Facing an uncertain future, industry leaders get creative with care delivery

Facing an uncertain future, industry leaders get creative with care delivery. Lauren Berryman

The Centers for Medicare and Medicaid Services projects national health spending will reach $6.2 trillion by 2028.

“This [expansion into healthcare] is a way for these retail organizations to get a piece of that $6 trillion pie, which may even be more lucrative than what they already have in terms of prescription activity and the retail portion of their stores,” said Michael Abrams, managing partner at the global healthcare consultancy firm Numerof & Associates.

CVS Health and Walgreens Boots Alliance executives, who appear on Modern Healthcare’s 100 Most Influential People in Healthcare list this year, have guided the companies through multibillion-dollar deals as they accelerated their diversification of healthcare services.

Last year, CVS announced its plan to close nearly 10% of its retail stores within three years while growing its health services arm. In May, the company launched a virtual primary care platform for eligible Aetna and CVS Caremark members starting in 2023. It signaled its plans to expand into the home health space in September with its proposed $8 billion purchase of Dallas-based Signify Health.

“We believe that our Signify Health [acquisition] will close some of the gaps that we have in home, and it will give us a platform to accelerate return to care and provider enablement,” President and CEO Karen Lynch said on the company’s third-quarter earnings call in November.

Meanwhile, Walgreens reported a successful year in primary care, specialty pharmacy, post-acute care and population health during its fourth-quarter earnings call in October.

That month, the chain stated its intent to purchase the remaining stake in post-acute care company CareCentrix, just two months after becoming its majority owner. It announced an $8.9 billion deal in November through which VillageMD, a unit of Walgreens, will acquire Summit Health-CityMD, a primary, specialty and urgent care company with presence in the Northeast and in Oregon. VillageMD—whose co-founder and chief medical officer Dr. Clive Fields also made the 100 Most Influential People in Healthcare list—operates more than 250 primary care locations in 22 markets.

“They obviously have high expectations for profitability in the coming year. They clearly believe they’ve got a winning combination here,” Abrams said, about Walgreens.

Other major retailers have made forays into the healthcare space. In September, Walmart struck a decade-long partnership with UnitedHealth Group to provide preventive and virtual care services to some members. It also in October announced a plan to open 16 more clinics adjacent to its superstores providing primary care, labs, X-rays, behavioral health, dental health and community health services.

On the company’s third-quarter earnings call in November, it announced sales growth in its health/wellness and grocery divisions while seeing a decline in general merchandise sales. What’s next for its healthcare arm remains to be seen: Dr. Cheryl Pegus, a 100 Most Influential honoree and former executive vice president for health and wellness, left in November for Morgan Health, JPMorgan Chase’s healthcare arm, though she’ll serve as a senior adviser to the retailer.

The complexity of the healthcare industry means there are learning curves for retail companies expanding services outside of their traditional offerings.

“There is some trial and error,” said Paul Schuhmacher, a managing director in the healthcare practice of AArete, a global management consultancy.

For instance, Schuhmacher noted, Amazon launched medical care service Amazon Care in 2019, only to announce its closure in August. And the joint venture Haven, formed by Amazon, Berkshire Hathaway and JPMorgan Chase to reduce healthcare costs for their 1 million U.S. employees, shuttered last year. Now, it’s pivoting again to start virtual health service Amazon Clinic.

“From my perspective, [Amazon is] trying out a few different areas in healthcare to see where they could fit in the best,” Schuhmacher said.

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