February 17, 2010

CLEVELAND, Ohio -- With medical costs climbing and health care reform stalled, Lowe's Companies Inc. decided to shop nationally for the best deal in heart surgery for its employees, and it landed at the Cleveland Clinic.

The nation's second-largest home improvement retailer reached a three-year agreement with the Clinic. The deal was praised widely as a groundbreaking business effort to purchase health care based on documented quality and value. The move could spur others to shop far and wide for medical treatment.

"This is the first I've seen a multistate, national company choose a center of excellence and make it available to their employees," said Dr. Jack Lewin, chief executive of the American College of Cardiology.

Lowe's is offering employees incentives in the form of reduced out-of-pocket costs to come to the Clinic for heart procedures. Lowe's said it chose the Clinic among five hospitals nationwide in an effort to improve the quality of medical care for its workers and to lower costs.

The arrangement shows how cost and quality, which won the Clinic praise last summer from President Barack Obama, can drive business to top-performing hospitals.

Neither the Clinic nor Lowe's would divulge financial details, but the Clinic said it gave the company a package price for doctor and hospital services.

The Clinic model of employing its doctors and paying salaries allows it to control costs, which Bob Ihrie, Lowe's senior vice president in charge of benefits, said attracted the Mooresville, N.C., company.

Ihrie said about 100,000 U.S. employees -- plus about another 100,000 dependents -- in Lowe's self-insurance plan are eligible for the program. Based on past claims, Lowe's estimates that some 125 patients a year could take advantage of the program. Patients must be approved for surgery in advance.

"How many take it depends on employee choice," said Ihrie. "We firmly believe the best quality in the long run will also deliver lower overall costs."

The arrangement was attractive enough that Lowe's will pay travel and lodging expenses for patients and a companion, and waive a $500 deductible and other out-of-pocket costs.

Good cardiac surgery outcomes are a selling point for the Clinic, says J.B. Silvers, a professor of health systems management at Case Western Reserve University. But equally important is that the Clinic model of employing physicians removes incentives for unnecessary surgeries to drive up volume and fees.

"I'm sure what they [Lowe's] concluded is they were overusing cardiovascular services," Silvers said. "I'm sure they have data that shows they're doing more than they should for the population they've got, and they want to control it. The Clinic will say no, where local hospitals may not."

Clinic doctors don't get paid for doing more procedures. "So [the doctor] is perfectly happy to say 'You don't need it,' " Silvers said. " 'I got 10 more right behind you who need it. I don't need to pump up my volume.' "

Ihrie of Lowe's declined to provide details about the company's cost projections for going with the Clinic plan.

The Clinic greatly expanded its capacity to treat heart patients with the opening of the Sydell and Arnold Miller Family Pavilion in 2008. Last year the hospital performed a record 4,128 heart surgeries. Forty-four percent of heart and chest surgeries patients were from outside Ohio.

Lowe's approached the Clinic about a year ago, said Michael McMillan, executive director of market and network services for the Clinic.

"The thing we will want to demonstrate together is that by an employee traveling to a place with better outcomes, fewer re-operations and lower complication rates, over time it will lead to lower costs," he said.

No other such deals are in the works, McMillan said, but "we would anticipate other employers would be interested as well."

Barbara Belovich of the Health Action Council, a local non-profit business coalition, said the arrangement is a sign of things to come. More often, businesses will shop for health care based on cost and outcomes data.

"It's leading edge and it's where medicine is headed," Belovich said. "The Cleveland Clinic has been and remains aggressive and smart in using data they've got to show they are doing things well.

"This is really medical tourism within this country , which is where we ought to keep it," she said.

The Clinic-Lowe's deal is sure to have a positive impact on the region, said Carin Rockind of Team NEO, the region's business attraction group.

"There are only a few hospitals in the world that export their health care," Rockind said.

The Clinic is in a unique position to draw people to Cleveland, she said. The immediate impact on the local economy would be money spent on food, lodging and other needs. And, people might get a chance to see other amenities of the city.

Source: Harlan Spector, The Plain Dealer

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