Can Retailers Solve America’s Long-Running Healthcare Problem?

Consolidation promises convenience and affordability

Consolidation between retailers and healthcare companies promises increased cost-savings and convenience. Getty Images
Headshot of Lisa Lacy

Walmart is reportedly in talks to acquire insurance company Humana.

In an email, Walmart vice president of global corporate communications Greg Hitt said, “As you know, we do not comment on rumors and speculation.” (Humana did not respond.)

If true, this certainly wouldn’t be the first instance of a retailer eyeing a healthcare company. In December 2017, pharmacy and healthcare company CVS Health said it was buying insurance company Aetna. In a similar vein, in February, grocery chain Albertsons said it was buying drugstore chain Rite Aid. And then there’s Amazon, Berkshire Hathaway and JP Morgan Chase, which announced they have partnered to create an independent company that will provide US employees with healthcare at a reasonable cost.

Sticker shock at the doctor’s office may very well be one of the biggest forces driving consolidation between retailers, insurers and pharmacies.

“Within the United States, healthcare costs are among the highest in the world, and the reason for that is we have a lot of inefficiencies in our landscape,” said Gurpreet Singh, partner and healthcare services leader at professional services network PwC.

That is driven by all of the different players involved, which include those who deliver care, finance care, promote wellness, create products for diagnostics and therapeutics and/or create the shared data infrastructure.

Consolidation, however, reduces some of the complexity and cost, so lines are blurring as retailers and insurers seek to not only deliver and finance care, but also dip their toes into wellness.

“I think we’re at an interesting time where consumers have more faith in brands and businesses to solve seemingly intractable societal problems,” added Elizabeth Paul, head of strategy at advertising agency MullenLowe, pointing to gridlock in Washington and faith in the government at an all-time low. “I think any time you have a real gap in consumer need, there is an opportunity for businesses to go in and address it.”

In addition, Paul said Walmart has built its business on using operational efficiencies to lower costs and return savings. This contrasts sharply with the public perception of the insurance industry, which is seen as maximizing profit at consumers’ expense—and the government hasn’t been able to do anything about it.

“If anyone can do it, it will be Walmart or Amazon,” she said, noting a move into healthcare would be similar to what Walmart has done in financial services by offering check-cashing services and prepaid debit cards.

“There were similar questions—should they be in that business—but they were looking at people underserved by financial institutions,” Paul added. “They could get into that market and offer a better product at a lower price and help [shoppers] save money to live better lives.”

Consolidation also helps retailers become more competitive by increasing their service offerings.

According to Robin Copland, head of the retail practice at digital marketing agency Huge, in-store medical clinics also allow retailers to address an aging population and wellness, which is a fast-growing segment in grocery.

Singh agreed a union of insurance companies and retailers creates an opportunity for the latter to drive a wellness agenda.

“It basically means taking a page out of Amazon’s playbook—acquiring companies and rolling together services, like Whole Foods and Prime membership,” Copland said.

He noted this is particularly true for a retailer like CVS, which really needed to pivot to a higher purpose if it wanted to survive because it sold the kind of products consumers could get anywhere.

Insurance is a natural extension for a retailer like Walmart, which first expanded into over-the-counter drugs before offering flu shots and eye exams as part of its attempt to build a physical version of a frictionless digital experience, Paul said.

“The thing that Amazon captured first that no one else really did in a meaningful way is our desire to have more time. And it’s all about convenience,” Copland said. “That’s where Amazon started—look at Dash, Lockers, Amazon Fresh, Amazon Go. It’s all about convenience and that is the premium that consumers are prioritizing today … that’s what all of this comes down to—these tie-ups.”


@lisalacy lisa.lacy@adweek.com Lisa Lacy is a senior writer at Adweek, where she focuses on retail and the growing reach of Amazon.
Publish date: April 2, 2018 https://dev.adweek.com/digital/can-retailers-solve-americas-long-running-healthcare-problem/ © 2020 Adweek, LLC. - All Rights Reserved and NOT FOR REPRINT
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