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  • New Wal-Mart: Save Money and Live Healthier?

    There is an interesting graphic from Minute Clinic’s (owned by CVS) presentation to investors. They expect a shortage of 45,000 primary care physicians by 2020 and physician supply is years away from catching up. On the demand side, the health care law is expected to add about 32 million new patients into the system.  So what should we do to provide affordable and convenient health care access for all?

    This fundamental problem of supply and demand requires sound business thinking to be solved. Assumptions that have become ingrained have to be questioned and possibly relaxed for developing innovative solutions (more on this in a later post). We have a comprehensive system of health care now where all ailments both simple and complex are all treated within the same framework. This strategy is both ineffective and inefficient.

    One possible first step is to split the different components of our health care into minor ailments and major ailments and have different providers taking care of these different types. Fortunately, this solution of creating retail health clinics staffed by nurses to strictly cater to minor ailments is gathering steam.

    Major retailers such as CVS, Walgreen’s, WalMart, Target, and Kroger are at the forefront of the retail health clinic strategy. Why? We live in an era where most products can be bought online leading to existential crises for brick and mortar retailers, so these retailers are always looking for products that cannot be supplanted by online retailers. Health clinics at the retail store front are perfect products to build destination stores.

    The industry leader now is CVS followed by Walgreens. Wal-Mart has signaled its intentions to expand its retail clinics (and back pedaled a day later) and become the leading provider of health care services. Interestingly, CVS and Walgreens have greater control in their clinical operations whereas Wal-Mart has outsourced its operations to a third-party provider and is facing teething problems. The pace of retail clinic formation has many industry watchers unsettled about the viability of clinics. We must remember that the retail clinic industry is going through a pilot-testing phase. In time, best practices will diffuse across the major players and the industry will survive the initial hiccups and thrive. Patience is key.

    Interestingly, these retail chains already dispense prescription drugs and over-the-counter drugs. For example, Wal-Mart runs the third-largest Medicare prescription-drug plan with 1.4 million enrollees. So these retailers already have a foot-in-the-door with satisfied clientele. With impending plans to set up insurance exchanges for small businesses, Wal-Mart (and other retailers if they follow suit) will control valuable pieces in the health care ecosystem. For retailers, this is a potentially win-win strategy. If the value proposition is clear, patients will come and quality experiences will result in higher loyalty towards the retail store for both their health and non-health needs. More importantly, the retail health clinic will enable them to move upstream in the health care value chain and become trusted brand names in the lucrative health care industry. Over time,  they can expand their scope of care.