7 Points About Cleveland Clinic's Bundled Payment Program for Lowe's Employees

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Under an unusual bundled payment arrangement, home improvement retailer Lowe's is flying employees who need heart surgery to Ohio, where the Cleveland Clinic treats them in exchange for a bundled payment. Michael McMillan, director of market and network services at the Cleveland Clinic, explains how the arrangement works, its current track record and the clinic's plans for more such deals.

1. Origin of the deal. Lowe's approached the Clinic in early 2009 about providing heart surgery for its 240,000 employees and dependents. Mr. McMillan says Cleveland Clinic is used to treating out-of-state patients. More than half of its heart patients come from outside Ohio.

2. The deal for Lowe's employees.
Lowe's waives employees' usual $500 deductible and other out-of-pocket costs and pays for the airfare, hotel and living expenses while in Cleveland. The program is optional and employees have to meet the criteria, such as being up to traveling to Cleveland.

3. How the payment works. Lowe's pays Cleveland Clinic a flat, "bundled" rate for all services but neither party would reveal the payment rate. Asked whether the contract calls for a discount, Mr. McMillan said: "It was not a unit price negotiation so much as it was how do we get to the best care possible. We could offer things like a faster return to work and fewer complications."

4. Physicians' incentives. Because Cleveland Clinic physicians are employed, they have no direct financial incentive to do more than what is needed. That means costs can be kept low.

5. Clinic has limited accountability. Asked if Cleveland Clinic would be responsible for treating a post-surgical complication, Mr. McMillan said: "This is not a guarantee program." In the event of a complication, he indicated the patient would not be flown back to Cleveland for follow-up. But he added that the risk of a complication is low, viewing the clinic's outstanding record on outcomes.

6. Volume so far. About 16 Lowe's patients have gone through the program since it started at the end of March. That rate is below Lowe's estimate of about 125 patients going through the program each year.

7. Future plans. Cleveland Clinic expects to announce similar initiatives with other employers "very soon." It is also think of extending the program to other specialties such as orthopedic surgery. He said the arrangement works best with big-ticket surgeries that justify the airfare and other extra expenses.

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