story by Kim Souza
(This story contains updates from Wal-Mart and analysts following the retailers added health care costs reported Aug. 14)
Wal-Mart has 500 million reasons to aggressively test company-owned heath care clinics in its retail stores, which it recently began piloting in Texas.
With more than 1.1 million Americans working at Wal-Mart, the retailer said in June it was facing an estimated $330 million in added health care cost this year as more workers have signed up for coverage in compliance with the Affordable Health Care Act. The retailer said it incurred $110 million in added costs during its first quarter. (Update: Wal-mart said Thursday (Aug. 14) the annual added costs for health care is now expected to be $500 million for the year as more of its employees have opted to take the Wal-Mart coverage. The retailer said plan costs have also gone up.)
When recently asked about the health clinic test then Walmart U.S. CEO Bill Simon said, “Wal-Mart is not that hard to figure out when you look at it from a pure math perspective.”
Last year the national average total health care cost per employee topped $12,000, rising 5% from the year before, according the National Business Group on Health. Employers typically cover 75% or more of that total cost as a benefit to their workers. That number was based on surveys off several hundred employers across the country.
“When an employee goes to see a doctor they pay a co-payment. As a self-insured employer, we end up writing a check for the cost of that visit, through a third party administrator like Blue Cross Blue Shield. By controlling the clinics ourselves we can offer a nominal fee for our insured employees because we don't have to pay for the outside doctor's visits,” Simon recently told reporters during the retailer’s shareholder week.
He added that if enough employees use the service then Wal-Mart can fund it through the savings not being paid to third party providers.
“At this point you can really get the price down for the general public,” Simon said.
It was Simon and Wal-Mart who pushed for the $4 generic prescriptions that radically changed the pharma industry in 2006. Analysts have wondered when Wal-Mart would try another major move with respect to health care, and they largely approve of this pilot clinic project as a way for the retailer to shave expenses, increase efficiencies and further build their brand.
"We're looking at creating a new price position for retail health services to give our associates and customers greater access to quality, affordable healthcare. Through the pilot, we’re looking at how we can drive down costs for our associates and customers," said Wal-Mart spokesman Randy Hargrove.
(Paul Trussell, an analyst with Deutsche Bank said Wal-Mart is facing big headwinds from higher health care costs, some $170 million more than previously expected. This increase is very hard to model and caught most by surprise)
"Wal-Mart does allow its part-time workers and same-sex workers to participate, which is a good thing, and Wal-Mart's employee participation was also likely under penetrated before the law change when compared to other retailers," he said. "Inflationary costs in health care are going to be an issue for all retailers, the larger the company the bigger impact,."
CLINIC PLANNED FOR ROGERS WALMART?
Simon said the test is small. Only three clinics are open in Texas and the company has earmarked about 12 openings by the end of this year.
The health clinics are not to be confused with other clinical projects operating in about 100 stores. Wal-Mart said those are lease arrangements in their stores and this new project is the company’s first effort to own and control its own primary care clinics.
For now the three pilot clinics in Texas consist of two in the Dallas-Fort Worth area and one is outside of Waco. Wal-Mart declined to confirm that there is a clinic planned locally in the Walmart Supercenter at Pleasant Grove Road in Rogers, Ark. However, there is a sign in that Rogers Walmart that says “Another Wal-Mart Concept Coming Soon.” The banner is health care related with eight photos depicting health and wellness which is located at the former clinic site in that store which was operated by Northwest Health System.
Wal-Mart said its Care Clinics offer primary care services at affordable prices for its own insured workers ($4) and the general public ($40). Insured Wal-Mart employees and store customers can also expect to pay lower prices on additional services beyond the office visit, such as vaccines, and lab tests for which separate charges apply, the company said.
Wal-Mart partnered with QuadMed to staff the clinics with licensed nurse practitioners. The clinics are open Monday through Friday from 8 a.m. to 8 p.m., Saturday from 8 a.m. to 5 p.m. and Sunday from 10 a.m. to 6 p.m.
THE SIMMONS FOODS EXPERIENCE
The Walmart Care Clinics aim to foster wellness and preventive care, such as screenings, vaccinations and lab testing as well as basic acute care, including diagnosis and treatment for flu and other seasonal illnesses. In addition, the clinic will also help manage chronic conditions such as diabetes, asthma and high blood pressure, Wal-Mart noted in its release.
The move to control health care costs by bringing primary care in-house is not a new phenomenon. Many of Wal-Mart’s suppliers are already doing it. HanesBrands said for every $1 it spends providing employees an in-house clinic in Winston-Salem, N.C., it reaps $1.40 in savings.
Locally, Simmons Foods began in-house clinics in 2007 in three of its manufacturing facilities — Siloam Springs, Van Buren and Southwest City, Okla.
Christy Pianalto, director for the Simmon’s health clinics, said the program has been a huge success. The poultry company provides access to the clinics for its employees and their family members free of charge. This eliminates the need for a co-pay plan and has allowed the company to require deductibles be met for coverage outside the clinic. Simmons works with Dr. Stephen Johnson, a family physician in Siloam Springs to staff the three clinics.
“Dr. Johnson works hard to help meet the schedules of workers. He has another physician and five nurse practioners who help staff our three clinics. The clinics offer a wide range of preventive and acute care. They perform lab work, x-rays and do simple outpatient procedures like mole removals,” Pianalto said.
One of the major reasons Simmons and other employers are bringing health care in-house is because it also reduces absenteeism and keeps operations running efficiently.
A December 2010 research paper by the Washington, D.C.-based Center for Studying Health System Change noted several positive outcomes of a well-managed in-house clinic.
“By far the strongest motivation for implementing workplace clinics is to contain direct medical costs. In the short term, exerting greater control over direct costs, such as specialist visits, non-generic prescriptions, emergency department (ED) visits and avoidable hospitalizations, is a key employer objective. In the long run, improving population health by preventing and managing chronic conditions is a major objective,” the report noted.
Other factors included:
• Employers also view onsite clinics as a way to boost productivity, reduce absenteeism, and prevent disability claims and work-related injuries.
• Some employers implementing primary care clinics also see opportunities to improve access to and quality of care.
• Some employers view workplace clinics as an important benefit that helps to attract and retain competitive workforces, while enhancing their own reputations as “employers of choice” in their industries and communities.
The study also said a return on investment for such clinics could take up to five years, depending on the scope of services offered, turnover among employees and the level of employee participation in wellness plans.