has transpired, I am certain that Levine’s team has saved taxpayers more than $200,000 in likely medical bills. This kind of care is not only outstanding, it more than pays for itself. [See Chapter 14 for more.]

See also: The Key to Digital Innovation Success  

The title of my TEDx talk was Healthcare Stole the American Dream – Here’s How We Take it Back. It’s great to see your leadership on this critical issue. The Health Rosetta community stands ready to help your efforts.


Dave Chase

P.S. We would also encourage you to adopt the Health Rosetta Plan Sponsor Bill of Rights (https://healthrosetta.org/plan-sponsor-bill-of-rights/). In light of your respective backgrounds in financial services, you are likely to be shocked by the lack of disclosure and conflicts of interest that are standard operating procedure in the vast majority of employer health plans. [See Appendix B for more.]

Walmart Shows Way on Health Benefits

Walmart, a true leader in benefit innovation, is taking the next right step, expanding its popular and successful Centers of Excellence.

When Walmart workers, called associates, use Centers of Excellence, deductibles and co-pays are waived. All travel expenses are paid for the patient and a companion.

Starting next year, if covered folks at Walmart have spine surgery outside of a Center of Excellence, it will be considered out of network, and only 50% of the costs will be covered.

This is a huge step and is reminiscent of the early days of preferred provider organizations (PPOs), provider networks and health maintenance organizations (HMOs). At the beginning, if you got care through a PPO, your deductible and co-pay were waived. In a few short years, those programs evolved into ones that paid regular benefits with deductibles, etc., if you used PPO doctors, but applied higher deductibles and co-pays if members went out of network. Of course, in most HMOs, if members went out of network, nothing was paid.

See also: Walmart’s Approach to Health Insurance  

What Walmart is doing now, while a very logical extension of what benefit plans have been doing for more than 30 years, is a huge step forward in truly controlling waste, overtreatment and misdiagnoses in health plans.


Here is the press release:

The Right Care at the Right Time: Expanding Our Centers of Excellence Network

Starting next year, Walmart will double the number of world-class medical facilities available to our associates who have been told they need a spine surgery. Whether you’re a cashier in Wyoming who’s been with the company for six months or you’re a 20-year associate running a store in Miami, if you have Walmart health insurance, you have this benefit.

We are adding the Mayo Clinic facilities in Arizona, Minnesota and Florida to our current list of Centers of Excellence (COE) for spine surgeries, which are Mercy Hospital Springfield in Missouri, Virginia Mason Medical Center in Washington and Geisinger Medical Center in Pennsylvania. Our COE program is about more than just access to these facilities and their specialists; it covers these procedures at 100%, including travel, lodging and an expense allowance for the patient and a caregiver.

Why would Walmart offer a benefit like this? It’s pretty simple – we care about our people and want them to receive the right care at the right time.

Walmart started offering this benefit in 2013, and our data tells us we are making a difference for our people, but we want to do more. That’s one of the reasons for adding more eligible medical facilities to the program. Other reasons these medical facilities were selected are that each facility:

  • Fosters a culture of following evidence-based guidelines, and, as a result, only performs surgeries when necessary.
  • Structures surgeons’ compensation so they [have incentives to provide] care based on what’s most appropriate for each individual patient and look at surgery as a last option.
  • Is geographically located throughout the country to provide high-quality care to participants in one of Walmart’s health benefits plans.

Research, as well as our own internal data, shows about 30% of the spinal procedures done today are unnecessary. By utilizing the Centers of Excellence program, our associates are assessed by specialists who are [given incentives] differently to get to the root cause and prescribe appropriate treatment.

Our associates are very important to us, and we want to make sure they and their families receive the highest level of quality care available.
Preventing a surgery that someone doesn’t need is only part of our Centers of Excellence. The other, even more important aspect is making sure our people receive the right diagnosis and care plan for their pain. In The New Yorker, renowned surgeon and public health researcher Atul Gawande underscored the importance of this approach:

“It isn’t enough to eliminate unnecessary care. It has to be replaced with necessary care. And that is the hidden harm: Unnecessary care often crowds out necessary care, particularly when the necessary care is less remunerative. Walmart, of all places, is showing one way to take action against no-value care—rewarding the doctors and systems that do a better job and the patients who seek them out.”

Walmart is not alone in this approach to appropriateness of care. One example is the Choosing Wisely initiative, which is backed by recommendations from more than 70 specialty societies including the American Academy of Orthopaedic Surgeons, North American Spine Society and the American College of Surgeons. The stated purpose of Choosing Wisely is to help patients choose care that is supported by the evidence, not duplicative of other tests or procedures already received, free from harm and truly necessary – we couldn’t agree more.

To further encourage our associates to take advantage of this offering, next year, spine surgeries at one of our six Centers of Excellence medical facilities will continue to be covered at 100% with travel and lodging paid for the patient and a caregiver. If the surgery is performed outside of a COE facility, it will be considered out of-network and paid at 50% in most cases.

Our associates are very important to us, and we want to make sure they and their families receive the highest level of quality care available. 

We have seen spine surgeries performed often when they are not necessary. By making these changes in our benefit offerings next year, Walmart wants to make sure that our associates and their family members are diagnosed correctly and that they get the best possible treatment.

See also: There May Be a Cure for Wellness  

The Case for Modernizing Insurance

Several drivers of change are compelling insurance companies to re-evaluate and modernize all aspects of their business model and operations. These drivers include new and rigorous expectations from regulators and standards, increasing demands for more relevant and useful information, improvements in analytics and the need for operational transformation.

The modernization creates considerable expectations for finance, risk and actuarial functions, and potentially significant impacts to business strategy, investor education, internal controls, valuation models and the processes and systems underlying each – as well as other fundamental aspects of the insurance business. Accordingly, insurers need more sophisticated financial reporting, risk management and actuarial analysis to address complex measurement and disclosure changes, regulatory requirements and market expectations.

Three key areas to look at:

Regulation and reporting

Changes in regulatory and reporting requirements will place greater demands on finance, risk and actuarial functions. Issues include:

  • Changing global and federal regulation (e.g., Federal Insurance Office, Federal Reserve oversight)
  • ComFrame, a common framework for international supervision.
  • Principle-based reserving
  • Own Risk and Solvency Assessment (ORSA), the Solvency II initiative that defines a set of processes for decision-making and strategic analysis
  • Solvency reporting measures
  • Insurance contract accounting

Information and analytics

Stakeholders are demanding more information, and boards and the C-suite need new and more relevant metrics to manage their businesses. Issues include:

  • Economic capital
  • Embedded value
  • Customer analysis and behavioral simulation
  • New product and changing underwriting parameters

Operational transformation

Those in charge of governance are demanding that the data they use to manage risk and make decisions be more reliable and economical. Issues include:

  • Updated target operating models
  • Centers of excellence
  • Enterprise risk management (ERM), model risk management and governance
  • New framework from the Committee of Sponsoring Organizations (COSO), a joint initiative of five private-sector organizations that provides thought leadership on ERM, internal controls and fraud deterrence
  • Optimization of controls, and efficiency studies

These drivers of change, which affect every facet of the business — from processes, systems and controls to employees and investor relations — have significant overlaps, and insurers cannot deal with them in isolation. To meet emerging challenges and requirements, simply adding processes or making one-off, isolated changes will not work.

Systems, data and modeling will have to improve, and the finance, actuarial and risk functions will need to work together more closely and effectively than they ever have before to meet new demands both individually and as a whole.

Moreover, all of this change is imminent: Over the next five years, leading companies will separate themselves from their competitors by fully developing and implementing consistent data, process, technology and human resource strategies that enable them to meet these new requirements and better adapt to changing market conditions.

The insurers that wind up ahead of the game will excel at creating timely, relevant and reliable management information that will provide them a strategic advantage. Legacy processes and systems will not be sufficient to address pending regulatory and reporting changes or respond to market opportunities, competitive threats, economic pressures and stakeholder expectations. Companies that do not respond effectively will struggle with sub-par operating models, higher capital costs, compliance challenges and an overall lack of competitiveness.

In subsequent articles, we will take a closer look at those leaders/business units that need to modernize.

 Eric Trowbridge, a senior manager, contributed to this article.