Some retailers, reasoning that they are "smart about efficiency and productivity and standardization and using digital technology and getting closer to the customers, believe that they can… really change the way that care is delivered and paid for in this country," says one analyst.
In Part 2 of an interview with HealthLeaders Media, analysts Vaughn Kauffman, Health Industries Principal at PwC and Ceci Connolly, the Managing Director of PwC's Health Research Institute discussed their views on what we might see in the coming months and years as retail businesses carve out a larger role for themselves in healthcare delivery. The following is an edited transcript. See Part 1.
HLM: It sounds like you believe that traditional providers could learn a lot from retailers.
Kauffman: They are actually. Over the last several years I've seen more and more recruitment happening outside of the traditional healthcare area at the senior level. [This is] to try to drive some of this change and… anchor their business and their operation where the consumer is at the center of that model as opposed to outside and navigating in.
We are seeing it all the way through not only in terms of the plans being designed, [but] all through operations, and even how the revenue cycle process is looked at. They're looking for ways to engage the consumer beyond the few hours they might spend in the hospital.
How do they become more relevant in their day-to-day lives, not so much Big Brother-like but in ways they can help inform decisions of health and fitness, etc. and become more of an advocate for their health rather than a treatment center for certain issues.
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Connolly: On the flip side, healthcare can get complicated. Think about patients with multiple chronic conditions. They need really good health coaches or care coordinators. They need a whole team around them. It would be naïve to suggest that now everybody can head to the retail store and manage their health on their own and it is all going to go great.
It is much more complex than that. What we are really trying to do is figure out where you can put together these smart care teams.
Kauffman: We think about it as the formation of multiple delivery systems as opposed to the replacement of the traditional monolithic structure. But it's always going to be situational. We aren't going to have cardiologists in the retail setting, but as innovation continues to happen where diseases can be more easily managed because of technology and advances in medicine and treatment, it opens up the door for alternative channels to provide that type of support where it doesn't have to be done in the more expensive hospital setting.
That is what we are saying. Who knows if it will be two or three or four different types of delivery options, but there are multiple ones out there now that are being experimented on and it really comes down to figuring out how to navigate.
HLM: Can traditional providers compete with retailers, or will they pursue alliances?
Kauffman: There is some overlap in services. You think about retail clinic setting versus an urgent care setting versus the traditional hospital setting. And then home healthcare and telemedicine are another decision point that consumers need to make.
Partnerships are going to be really important because of this overlap and because of the risk of this decentralization of healthcare confusing consumers even more around 'what do I do and when do I go to a retail clinic versus urgent care or when do I stay home and call somebody?'
That is going to evolve over time, but it is going to be important to have these partnerships form because when you start to add up the capabilities, the retailers ability to engage the consumer whether it be a brick-and-mortar or an e-commerce platform, to combine that with the clinical knowledge of urgent care centers and hospitals, we are going to see some interesting innovation occur.
One of the reasons why this is happening now is because of the innovations in healthcare over the years. The ability to treat some diseases in a much more manageable way has opened up the opportunity to provide new ways to deliver care.
There are a lot of examples where at one point, it was a very acute disease that required a highly specialized physician to treat it. But it's now something you can do at home on your own through technology. It is that evolution that is opening up the door to allow new entrants to come in, leveraging what their core capabilities are, which is engaging consumers, brand awareness, providing convenience and trust, and offering that platform to consumers to give them choice, which is ultimately what they want."
HLM: Will we see traditional retail strategies used to attract healthcare consumers? Will the corner pharmacy use free flu shots, for example, as a loss leader to get people in the door?
Connolly: It is certainly possible. It depends upon the core business for the entity. A big retailer or grocery or pharmacy chain has different business models and numbers they work through. Some may be very interested in volume and foot traffic. But we have been struck by the number of entities, [of] the Fortune 50 companies, more than 75% of them identify themselves as being in the healthcare business and they are not hospital or insurance companies.
These are big technology companies, these are telecommunications, retailers. They are making investments because they feel that there is a great deal of opportunity in healthcare right now. Not only is healthcare about 15% of GDP and growing, but you start adding on the wellness industry, which is another few hundred billion dollars, and they see opportunities and money to be made.
HLM: What is retail medicine going to look like in five years?
Kauffman: As long as the consumer continues to bear more of the risk of the cost of healthcare, this is something that is going to move forward and should not be viewed as a fad. The retail and technology players will continue to look at ways to steal revenue from traditional players because they are looking at their own challenges to try to grow.
There are going to be a lot of companies trying and the ones that succeed are those that within their own organizations have the clout to help steer the ship in a particular way. If healthcare is viewed as a side project for one of these large retailers or technology organizations it is likely not going to survive under core business pressures.
HLM: With so many traditional providers complaining about tightening margins, why are retailers so eager to get into the sector?
Connolly: Healthcare is a sector that has not made any notable productivity gains in years, if not decades. The smart players outside of healthcare are looking at this and thinking 'we have been through a similar journey in our own core business and we are pretty smart about efficiency and productivity and standardization and using digital technology and getting closer to the customers,' so they believe that they can bring those lessons from elsewhere and really change the way that care is delivered and paid for in this country. It is going to be a fascinating journey to watch to see if that gamble makes sense.
On the question of timing, there are a couple of mile markers that are worth keeping in mind. An important on is 2017 when states can open the public exchanges to employers. Employers are also looking at private exchanges and this becomes very relevant because that is more and more individual retail customers shopping for healthcare and when you flip that business model from wholesale to retail that is when you see this changing dynamic pick up speed.
HLM: Do you foresee retailers acquiring hospitals or other traditional venues?
Connolly: It's been widely reported that Walgreen's is running three ACOs right now. I don't know if that means they want to run 300 ACOs but it is interesting that they are experimenting with that. CVS is a licensed Medicaid provider in the state of South Carolina, at 28 CVS pharmacies. Overall we are seeing experimentation. And this is a real testing period for these players to see what they might be good at.
John Commins is the news editor for HealthLeaders.