Q&A Wal-Marts Linda Dillman Talks About Changing the Health Care System

By Jeremy Smerd

Mar. 16, 2007

Linda Dillman knows how to execute the Wal-Mart playbook. When she was the company’s chief information officer, she used the retail giant’s size to force its supply chain to change. Change, in Wal-Mart’s case, means becoming more efficient. You don’t become the world’s largest retailer and largest employer, with 1.8 million employees in about 6,400 stores worldwide, unless you are able to move thousands of products globally with the precision of a Swiss watch (a watch you’re likely to find these days in a Wal-Mart store near you).

    As CIO, Dillman led Wal-Mart’s embrace of radio-frequency identification (RFID) tags, which use wireless bar-code technology to track products from factories in China to store shelves around the globe. Now, the use of RFID is standard in the industry—and just about everywhere else.

    In 2006, Dillman was named executive vice president of risk management, benefits and sustainability, succeeding Susan Chambers to manage the company’s health benefits as Chambers moved up to become the head of the company’s people division. Once again Dillman is trying to use technology to change the health care industry and, in the process, improve health care quality and drive down costs through greater efficiency.

    Before Dillman even took her new job, she met with other CIOs to ask how information technology could make health care more efficient and responsive to consumers. What Dillman learned was made clear on December 6, when Wal-Mart announced it would join Intel’s effort to offer employees personal, private digital health records. Joined by BP, Pitney Bowes and Applied Materials, the employer consortium called Dossia is the latest attempt by Wal-Mart and other large employers to use their clout as innovators and market movers to change the health care industry.

    Dossia is both a system to store the personal health records and a nonprofit organization that will be run independent of the employer-members who finance it, ensuring the privacy of the personal records. The records will be owned by employees regardless of whether they stay with one of the member companies.

    The decision to join Intel’s Dossia project was an act of faith in the power of technology, Dillman told Workforce Management. Dillman knows that technology can cut waste from an inefficient system, and that as much as $350 billion spent in the $2 trillion health care industry is considered wasteful. With that in mind, she and her company decided to support Dossia in hopes of taking costs, rather than benefits, out of the entire health care delivery system.

    “This was not something we did because we wanted to reduce our health care costs,” Dillman says. “What we wanted to do was impact the trajectory of both cost and quality of health care in the United States. It’s long term, which is going to impact all of us.”

    Dillman spoke to Workforce Management staff writer Jeremy Smerd shortly after the Dossia announcement to discuss how employers can think strategically about health care benefits.

Workforce Management: How did a former CIO become the chief administrator of health benefits for the world’s largest employer?

Linda Dillman: There are several factors. One that’s key is that Wal-Mart is notorious for moving us around to expand and grow us. And they had been in discussions with me for a long time about an upcoming change. I didn’t know what it was going to be.
And there are other aspects. One is, if you look at what you do in a technology role, you spend most of your career solving complex business problems, working across silos. That’s a lot of what I need to do in this space.

WM: And is Dossia a manifestation of your role to bring together IT and health benefits?

Dillman: The icing on the cake—Dossia—was not a consideration at that point. But what was a consideration was looking at our involvement in health care and taking Wal-Mart’s known strengths and apply them to the health care industry and try to drive change.

WM: Where do you see technology decreasing the costs of Wal-Mart’s health benefits?

Dillman: We are going to do things internally, but the biggest fact is, there’s only so much I can manage within the space of Wal-Mart and what we do internally. When you have an issue that looks like the health care issue looks for us, for all of the United States, when you have the disconnect on quality and payment, when you have limited use of technology in the industry itself, when you have costs escalating at the rate they are, I could change our plan forever and implement all kind of technology internally and it would not change the needle.
A lot of it is looking externally, which is why we like the Dossia announcement. It’s an initiative that is broader than what we hope we can do with our associates. We hope it will move the industry.

WM: Other than those involved with Dossia, which employers have you reached out to?

Dillman: Oh. I’m not sure I can share those with you. We’re having discussions with a lot of people who we would normally partner with to just get employers engaged in the health care situation.

WM: Any particular industry?

Dillman: In a lot of our supplier base—to a lot of consumer goods companies and tech companies.

WM: Any carrot-or-stick approach you can use?

Dillman: This will never impact, not today, the business we do with them. We’re really just speaking to them as, you know, “You are an employer as well and you’re facing the same issues we are in terms of being competitive in the global marketplace and trying to manage the costs while trying to provide the most you can for your associates.” And most are willing to have those discussions.

WM: Are they more interested in becoming more publicly involved about the need for employers to involve themselves in the health care debate?

Dillman: Yes. Everyone is trying to figure out what that means.

WM: Are you working with GM and other employers who have been vocal on a policy level in this issue?

Dillman: We have not talked to GM about this.

WM: You mentioned escalating growth of health care costs. What are they for Wal-Mart?

Dillman: That’s not something we talk about. We are double digit in our costs like everybody else. Our trend is not going to be all that different from the [rest of the] country.

WM: You recently introduced health plans with higher deductibles. Part of your reasoning was you felt employees would save money with the plans. There was also some mention of wanting to attract healthier workers.

Dillman: First of all, that’s not the reason we did that. So let me debunk that myth. You’ve been reading the wrong Web site.

WM: No, I’ve been reading the memo the head of Wal-Mart’s people division, Susan Chambers, wrote last year when she was in your position.

Dillman: Well, you might want to reread it. And read it in its entirety. I get to look at the facts. What we drove for with our value plan [is this], and I’ll explain it to you so you understand what it is.What we needed to do was to get something that was affordable and had broad reach for our associates. Our current plans are available to all of our associates for $23 a month. They can afford that. They can’t afford some of the plans that are in other spaces.We needed to be able to give them something that was affordable. So we did that. We wanted them to not forgo health care, so we included in it first-dollar coverage. And we are going to continue to work on how we do this. But for right now, it gives every participant three doctor visits and three generic prescriptions a year, pre-deductible. And it allows them to have catastrophic coverage. It’s very good coverage. It’s the same we have on the rest of the plan, after the $1,000 deductible.Most of the scenarios we ran—and we ran a lot of scenarios for our associate base—over 70 percent of them actually come out financially ahead. So the difference with plans most employers are offering, the difference … is that we are putting the money back into the pockets of our associates.We happen to believe that our associates are pretty smart, and can add value when they’re managing those costs. We believe that by putting the money in their hands they will end up getting more for those dollars than they do in large plans today.(Editor’s note: In more than 40 percent of the areas where Wal-Mart has stores, that $23 value plan is even less: $11 a month.)

WM: So, how does Dossia and this push for empowering the consumer fit into your overall benefits strategy?

Dillman: Dossia was not part of our benefits design. It was part of this external initiative to look at the health care system and see if we could make a difference there. We believe in the value of electronic health records. We see how both from a quality perspective and an efficiency perspective, technology has made improvements in virtually every other industry.

WM: Have you done any analysis of how it might improve the health of workers or save you money?

Dillman: No, none.

WM: It was just a leap of faith in the power of technology?

Dillman: I didn’t build this into my business plan. This was not something we did because we wanted to reduce our health care costs. What we wanted to do was impact the trajectory of both cost and quality of health care in the United States. It’s long term, which is going to impact all of us.Sometimes you have to take strategic initiatives. Anybody who innovates will tell you that if you can create a business plan and prove it, it’s probably not an innovation because it’s already being done.

WM: How soon after talking to Intel chairman Craig Barrett did you give the OK to join Dossia?

Dillman: We knew we were interested. You go through an initial interest level, which was actually pretty quick. And then work through all the logistics. So it was probably three or four months.

WM: What does Wal-Mart bring to Dossia?

Dillman: We’ve got a pretty good track record for being able to use technology. We’ve built large data warehouses. We’ve deployed to a large number of people, specifically. Our associate base uses a lot of technology every day, so we kind of know how to do that.

WM: Are you bringing any of your expertise to bear on the Dossia project?

Dillman: Absolutely. Our tech people will be involved. Our process people will be involved. Our security people will be involved. Our experience in implementing technology to a large group of people as diverse as this will be involved.

WM: Will Wal-Mart integrate this with its benefits?

Dillman: No. No. You really have to take this out of a P&L, traditional business kind of view. Not everything has to integrate back into your core business. We believe this will change the bigger picture. This will be given to our associates. It’s theirs to use, their choice to use it—they and their dependents. We believe it adds value. They will see that value. They will understand how their health care is working. They will begin to tell their health care providers and start to drive adoption across that space. We believe it is a benefit, by the way, that we offer to them. This is not going to tie back to our health care plan. We are not going to have any access to the data. We’re not going to have any access to the system. We are not going to monitor who does and who does not use it. We will not know that. This is intended for their benefit.

WM: Are these personal health records something a Wal-Mart customer could use?

Dillman: Dossia is meant to be the framework that personal health records, that are customer-facing, and electronic health records, that are provider-facing—they all can connect to this framework. Dossia is not trying to create the software that others are going to go use. But whatever anybody creates will have the ability to connect to this to get all the information.Having said that, all of our [health] clinic providers have their own information systems that they use to manage their clinics. Most are already using electronic health records. Of course, we’d like for their system to connect to Dossia so when [customers] come in they can have an entire record.

WM: Is that a decision the clinics will make for themselves?

Dillman: That is absolutely their decision. What we can do is make it easier for them. A parallel initiative is to make sure providers have the ability to access [the records stored in Dossia]. We started with our base [in Dossia] because 2.5 million people is a pretty good place to start. When we get past 2.5 million, the intention is really to start opening up access.

WM: When might that happen?

Dillman: The second half of 2007 is when we will start piloting to our associates. Then we will have a better sense of how fast we can go.

WM: What else can Wal-Mart do as a business leader to address this issue of rising health care costs? What is Wal-Mart’s role?

Dillman: Our vice president, John Menzer, was appointed to AHIC—the American Health Information Community. So again, getting involved at a higher level with how technology can get implemented in this space.

WM: Were you aware of the AHIP announcement saying health insurance companies representing 200 million Americans will create a health record that can be used at all carriers?

Dillman: Sure.

WM: Any sense of how that fits in with Dossia?

Dillman: In the long term, we’d like to be the backbone that everybody can connect through. So they still have the ability to offer the people on their plans the front end and the functionality that makes them competitive and then everybody shares data.

WM: They have 200 million members.

Dillman: We don’t want to compete.

WM: Is this a movement that should be employer-driven?

Dillman: What we wanted to do is to introduce something that would belong to the individual, that was in a nonprofit space, not a commercial space, and that an individual could have for their entire lifetime. So they go from being a child who is on their parents’ health insurance or wherever they get health care to their own careers through many insurance companies to retirement … to make sure all their information was cohesive through that entire lifetime.

WM: And lastly, getting back to the high-deductible plan, have you selected a high-deductible health plan for yourself?

Dillman: I absolutely have.

WM: You have a high deductible?

Dillman: Oh, you better believe it. In an instant. I actually have a health savings account. How about you?

WM: No, I don’t.

Dillman: And it was one of the smartest—I mean, it was a great choice.

WM: OK, so you’re doing better than CEO Lee Scott, because he has said that he couldn’t figure out how to sign up for one. Have you talked to him about how to do that?

Dillman: I think we’re probably done with the interview. I don’t know if I want to talk about how Lee manages his health care.

Jeremy Smerd writes for Crain’s New York Business, a sister publication of Workforce Management.

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