Could Wal-Mart thinking improve healthcare?

Wal-Mart revolutionized the way we shop by making America’s retail trade system more cost-efficient. Could it do the same with our dysfunctional health care system?

That’s a big question being asked these days at the headquarters of the world’s largest retailer.

One of the bright minds trying to answer it belongs to Marcus Osborne, 32, a Transylvania University graduate from Frankfort.

The way Osborne and other Wal-Mart executives are thinking about that question has huge implications.

Rising health care costs stung Wal-Mart several years ago when critics pointed out that many of its workers were on public assistance because they didn’t have health insurance. Rather than keep trying to avoid rising healthcare costs, Wal-Mart decided to attack them.

The company revamped its insurance plans to cover more employees. The company says nearly 93 percent of its workers now have health insurance, more than half of them through Wal-Mart.

Wal-Mart also began launching initiatives to cut health care costs for customers. It started selling hundreds of generic prescriptions for $4, forcing other retailers to do the same. It started a chain of in-store medical clinics, which it hopes to have in 400 stores by 2010. In those clinics, nurse practitioners from local hospitals will provide basic medical services, and Wal-Mart will design and manage the business systems behind them.

Those ventures could be just the beginning.

“We’re looking at things like how could we work with providers to increase productivity, increase efficiency,” said Osborne, who joined Wal-Mart last June and is now senior director of business development/healthcare.

Other initiatives that Wal-Mart CEO Lee Scott has talked about include contracting with other U.S. companies to help manage how they process and pay prescription claims. Wal-Mart also is promoting the use of electronic health records and prescriptions, which Scott says would improve quality and safety while driving down costs.

Fixing inefficiency

“I’m personally amazed by the sheer inefficiency in the (American health care) system,” Osborne said. “I’m amazed by the lack of transparency, particularly to the customer. With all the political, business and social rhetoric around the need for change in the health care industry, I’m just astounded how little change is occurring.”

Wal-Mart doesn’t seem to be looking for big profits in health care. Rather, it wants to protect its core business. If customers can spend less on health care, they’ll have more to spend on the zillions of products Wal-Mart stores sell.

The company is looking for market solutions to rising health care costs, as opposed to government solutions, which Osborne also knows something about. After graduating from Transylvania in 1996, he worked in the White House for Clinton adviser Ira Magaziner and his public policy team. The team was then working on Internet policy, having just flamed out in its controversial effort to reform health care.

“I learned a lot from their pain,” Osborne said.

After leaving the White House, Osborne worked as a corporate consultant and earned an MBA at Harvard University. What led him to Wal-Mart were the opportunities he saw in both the company’s huge size and its innovative corporate culture.

“It strikes me as one of the few entities around capable and willing to take the action necessary to deliver meaningful change,” Osborne said.

Wal-Mart has been successful — and often controversial — because it knows what it does well and how to make the most of it. It creates efficiencies by squeezing costs, streamlining systems and giving customers what they want at the cheapest possible price.

Osborne thinks the problem with American health care is that companies and whole industries profit by exploiting inefficiencies in the system. That leaves little incentive to make the system efficient.

Lessons for Kentucky

That sounds a lot like Kentucky, where some people have prospered for generations by exploiting the inefficiencies of a small state with 120 counties and even more school districts.

And it makes you wonder: What could Kentucky learn from Wal-Mart? What core strengths could Kentucky government and industry leverage to solve health care problems and maybe even grow the economy?

Osborne notes that parts of Kentucky have an excellent health care infrastructure, yet the state overall has huge problems with obesity, diabetes, heart disease, poor dental health and substance abuse.

“Are there opportunities in business to actually create solutions from a wellness point of view?” he wondered. “Is there some way to make a business out of engaging people to take action?”

As it happens, Osborne’s wife, Cara, is part of one such Kentucky effort.

The 28-year-old Grayson native, who graduated from Transylvania and earned a doctorate in public health from Harvard, works from their home in Arkansas as a professor in the distance learning program of Frontier Nursing Service. The Hyden-based service is one of the nation’s largest trainers of nurse practitioners and midwives.

Whatever Wal-Mart does has a big impact. It is Kentucky’s largest private employer, with nearly 32,000 workers at 99 stores and two distribution centers. Wal-Mart’s approaches also could serve as models for other Kentucky companies, as well as government agencies, non-profits and entrepreneurs.

Like Wal-Mart, Kentucky must face up to some tough issues it has always preferred to avoid. If we are ever to improve health care in Kentucky, we must squeeze out unnecessary costs, invest wisely and encourage creative thinking by our brightest minds — minds like the Osbornes, the Kentuckians who now live in Arkansas.

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