With the majority of Americans living just a few miles from a Walmart, how might independent clinical laboratories compete?
Retail giant Walmart (NYSE:WMT) plans to install 4,000 primary care “supercenters” in stores by 2029 that will include clinical laboratory testing services. This is on top of the dozens of Walmart Health locations already in operation in Georgia, Florida, Arkansas, Illinois, and Texas.
Clinical laboratories already have growing competition in the healthcare marketplace from pharmacy chains CVS (NYSE:CVS), Walgreens (NASDAQ:WBA), and Rite Aid (NYSE:RAD) which have installed in-store healthcare clinics in their retail locations—many of which offer limited, but common, medical laboratory services—as well as from existing Walmart Health locations.
Now, Walmart is poised to become a much bigger healthcare player. According to MedCity News, Walmart is “looking beyond traditional retail clinics as it seeks to create ‘supercenters’ with comprehensive healthcare services.”
Presumably, this includes an expanded menu of clinical laboratory testing services—along with the EKGs, vision care, dental care, and more—that Walmart Health locations currently provide for children and adults.
And though Becker’s Hospital Review reported in March that Walmart’s “plan is in flux,” the major national retailer continues to disrupt healthcare in significant ways.
We reported that Walmart Health’s list of services included:
Primary care,
Dental,
Counseling,
Clinical laboratory testing,
X-rays,
Health screening,
Optometry,
Hearing,
Fitness and nutrition, and
Health insurance education and enrollment.
However, the new Walmart Healthcare supercenters differ from Walmart Health clinics and the clinics operated by Walmart’s retail competitors Target, CVS, Walgreens, and Rite Aid.
Those clinics are designed to draw customers into existing retail setting. Walmart has a different goal with its healthcare supercenter concept.
“There’s a big difference between offering healthcare services to drive more people to your store and offering healthcare services because you’re in the healthcare business,” said former President of Health and Wellness for Walmart, Sean Slovenski, during a panel hosted by the American Telemedicine Association. “We’re in healthcare,” he continued, “We’re not in retail healthcare. We’re recruiting physicians in all of these areas and bringing them in.”
Providing Transparency with Clear, Consistent Pricing
In response to consumer demand for transparency, Walmart is taking a different approach to charging patients for healthcare services. The cost of an appointment for primary care is $40 for an adult and $20 for a child. The patient can choose to bill insurance or not, and people without insurance can pay out-of-pocket.
Prices for individual services are equally transparent. Explaining why Walmart is becoming a player in the healthcare industry, Marcus Osborne, Senior Vice President Walmart Health, told Fierce Healthcare, “It’s issues of affordability. That people can’t afford the care they need for themselves and their families. It’s issues of access … That really is the business that we’ve been in. Walmart’s business has been about helping people afford the things they need, getting them in a more accessible, convenient way, and doing it in ways that are simple. Healthcare’s no different in that regard.”
According to STAT, some 35 million Americans were uninsured in 2020. Thus, the idea of transparent pricing and walk-in affordable care should appeal to a sizable market. Walmart is banking on that. Considering that 90% of Americans live within 10 miles of a Walmart, the potential success of the healthcare supercenters becomes clear, Becker’s Hospital Review noted.
Walmart’s Other Healthcare Moves
In addition to opening 20 Walmart Health Centers, and its plans for 4,000 healthcare supercenters, Walmart has made other moves that indicate its intention to disrupt the healthcare industry.
Walmart Insurance Services, for example, partnered with eight payers during the open enrollment period in 2020 to sell its Medicare products. Through a partnership with Clover Health, a Preferred Provider Organization (PPO), and a Health Maintenance Organization (HMO) with a Medicare contract, Walmart made its insurance plans available to 500,000 people in Georgia, Becker’s Hospital Review reported.
“We’re going to have a consumer revolution in retail for point of care,” John Sculley, former Apple CEO and current chairman at RxAdvance (now called nirvanaHealth), told CNBC. “Why? Because if the Walmart tests are successful, and I suspect they will be, people will be able to go in and get these kinds of health services at a lower cost than if they had health insurance.”
“A lot of the opportunity is just about bringing what we’re doing to more people. I think about Walmart Health and what we launched a little over a year ago in Georgia and the impact we’ve seen in the communities where it launched. I think one of the biggest things to do is how do we continue to find ways to make that model work so we can reach more people with it in more communities,” Marcus Osborne (above), Senior Vice President Walmart Health, told Fierce Healthcare. Walmart certainly has experience in disruption. The retailer upended the grocery industry from the moment it entered the market, and it was the first to offer $4 prescriptions, which disrupted long-standing retail relationships consumers had with their pharmacies. Clinical laboratories should realize that Walmart will likely make similar waves in the healthcare sector. (Photo copyright: Consumer Goods Forum.)
How Will Clinical Laboratories Compete?
Change is constant. Clinical laboratories that cannot adapt to changing market forces are ill-equipped to withstand the coming “consumer revolution.” However, labs that have already begun to plan for more direct-to-consumer interactions will be better positioned to adjust as changes come.
“My goal is that we have done the work on Walmart Health as a model, to really get it to work from a consumer perspective and get it to work in a way that it scales effectively, that we are able to reach more people,” Osborne told Fierce Healthcare.
Clinical laboratory leaders should understand that this trend is being driven by consumer demand for convenience, lower costs, and price transparency. Labs that don’t prepare to address those forces will be left behind as Walmart provides what consumers want.
The clinics are part of a growing trend among large retailers to open full-service healthcare clinics where consumers seek out other goods and services
Major retail chains continue to partner with local health systems and other healthcare companies to expand the range of primary care services delivered in their stores. The latest such collaboration is a partnership between Walmart (NYSE:WMT) and Oak Street Health (NYSE:OSH) at three locations in Texas.
Why is this trend important for clinical laboratories to follow? Because after 15 years, retail chains are moving past the simple walk-in clinic model of using a nurse practitioner to provide limited diagnoses that produce prescriptions at chain store pharmacies and other retail locations. They are now partnering with local health systems to provide full healthcare services that are delivered by physicians. These medical services include many common clinical laboratory tests.
The new OSH clinics, located in Walmart Supercenters, are open and accepting patients via walk-in, same day, and scheduled appointments. The clinics are located in the Dallas-Fort Worth area at:
Arlington Walmart, 4801 S Cooper St, Arlington, TX, 76017
Carrollton Walmart, 1213 E Trinity Mills Rd, Carrollton, TX, 75006
The clinics offer comprehensive, preventative, and urgent care services to consumers, including:
Primary care
Optometry
X-rays
Dental
Behavioral counseling
Hearing services
Nutrition and fitness
As well as clinical laboratory testing, including:
A1C
Lipid
Pregnancy
Strep
Mono
Flu
Drug screenings, and more.
“While all members of the community—from toddlers to seniors—are welcome at these clinics, Oak Street Health’s focus in its growing network of more than 60 primary care centers remains adults on Medicare,” states an OSH press release.
This partnership between Walmart and Oak Street Health means clinical labs in that area will need to follow their patients to be able to collect the specimens and perform the lab tests for patients seen in Walmart Health clinics.
In, “Walmart Opens Second Health Center Offering Clinical Laboratory Tests and Primary Care Services,” Dark Daily reported in May on similar Walmart Health Center openings like that shown above in partnership with WellStar Health System in Georgia. These full-service primary care centers offer many common clinical laboratory tests. “By offering clinical laboratory testing in support of primary care and urgent care, Walmart may be able to lower prices for lab tests in any market that it enters,” said Robert Michel, Editor-in-Chief of Dark Daily and its sister publication The Dark Report. (Photo copyright: Walmart.)
Oak Street Health Brings Value-based Medicine to 11 States
“It is our mission at Oak Street Health to rebuild healthcare as it should be, and that aligns directly with Walmart’s history of providing accessible and equitable healthcare in communities across the country,” said Mike Pykosz, CEO of Oak Street Health, in the press release. “We look forward to becoming a positive addition to the neighborhood in these new markets and providing an unmatched healthcare experience in a convenient location.”
Both companies are planning to extend their relationship beyond these three locations and open additional clinics in other regions.
“We’ve proudly served customers at these three former Walmart Care Clinic locations for the last five years, and we are excited to bring this evolved approach to healthcare to our customers at these locations with Oak Street Health,” said Marcus Osborne, Senior Vice President, Walmart Health, in the press release. “As we grow Walmart Health locations in other markets, we think Oak Street Health’s innovative value-based healthcare model will help us continue to deliver on our live better promise at these locations.”
The majority of Oak Street Health consumers are Medicare Advantage patients, but OSH does accept most major and commonly-accepted insurance plans, Healthcare Dive reported.
There is evidence that savvy investors believe moving primary care into retail stores and other non-traditional locations can be a big winner. In its third quarter report, Oak Street Health released very strong numbers for their third quarter, which ended September 30. Their total reported revenue for the quarter was $217.9 million, which accounted for a 57% increase over last year’s third quarter earnings, Yahoo Finance reported.
OSH’s capitation revenue totaled $211.8 million, according to the report, which was a 59% increase year over year. Law Insider defines capitation revenues as “all payments from managed care organizations, where payment is made periodically on a per member basis for the partial or total medical care needs of a patient, co-payments, and all HMO incentive bonuses.”
In its third quarter statement, Oak Street Health also reported caring for approximately 59,500 at-risk patients, which represented 66% of its total patients.
“Our strong third quarter results were highlighted by 38% growth in at-risk patients, 57% revenue growth, and the resumption of new center openings, as we opened 13 centers during the quarter amidst continued uncertainty related to the COVID-19 pandemic,” said Pykosz in a statement, Yahoo Finance reported. “Looking ahead, we continue to be excited by the ample opportunity to drive continued de novo expansion across both new and existing markets, as well as the complementary growth opportunities presented by our Walmart collaboration and CMS’ Direct Contracting program.”
As we wrote in the May Dark Daily e-briefing, “Clinical laboratory leaders may want to explore partnerships with Walmart and other retailers that are developing healthcare centers to deliver primary care services in places where masses of people shop for everyday items. Especially given that these big-box retailers remain open during healthcare crises like the COVID-19 pandemic.”
This is even more critical now, as more retailers partner with health systems to provide expanded primary care and clinical laboratory services.
