“Why is Wal-Mart speaking at a health care summit?” the company’s vice president for health and wellness, Marcus Osborne, rhetorically offered up at a conference back in January.
“Wal-Mart’s in retail, we’re not in health care.”
But as analysts, researchers, and other experts who spoke with “Road to Reform” took care to point out, Wal-Mart is in health care, and getting further entrenched by the year. In the past six months alone, Wal-Mart launched a major contracting initiative with half-a-dozen major hospitals, and dropped hints — since retracted — that the company is exploring new services like a health insurance exchange.
Notably, Osborne teased a broader health care strategy for Wal-Mart that would include “full primary care services over the next five to seven years,” in a Q&A at that January conference captured by the Orlando Business Journal.
Wal-Mart has since denied Osborne’s comments — the second time in about 18 months that the company has had to walk back stories about its planned primary care services — and Osborne subsequently stopped talking to the press. (Wal-Mart declined to comment, and Osborne did not respond to an interview request for this story.)
But Osborne’s remarks from that January conference, and his other archived speeches, are still readily accessible. And they paint a vivid picture of a company that’s not just a potential market-mover and disruptive innovator, but an organization that could do a lot to positively reform health care.
Background: Wal-Mart’s Growing Role in U.S. Health Care System
In many ways, this isn’t a new story. Back in 2007, Princeton University’s Uwe Reinhardt suggested to NPR that Wal-Mart could be “taking aim at the entire health care system” by expanding its new discount drug program.
“I think it’s a really fascinating way to come out of the corner and really slug the system,” Reinhardt said at the time. “At the moment, the body blows don’t hurt. But they add up. I’m watching this with great fascination, and expect more from them.”
And in subsequent years, Wal-Mart did grow its health care footprint, from launching retail clinics based within its stores to advocating for national health reform. Considering its history — as recently as 2005, Wal-Mart had little involvement in the health care market and was being pilloried for skimping on its own employees’ benefits — it’s been a significant turnaround for the firm, and has positioned Wal-Mart as one of the leading disruptive innovators in health care.
Case Study: Wal-Mart as Powerhouse
But when it comes to potentially reshaping care access and delivery, Wal-Mart is still just scratching the tip of the surface. To understand the company’s scale and ability to disrupt traditional market dynamics, look no further than last year’s Center of Excellence program.
The company decided to directly contract with Mayo Clinic, Cleveland Clinic, and four other leading hospitals. As a result of the COE program, more than 1.1 million Wal-Mart employees and dependents can now travel, at no cost, to those leading hospitals for certain cardiac and orthopedic procedures.
(For perspective, consider that CMS’s much-discussed accountable care organization effort last July, which involved 88 hospitals, affected about 1.2 million Americans.)
“Love them or hate them, Wal-Mart has a huge ripple effect,” Dave Chase wrote at Forbes. “Overnight, every facility in America that does cardiac, spinal, or transplant procedures is now competing with Mayo, Cleveland Clinic and other top providers.”
Opportunity: Wal-Mart as Destination
One reason that Wal-Mart partnered with those hospitals: lowering its health care costs.
“We literally spend billions of dollars” on employees’ health care insurance alone, Osborne noted.
Still, there’s a distinction between contracting with providers to tamp down your own health care costs and competing with those providers by offering services like retail clinics or even primary care.
So why would Wal-Mart get into broader health care services? It starts with “the obvious financial opportunity,” as Osborne alluded to in one talk.
U.S. spending on health care is poised to surpass spending on retail — the only developed economy where that’s the case — and Wal-Mart has natural advantages like foot traffic and scale. About 150 million Americans visit a Wal-Mart every week, spending about 50 minutes on average.
Could Wal-Mart Positively Reform Care?
That ease of access could be transformative if Wal-Mart elected to expand its primary care services, experts note, given that many patients struggle to simply get in the doors of a doctor.
And many of Wal-Mart’s customers are especially affected by the burdens of health care. As Osborne noted, roughly one in ten Wal-Mart customers identifies as a caregiver. And the average Wal-Mart customer is losing about $6,000 in income because of that caregiving, he added.
Meanwhile, the companyâs $4 generic drug program has appeared to boost adherence to certain medications and reduce costs for some low-income Americans.
One unique element that Wal-Mart could bring to health care access, Dave Chase told California Healthline, is the company’s presence in rural markets. That’s where there’s “the biggest shortage of primary care doctors, and it’s not getting any better,” Chase noted.
A Sleeping Giant
But great things have been predicted of Wal-Mart’s role in health care before — even by Wal-Mart itself.
In 2007, the company’s then-CEO Lee Scott predicted that Wal-Mart would have 2,000 retail clinics in place by 2012.
Today? Wal-Mart has closer to 130, and is “closing locations faster than it’s opening them,” Renee Dudley noted at Bloomberg BusinessWeek.
One of the challenges facing the company: For all of Wal-Mart’s advantages, officials are still feeling their way in the health care space.
“Wal-Mart has developed a great deal of expertise at how to buy and sell products at a discount price,” Ateev Mehrotra, a physician at the University of Pittsburgh Medical Center and a researcher at the RAND Corporation, tells California Healthline. “Providing health care is different” and much more complex, ranging from developing the needed expertise for a broader strategy to hiring practitioners to deliver care, he added.
And the speed bumps of launching the retail clinic program may have slowed down Wal-Mart’s plan to launch broader health care services.
“I think Wal-Mart is still going to” move into the health care market, Chase said, although “they’re not on the fast track.”
“But they could be formidable.”
Weekly Roundup
Here’s a quick look at this week’s other stories on health care reform.
Hospital charges go public: In a major new effort intended to increase transparency, CMS has released new data on hospital billing and charges.
The death panel that went to die: At Project Millennial, Adrianna McIntyre takes a look at why HHS has hit the “pause button” on the Independent Payment Advisory Board.