What Will the Future of Retail Health Look Like?

What Will the Future of Retail Health Look Like? Katie Adams

There are no shortage of stories that warn us about the perils of overambition. But perhaps the executives at the nation’s largest retailers — in their quest to master primary care by banking on their consumer expertise — have never come across Don Quixote, Macbeth or Icarus.

Instead of a fairytale ending, top retailers Walmart and Walgreens have begun to significantly wind down their primary care operations. Others still stand, though the jury is out on whether they can master the tough unit economics that come along with healthcare delivery.

While retailers are realizing that healthcare is one of the most foreboding frontiers to conquer, they’re not giving up completely — they are reining in their ambition and trying to be more strategic. Some are deepening their focus on pharmacy services, some are pursuing partnership with digital health startups, and some are teaming up with health systems. 

Whatever strategy retailers pursue, experts think they need to center their efforts on building trust and fostering long-term patient engagement.

Misdiagnosing the problem

This year, Walmart threw in the towel on its healthcare delivery unit, and Walgreens CEO Tim Wentworth announced that Walgreens will soon no longer be the majority owner of VillageMD. Given that Amazon’s acquisition of One Medical and CVS’ purchase of Oak Street Health are still quite recent, both retailers continue to operate their healthcare clinics and haven’t announced major rounds of closures.

Even though some retailers’ healthcare delivery projects are still operational, none have really been all that successful, said Ashok Subramanian, CEO of health plan Centivo.

In his view, retail clinics are doing poorly because retailers haven’t had a good understanding of what problem they were trying to solve.

“I believe these organizations have misdiagnosed the problem from the lens of the consumer. I think they believe the problem was that people don’t have enough access to primary care, and therefore, they could step up in that vacuum and use their brand and their capacity to provide convenient primary care where it doesn’t exist. They’re not wrong that there’s a shortage of primary care, but people don’t want to go to random providers in a super transactional way,” he explained.

Healthcare is incredibly personal. Retail clinics may be accessible and convenient, but retailers are not paying enough attention to trust building or relationships, Subramanian argued. Without strong relationships, it’s difficult to build patient loyalty and ensure that people keep coming in for their visits, he added.

Perpetuating the sick care model

Neal Batra, principal and healthcare leader at Deloitte Consulting, thinks that a greater focus on trust and relationships might help retailers better engage consumers.

“The future of retail health is truly poised for transformation, but it won’t be fully realized unless there is a strategic shift in design and approach that is centered around engaging consumers before they are sick. When you consider what hasn’t worked with retail health, I believe it’s because they’re chasing after the same dollar, or consumer, that is already engaged with incumbent health care providers for traditional sick care,” Batra remarked.

To him, retailers have an opportunity to differentiate themselves by focusing on wellbeing and prevention. This way, retailers can engage consumers earlier — before they need sick care.

To be successful, Batra thinks retailers must build trust in the communities they serve, as this will make it easier to engage people who wouldn’t otherwise be seeking health and wellness services. 

He also thinks retailers should offer more accessible programs centered around preventive care and wellness. These could center around things like vaccinations, screenings and exercise.

Neglecting value-based care opportunities

It’s also important to note that most retailers haven’t gotten into the value-based care game. This means they have neglected to integrate primary care in a way that allows them to benefit from the positive behavioral change they are seeking to create in patients, said Oron Afek, CEO of healthcare software company Vim.

He thinks retailers have an opportunity to benefit from value-based care models.

“[Retailers] can go to large payers and say, ‘I already see 10 million patients covered by you who go to my clinic every year. They touch my pharmacy X number of times, I can see what they’re buying for food, and some of them are using my primary care assets. Here’s what I’d like to propose — I’d like to get paid on a per member per month fee schedule. I want to offer your members my services and be able to benefit from shared savings.’ None of them have done that,” he declared.

Without adopting value-based care models, retailers have little incentive when it comes to building long-lasting relationships with patients and keeping them healthy over a long period, Afek noted.

He pointed out that chronically ill patients usually see a pharmacist much more often than they see a primary care provider. With the large number of chronically ill patients that visit pharmacies every day, retailers have a huge opportunity to engage these patients in primary care services. 

However, without value-based care, retailers will continue to provide this primary care in an episodic fashion, with little regard as to whether the patient is keeping up with their care plan, Afek explained. To successfully care for chronically ill patients, he thinks retailers have to take on value-based contracts and connect to broader networks of specialists and integrated labs.

“Everything is focused on efficiency. It’s not really focused on the idea that, ‘Oh, that patient just stepped in and they’re chronically ill. There’s a huge potential cost savings that can drive here if I just coached them to do A, B or C or offered to close this care gap,” Afek explained.

He noted that CVS is an exception.

When CVS bought Aetna in 2018, it allowed the company to “truly manage value-based care,” Afek said. CVS’ pharmacies and MinuteClinics can act as a feeder to its broader primary care play, Oak Street Health, he explained. 

“Oak Street only treats Medicare patients, but I think Oak Street is going to be expanding to commercially covered patients,” Afek remarked. “You can see a nice funnel. You have the huge capture of Aetna, but also the retail pharmacy operation feeding into the MinuteClinics feeding into the primary care assets in a way that could be monetized in value-based care.”

CVS has opened Oak Street Health centers in Texas and Illinois, and roughly two dozen centers are scheduled to open by the end of the year, a company spokesperson said in an email.

“Our approach to put Oak Street Health and CVS Pharmacy under one roof is one of many ways that we are advancing our health care delivery strategy. We believe what differentiates us in this approach is the specific attributes of our assets. Unlike some retail health models, the Oak Street Health model takes full risk, which allows us to invest up front in keeping patients well,” the spokesperson wrote.

Partnering with health systems

As companies like Walgreens and Walmart begin to recover from their retail clinic failures, Afek thinks retailers may shift their focus to focus more on health system partnerships.

For example, Walgreens is currently partnered with 17 health systems across the country, including Providence, AdventHealth and NewYork-Presbyterian. These partnerships are designed to provide easily accessible healthcare services through co-located clinics within Walgreens stores, a company spokesperson said in an emailed statement.

“Walgreens emphasizes the importance of pharmacies in communities by collaborating with health systems to offer health services at certain locations. This strategy reinforces the role of pharmacies in providing convenience, access and trust. The common thread is a locally-based partnership with the shared goal of offering convenience and access to patients,” the statement read.

A hospital may end up bleeding money at its retail clinic locations, but they can usually justify the investment because of all the referrals these retail visits generate, Afek explained.

He thinks retailers will probably continue to pursue partnerships in which health systems rent out their clinic space, but he doesn’t think this is good news.

“I think it’s actually really bad news for the industry because they’re just going to continue to increase the power of integrated delivery systems and their ability to increase prices for customers because they can capture more referrals,” Afek stated.

Walmart is also trying to recoup costs by leasing its clinic space to a health system — last month, Mercy announced its plans to lease three of Walmart’s shuttered health centers in Arkansas.

Partnering with startups

The multibillion-dollar primary care acquisitions that retailers have made in the past few years aren’t proving to be very successful, so we will likely start to see a greater focus on partnerships rather than purchases, pointed out Kate Festle, a partner in West Monroe’s healthcare M&A practice.

She said she is keeping her eye on Costco, which is often overlooked in the retail healthcare conversation. She called the retailer’s partnership with Sesame, announced last September, a smart move.

Through the partnership, Costco members receive discounted pricing for Sesame’s virtual health marketplace, giving them easy access to things like GLP-1s and mental health services.

“[Retailers] will go the route of a partnership versus an acquisition — it’s like dating versus being married. Partnerships tend to help contain risk, especially in a market that is still finding its footing,” Festle said.

All of Sesame’s services are cash-pay, which is a more fitting model for a retailer, she added.

Retailers are focused on preserving the bottom line, direct-to-consumer marketing and immediate reimbursement for rendered services, Festle explained. Most retailers aren’t prepared to deal with the massive administrative burden and waiting game that comes along with billing insurers, she stated.

To Festle, retailers would be better off if they partnered with startups that deliver cash-pay services — which conflicts Afek’s belief that retailers should be diving into value-based care.

“There is the deferred revenue versus the immediate cash pay, and there is the simple customer encounter versus the complex patient encounter. All of those things just became this perfect storm — it’s just not a harmonized view of the retail and health clinic combination. I think that’s where a lot of big box retailers found themselves, or at least the ones who had either acquired clinics or had invested materially in retail square footage,” Festle declared.

Walmart has also partnered with a startup recently. After shutting down its primary care business earlier this year, the company announced in July that it is teaming up with MISTR, an online platform that offers telemedicine access to PrEP and long-term HIV care.

Through the partnership, customers at seven Walmart locations in Georgia are able to access MISTR’s at-home HIV testing kits at zero cost. MISTR absorbs the cost of its test kits and test processing, as well as provides information to customers about getting started on PrEP. 

Return to what they know

In addition to pivoting to partnerships, some retailers appear to be shifting their focus away from healthcare delivery and back to their core pharmacy businesses and specialty pharmacy services.

For instance, Walmart announced last month the opening of 25 new autoimmune-focused specialty pharmacies across five states. These new pharmacies aim to deepen Walmart’s healthcare focus and go beyond simply providing medication, said Aleata Postell, the company’s group director of specialty pharmacy, in an email.

“Our pharmacists work with patients to develop specialized plans that incorporate therapy goals and strategies to achieve those goals, including how to manage flares and prolong remission. We also offer in-person injection training, caregiver support and guidance around nutrition or supplements that patients may leverage while managing their conditions,” she wrote.

Walgreens also recently made an announcement that it was strengthening its pharmacy services. In April, the company revealed plans to expand its specialty pharmacy offerings to include cell and gene therapy services.

With the announcement, the pharmacy giant introduced a newly integrated business unit called Walgreens Specialty Pharmacy. The unit encompasses most of Walgreens’ assets in the specialty pharmacy space, including specialty pharmacy subsidiary AllianceRx. 

The newly rebranded business unit will include an 18,000-square-foot innovation center in Pittsburgh, nearly 300 community specialty pharmacies, four central specialty pharmacies and more than 1,500 specialty-trained pharmacists.

For retailers, it’s “frankly a lot easier and a lot more lucrative” to expand their presence in the specialty pharmacy space than it is in the healthcare delivery space, noted Subramanian of Centivo.

After all, it’s far easier to stay close to the devil you know than fly too close to the sun.

Photo: lechatnoir, Getty Images