- Retailers like Walmart and CVS are pushing deep into healthcare, betting they can boost sales and offer more convenient healthcare.
- It’s happening at a time when retailers are grappling with more business going online to competitors like Amazon.
- The retailers stand to win out on the big percentage of Americans that don’t have a go-to doctor, potentially threatening hospitals’ future revenues.
- Here’s why that should make hospitals and health systems nervous.
- Click here for more BI Prime stories.
The way Americans go to the doctor is changing.
Options promising convenient care at all hours have popped up at drugstores and strip malls across the country. They promise American consumers the same easy experience navigating the healthcare system that they get shopping on Amazon.
Take CVS Health and Walmart. Over the past year, the biggest pharmacy chain and the dominant US retailer have both pushed deeper into providing healthcare, revealing plans for new health clinics. It’s happening at a time when the retailers increasingly have to compete to get people through the door as customers shop for everyday goods on websites like Amazon.
The inroads from the retailers, as well as urgent care clinics that can provide a broader array of health services, are forcing major hospitals to rethink how they appeal to patients. Of course, retailers like CVS and Walmart aren’t likely to offer surgeries or overnight stays.
But medical centers used to be able to rely on their reputations for providing cutting edge medical treatments and top quality care to drawn in patients. As Americans are increasingly able to get health needs taken care of at clinics, it threatens to make them less loyal to big health systems, which could threaten those systems’ profits.
“This does represent the beginning of competition at the top of the funnel. which will in the long term hurt health systems,” Tom Charland, the CEO of Merchant Medicine, a consulting firm that tracks retail clinics, told Business Insider.
Where CVS and Walmart could gain on health systems
Historically, clinics in stores like CVS and Walmart have employed nurse practitioners or physicians’ assistants who offer a fairly limited range of services, like checkups, shots, and care for coughs and colds.
Now, though, one of the ways retailers stand to gain ground from health systems is by expanding the types of care they provide. One area they’re focused on is managing the care of patients living with chronic conditions.
In February, shortly after the completion of its merger with health insurer Aetna, CVS began setting up its HealthHub stores, which have an increased focus on health services, including a wellness center and more chronic care management for people with diseases like diabetes.
By the end of 2021, the company plans to turn 1,500 pharmacies into locations that can provide an array of healthcare services.
Walmart in September opened a “prototype” health center in northern Georgia, offering primary care, dental, lab testing and counseling services at lower prices. For instance, a primary care visit costs $40, while a dental visit costs $25. Sean Slovenski, Walmart’s president of health and wellness, told Business Insider in September that Walmart could quickly become the largest provider of basic healthcare in the region.
Both CVS and Walmart say they want to work with existing health systems, and that they’ll refer patients to those partners for some more complex or ongoing care needs. Walmart is partnering with other healthcare firms to offer some of the services in its stores.
“Health systems have to be more innovative and forward looking, or they stand to lose what they would historically, they would say is ‘These are our patients, This is our community, This is where we’re investing.” Todd Latz, the CEO of urgent care chain GoHealth, which partners with health systems, said in an interview on the sidelines of the HLTH conference in Las Vegas in October. “That’s all true. But you can have that taken away from you.”
Delivering care at CVS’s HealthHubs
In a recent interview with Business Insider, CVS CEO Larry Merlo recounted a story that he said illustrates how the company’s HealthHubs can help people with chronic diseases.
He told us about an instance in which a patient came to the CVS MinuteClinic at a HealthHub more than two years after being diagnosed with diabetes. The patient hadn’t been back to see a primary care doctor since, and when the nurse practitioner at the MinuteClinic took a blood test to get a better picture of the patient’s disease, it showed the situation was serious.
From the MinuteClinic, CVS linked the person back up with their primary care doctor, who could help the patient manage their diabetes on an ongoing basis. Merlo also pointed out that about 50% of the patients who visit MinuteClinics don’t have a go-to primary care provider.
“There is an important complementary role that we can play to ensure that those care plans are in fact being followed,” Merlo said. “We’re confident that executing the strategy will make a difference in the health of those we’re serving and in doing so reduce overall healthcare costs.”
As an insurer, CVS stands to benefit from managing the care of those living with chronic conditions. If the HealthHubs help Aetna decrease the amount it spends on healthcare for its members, by better managing chronic conditions like heart disease or diabetes, for instance, that would result in higher profits for the company.
Some analysts have said that CVS should go deeper into healthcare to wring more benefits from operating the clinics.
“We believe the value is in having primary care at retail taking full medical risk for patients and having greater convenience and ability to manage chronics,” Bernstein analyst Lance Wilkes wrote in a note Wednesday. “Management comments that HealthHubs are not a replacement for PCPs, and that they are Nurse Practitioner focused, which is not aggressive enough in our opinion.”
What health systems are doing instead to compete
Going toe-to-toe with retailers by opening competing clinics might not be the way forward for hospitals. The business is expensive to run and often loses money, Charland said, and health systems run into the issue of competing against themselves for providers.
Walgreens, the second-biggest operator of retail clinics in the US, is shrinking its footprint. The company said in October that it’s closing more than 150 clinics and plans to work with health-system partners to run about 200 others.
Walmart and CVS are both in the early stages of rolling out their new clinic strategies. Walmart for its part has taken a number of stabs at building clinics in the past without much success. While the company has announced plans in the past to have as many as 2,000 clinics, it currently has about 20 clinics over three states.
“Everybody is still trying to figure out the whole concept of a retailer participating in what I would call traditional healthcare,” Charland told Business Insider in September.
There are a number of ways health systems are working to compete with retailers and make sure they own their relationships with patients.
Health systems have been betting heavily on urgent care as a way to capture more of the first patient interactions as both a less-expensive alternative to emergency rooms and a way to gain referrals. GoHealth, for instance, collaborates with health systems in each area that it operates. In New York, it partners with Northwell Health, the largest health system in the state. It has about 135 urgent care clinics around the US.
Health systems are also working with some newer entrants. For instance, One Medical, a primary care service that comes with a $200 annual fee, has been partnering with health systems in different geographies. The idea is to offer services that go beyond primary care but can often be done by a primary-care doctor, as well as give One Medical users access to the larger health system.
Then there’s the decision to hire tech talent and try to disrupt yourself before anyone else can do it, a method West-Coast based health system Providence St. Joseph Health is deploying. Providence has upgrade the health system’s technology, partnered with tech giants like Microsoft and Amazon to design health clinics, and made it easier to schedule appointments.
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