Corporate giants like CVS and Amazon are getting into healthcare, what does this mean for traditional providers?
Retailers like CVS, Amazon, Walmart, and others have been creeping into the healthcare space, claiming to offer patients more convenient and affordable access to healthcare. Traditional providers have been monitoring the situation, assessing how to handle this retail disruption, and considering if they should treat these corporate giants as partners or competitors.
Stacey Malakoff, the CFO of the Hospital for Special Surgery in New York City, recently appeared as a guest on the HealthLeaders podcast, where she discussed this influx of retail giants into the provider space and what it means for hospitals and health systems financially.
HealthLeaders: What is your first thought when you hear about a retailer getting into the healthcare space and/or acquiring a provider?
Stacey Malakoff: Healthcare is in a moment of transition. It's a messy time with lots of people trying to enter the market via technology or altering the way healthcare has been provided in the past. The transformation of delivery and financing of healthcare is going to change in the future. With the big box stores coming in and providing healthcare, my first thoughts are will [they] provide quality healthcare?
It will provide accessibility to people everywhere. Big Box stores are all over even in rural areas, so it will provide easier and quicker access for more people, especially in underserved rural areas. I think having the big box stores promote healthcare around the stores will provide people with more knowledge on maintaining their wellness, which will help them catch problems earlier, and if you catch problems earlier it will lower the cost of healthcare down the road.
HL: That’s a plus from the patient’s perspective, but what does a greater retail presence in healthcare mean for providers?
Malakoff: The cultures of retail and healthcare are not necessarily compatible, so it will depend on the way in which the retailer enters the market and what market they are in. Are the retailers in this for the short haul or the long haul? I think that for hospitals and healthcare systems, it will depend on if [retailers] are cherry-picking patients and taking the lower acuity, easier patient to treat and it will also depend on how quickly they can diagnose the situation and get them to a specialist. It will depend on the quality of care that they provide.
HL: What might this disruption mean for providers from a financial wellness perspective?
Malakoff: It will totally depend on the retailer’s strategy. If their strategy is cherry-picking higher paying and less complicated patients that could undermine the financial viability of the health care providers. Hospitals are operating at razor-thin margins and expenses are outgrowing revenues. If the sticker, less affluent patients are left in the health systems, financial viability will become an issue.
But the positive can be if the retailer decides to partner with health systems and just be an easier way to care for the patient, due to the easy access they provide. [Retailers can do] the basic tests and then farm them out quickly to the specialist. It could cut emergency room costs because hospitals lose money in emergency rooms. But retailers have to be able to take all comers, including those uninsured, and be able to do what hospitals do in providing sometimes free care to the uninsured and underprivileged. And so, if they run under the same methodologies of an E.R. it could really cut the cost as well.
HL: Should healthcare providers view retailers as potential partners or competition?
Malakoff: Both. There will definitely be competition, retailers are definitely going to provide primary care services. But it'll be no different from the urgi-centers that we see today. I think the urgi-centers that have popped up at least in the New York market, every few blocks in the city, I think they should be worried because those things will be moving inside the retailers.
I think the hospitals and health systems will have competition. Again, definitely in primary care but again, it'll depend on what the retailer does, and how they really build this. Are they going to go ahead and buy practices and just open separate practices attached to the retailer? Are they going to go to malls? Are they going to provide walk-in services even for specialties? So, I think it's going to be competition, but there are ways to partner with them.
I could see HSS partnering with them to take on the more severe cases that they don't want to take on. Musculoskeletal is highly costly and the waste in spend is really on physician variations if retailers partner with high-value efficient musculoskeletal care, you can minimize the waste and maximize long-term muscular skeletal wellness and productivity.
If you catch people before it gets severe, if you catch people early on, and I think that's where the retailer could come in and get them out to the specialist there could be savings in the entire musculoskeletal spend. Musculoskeletal diseases are the second leading contributor to global disabilities. If we could stop those disabilities earlier, and people become aware of their health through the retailers, it could be a good thing.
I do think there'll be competition and positives that will come of it just as healthcare is being disrupted constantly.
Amanda Schiavo is the Finance Editor for HealthLeaders.