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Analysis

Walmart Pilots Health Center, Pushing Deeper Into Provider Space Ripe for Disruption

By Steven Porter  
   September 24, 2019

The retail giant has 'bold ambitions to partner' with providers as it aims to make care more affordable and accessible.

There's more than a fresh coat of paint at a newly remodeled Walmart supercenter in Dallas, Georgia, where the company aims to deliver a better shopping experience not only for electronics and home goods but for healthcare services as well.

The retail giant opened its first Walmart Health prototype this month, partnering with local providers to offer an array of services, including primary care, lab work, x-rays, EKGs, vision and hearing care, counseling, and more right there at the store, accessible through a separate entrance.

It's precisely the type of retail invasion that's been making incumbent hospitals, health systems, and medical groups nervous. And the disruptive influence could spread to other markets, as the company aims to perfect a scalable model.

"This is kind of an Amazon play," says Ken Kaufman, MBA, managing director and chair of consulting firm Kaufman Hall.

In the same way that Amazon established its market dominance in the online retail space for books and more, Walmart might cement its footing in outpatient healthcare delivery by underpricing the competition, Kaufman says.

The company said it aims to price Walmart Health services at 30%–50% below what patients have been paying elsewhere, partly by eliminating middlemen and using Walmart's market size to negotiate, as Business Insider reported.

That's feasible because Walmart is the biggest corporation in the country, by revenue, Kaufman says.

"They can really do whatever they want for as long as they want," he says. "If this doesn't work and the whole venture is losing money, then they'll have to decide how much pain to take."

Related: Walmart Encourages Retail Workforce to Train for Healthcare Jobs

Related: When Retail Giants Like Walmart and Amazon Invade Healthcare

Related: What's to Keep Amazon From Competing in Brick-and-Mortar Healthcare? Not Much

The possible strategy, as modeled by Amazon, seems to be pretty clear, Kaufman says.

"You just hang on until you have created the No. 1 market share in that particular area, that particular vertical. Then you expand your business out from there," he says.

"It's worked extraordinarily well for Amazon in numerous different areas," he adds. "I think that's what Walmart's going to try here."

If successful, Walmart's moves will translate into market share, will likely rearrange the way referral systems work within those markets, and could lower the cost of care, Kaufman says.

Meeting Consumer Expectations
 

Walmart Senior Vice President Sean Slovenski, who also serves as president of health and wellness, said the company plans to use the prototype to learn best practices that it can then roll out to the other communities it serves. A second location is already slated to open early next year in nearby Calhoun, Georgia, he said.

The retailer's expansion in brick-and-mortar healthcare delivery stems from its ambition to improve affordability and accessible for patients, whether they have insurance or not, Slovenski said.

"For the past year, a team of healthcare experts and visionaries inside and outside of Walmart have been working hard to bring this concept to life in Georgia, and the journey we've been on is just the beginning as we aim to bring quality, accessible healthcare to our customers," Slovenski said.

Walmart's undertaking includes key principles of the emerging healthcare marketplace:

  • Price transparency: An average primary care office visit for an adult patient will cost $40, a dental exam will cost $25, and a 45-minute counseling session will cost $45, according to a pricing list for the Dallas, Georgia, location. The goal is to charge 30%–50% less than other providers, as Slovenski told Business Insider.
     
  • Community health: The facility will offer education and enrollment assistance for health insurance programs, plus fitness and nutritional resources. This could be a big differentiator for the retailer, since Walmart's grocery aisles give it an edge over Amazon, as CNBC's Tim Mullaney reported last month—though Amazon has been investing in a grocery strategy of its own. Industry players and policymakers alike have acknowledged the role access to healthy food plays in social determinants of health.

To pull this off, Walmart knows it will need strong partnerships with local providers and wellness organizations alike.

"Helping families save money so they can live better is at the heart of Walmart's business," Slovenski said, "and we have bold ambitions to partner with great providers and find solutions to deliver quality health services at low, transparent pricing to our customers in a way that is convenient for them, making 'live better' the norm."

Don't mistake this prototype as some shot in the dark. This is "not a dabble" but a "serious" strategy, as Slovenski told Forbes. And the company's follow-up announcement Tuesday that it is investing in health-related educational opportunities for its associates adds to the reasons to believe Walmart intends to have its healthcare priorities taken seriously.

Serving Rural Populations
 

Christopher Cornue, MSHSA, FACHE, a Chicago-based strategic adviser who used to work for Navicent Health in Macon, Georgia, says Walmart is moving into relatively rural areas that have high percentages of Medicaid and uninsured populations.

In a state that didn't expand Medicaid under the Affordable Care Act, that might set Walmart Health apart from the strategies undertaken by CVS Health or Walgreens, Cornue says.

"They are not necessarily going to be going after the same type of patient that maybe some of the other retail boxes would be," he says.

Each of the two Georgia communities in which Walmart is opening its health centers has fewer than 17,000 residents. Rural providers in those communities and surrounding areas may not be fully prepared to respond to the disruption, Kaufman says.

Cornue says another business model is emerging, whether the most viable version comes from Walmart, Amazon-backed Haven, the newly merged CVS-Aetna enterprise, or elsewhere. So incumbent health systems should be thinking through the possible implications for their own operations, he says.

But keep in mind, Kaufman says, that Walmart doesn't have to expand into your market for a Walmart-style model to disrupt your relationships with your patient populations: "You should see this as the introduction of a very competitive business model, where Walmart just happens to be the first practitioner."

Steven Porter is an associate content manager and Strategy editor for HealthLeaders, a Simplify Compliance brand.

Photo credit: Provided / Walmart Health


KEY TAKEAWAYS

Incumbent healthcare providers could find opportunities and threats alike in Walmart's strategy.

Walmart's tactics may in some ways resemble those taken by online retailer Amazon.


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