Walmart's moves matter. But here's what's really important for CEOs

The Daily Briefing's Dan Diamond spoke with Alicia Daugherty and Rob Lazerow about Walmart's new push into care delivery, and key takeaways for health care executives. Here's a condensed transcript.

Q: As we reported in the Daily Briefing this week, Walmart's launched a half-dozen "primary care clinics" in South Carolina and Texas.

You're both experts who track retail strategy and care innovation. Does anything stand out or surprise you about Walmart's move?

Alicia Daugherty: Back in 2007, the CEO had spoken optimistically about opening thousands of retail clinics, but Walmart has actually proceeded cautiously with its primary care moves. That's not a surprise, given their corporate tradition.

Alicia Daugherty

When the company first announced that it would be hosting retail clinics, Walmart leased space to health systems rather than operating their own stores, which was a way to test the market with little risk. They've also kept their health care plans relatively quiet.

And Walmart's corporate strategy has never been about first-mover advantage—it's about distribution efficiency and cost management. Coming in a little later in the game allows them to capitalize on markets created by others, and learn from others' mistakes.

Q: I think we'd agree that Walmart's entry into primary care is a signal moment in health care—that one of the world's largest retailers is going to chase this market. What's the key takeaway in your mind?

Daugherty: It's time for hospitals and doctors to get real about being patient-centric.

Provider organizations have aspired to be so, but strategy has been largely provider-focused: What's convenient for us as an organization? What do our physicians want and need?

Walmart is offering consumers two important things: Easy access and upfront, low prices.

[Update: Alicia expands on her comments that it's time for providers to 'get real' about being patient-centric]

Rob Lazerow: I'll focus on a different takeaway: "Retail" is one of the hottest buzzwords in health care right now, and Walmart's moves help show why.

But retail's much more than just retail clinics.

Q: Explain what you mean by that, Rob.

Lazerow: Walmart's new clinics show the continued growth of retailers launching clinics or getting into health care. It's an important story, absolutely.

Rob Lazerow

But it only highlights one aspect of the emerging trend of retail health care.

For hospital and health system executives, especially those in markets without a Walmart clinic, the new retail insurance market is much more transformative.

Through public and private health insurance exchanges, millions of patients are gaining unprecedented control over their health plan decisions, actively selecting among many plans offered by a range of health insurers. 

Beyond the clinics: What the "retail" movement actually means

Q: Which circles back to Alicia's point: That providers need to be more patient-focused. That's something we've been hearing for years—how can they finally make it real?

Daugherty: It's a good question, and one that many executives have asked me, too. And this is a focus of our upcoming meeting.

Becoming patient-centric will require provider organizations to make some difficult changes—expanding hours, offering virtual access, and expanding price transparency.

And there are some real cultural, structural challenges to overcome, too. Physicians don't want to work on Saturdays—who can blame them?—and chargemasters are a mess.

Across the organization, strategy will need to move from "which services are we going to grow" to "which patients are we going to serve, and what do they want and need?" Not what we want them to want, but what they actually want.

Q: Making these changes…they sound intuitive, but also incredibly disruptive to hospitals' business.

Lazerow: That's right.

This retail insurance market fundamentally changes how hospitals and health systems compete—they now have to win at multiple decision points.  

First, they need to win when a health plan, exchange operator, or some other network aggregator is assembling a network to sell with a health plan on an exchange.

Second, they need to win when individual consumers are selecting their health plans during open enrollment.

And finally, hospitals need to win a third time when patients are selecting where to receive care, often with the cost exposure of a high-deductible health plan influencing those decisions.

To fight these battles, hospitals need a consumer-oriented ambulatory network. And this is a very different competitive landscape than what most executives have faced previously—and hospitals risk losing volumes at each decision point.

Daugherty: Some of those volumes may be the executives themselves. I talk with many Chief Strategy Officers and CEOs who admit that they've gone to a retail clinic for care.

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