And Then There Were Two

The Retail Healthcare Update

 Dan Stanek

 Kate Fisher

Earlier this year, significant news broke about Walmart Health exiting the US healthcare business, now leasing their locations to other providers.¹ This was soon followed by Walgreens announcing the closure of most VillageMD co-locations and reducing their investment in VillageMD.

The promise of access, affordability, and a better customer experience that these innovative and disruptive retail concepts represented suffered a severe blow. Many industry observers chalked it up to retailers’ inability to operate healthcare effectively. However, examining the rationale and statements of the businesses involved reveals that primary care is simply a bad business. Costs have skyrocketed, there is a shortage of qualified providers, and revenue control lies with third-party payers, who have been reducing reimbursements for these services. Despite having the vision to try to fix this severely broken system, these companies found it required too much patience and investment than they could justify compared to other potential investments.

Traditional health systems can use primary care as a loss leader, referring patients to specialty and acute services to recover margins. Retailers, however, do not have these avenues. The reasons retailers got involved in primary care still exist, and the problems for consumers that they hoped to resolve remain. The average wait time for a primary care visit is one month and nearly one third of consumers do not even see a primary care doctor.²³ So, where does primary care change and where does innovation go from here?

Amazon and CVS Health: Committed to the Cause

Two of the retail healthcare providers remain committed to the cause – Amazon and CVS Health.

Amazon seems to be aggregating its clinical services behind Amazon One Medical (AOM), which it acquired a few years ago for nearly $4B. The brand recently wrapped its telehealth services into that brand along with 240 physical locations. To help make primary care more economically palatable, AOM is able to charge an annual membership fee, as well as partnering with local health systems which likely involves an economic incentive. The brand is also heavily involved with the pharmacy market with the aggressive Amazon Pharmacy offer and its competitively priced RxPass. Part of the One Medical deal included the senior-focused primary care group Iora, now Amazon One Medical Senior. The next moves for AOM are a bit of a mystery, as they seem to be analyzing market developments before making a more aggressive push to gain share.

CVS Health has announced an aggressive expansion of its own senior care offering, Oak Street Health, operated both as standalone sites and co-located sites with CVS. The economics of this offering are likely more compelling than other players, focusing on value-based care vs fee-for-service and they own Aetna, so they control both payment and delivery. They also have made key investments in home care should the market shift in that direction.

An Opportunity to Learn and Change

Corbin Petro, Founder of Eleanor Health, health care advisor, and board member, recently stated, "Walmart is known for being the most efficient, the most scaled [retailer]. If anyone can do something profitably based solely on scale, it’s Walmart. They can figure it out. And the fact that they haven’t is really alarming. If they can’t figure it out, who can?"

Primary care is considered the lynchpin of the healthcare system, and it is tragic that the systems complexities and economics burden this critical component. While traditional health providers may laugh at the failures of these disruptive efforts, a much better perspective would be to learn from the positives and apply those lessons to traditional primary care and outpatient practices. As noted earlier, the problems that drove consumers to these alternative providers still exist. The vulnerabilities of the traditional provider delivery model experience have been exposed. Other innovative players will step forward. This is an opportunity for primary care and outpatient providers to close the experience gap using the tools, techniques and learnings these innovative retail concepts have introduced.

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WD Partners is a customer experience innovation and execution firm, helping clients to design and scale consumer experiences and bring sophisticated retail practices to the Health + Wellness Sector. WD Partners offers fully integrated strategy, design, architecture, and engineering services and partners with many of the largest brands in the world, helping them to develop world-class experiences and scale them nationally or internationally.

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