Not Awesome:  Healthcare is No Longer Available on Aisle 3

There has been plenty of coverage of Walmart’s recent decision to shutter its healthcare centers and telehealth services as the world’s largest retailer pulls back from its foray into Primary Care. This follows hard on the heels of Walgreen’s $6bn (!!!) writedown of its investment in VillageMD, having closed or planning to close hundreds of locations across the country. Even United, the proverbial sharpshooting industrialist in healthcare, seems to have misfired with their virtual care ambitions. Then add CVS’s outsized bet with Oak Street that has been a drag on the bottom line while the MinuteClinic strategy is still trying to find its footing. And, finally, throw in Amazon’s “retailization” of the once high flying OneMedical to the mix, and the track record for the retail giants in healthcare is – well – not awesome. 

But hey, there might be something to sooth the indigestion (or hives) on Aisle 3! 

While it’s easy to Monday morning quarterback all these moves, I do think there is a serious issue to be raised. Each of the above efforts was rooted in the “great cause” of trying to get more, and better connected, Primary Care to as many people as possible. These efforts should absolutely be promoted and applauded; and I wouldn’t want any of these “failures” to damage future investment. There will, unfortunately, be some damage where this faltering will negatively impact critical access to affordable care and the notion of a safety net which is an unfortunate outcome. 

The motives of these companies (and other major retailers) to enter Primary Care were partially–I’m sure–based on contributing to building out a stronger Primary Care foundation in the US. There are significant revenue opportunities in the $350bn dollar Primary Care sector, along with a clear shortage of Primary Care services. There was also the hope–I am equally sure–that offering primary care could create follow-on revenue opportunities when co-located inside physical stores. The convenience of receiving care, picking up a prescription, and other medical supplies makes so much sense. The expertise earned running national retail operations at scale is clearly a unique competitive advantage that was certainly factored into their calculus as well. 

Despite the multiple theorems and derivations, and all the competitive advantages, the math for the big retailers never seemed to add up. 

There are likely many reasons for this, but I did find the quote from Forrester Principal Analyst Arielle Trzcinski to be particularly revealing: “Primary Care is often a loss leader for larger health systems [or big box retailers] but serves a critical role as a feeder of patients and customers for specialty care and procedures. Without those higher revenue opportunities, retailers must achieve high levels of adoption and volume to unlock profitability.” Turns out, feeding the patient into a $40K gamma knife procedure makes much more business sense than flipping them to the shampoo and lotion aisle. 

And therein lies the root challenge with healthcare “retailization”. 

When Primary Care is viewed as a secondary means to some other primary end, it’s going to be challenging to make it work. Primary Care is best served “warm”, in the context of a trusted relationship that has been built over time. It’s a people business, with staffing being the largest component, which requires systems, processes, and technology to be smartly harnessed together–with a Service Design mentality–to ensure that each part contributes to a larger, systematic whole. The care model and service experience also have to fit into a rational, sustainable, and viable business model, one that can endure over time and varied economic circumstances. I would argue that this is one of the most critical, and probably most overlooked components of so many Primary Care initiatives–ensuring that there’s a sustainable business model. Primary Care’s role is most definitely not to be the well-intentioned but loss-leading road to hell(th).

The job of Primary Care (and Crossover’s more broadly defined set of services we call Primary Health) is to not only help people get better, but more fundamentally, to keep them well in the first place. Thus, one of Primary Care’s principal responsibilities is to do its utmost to minimize patients’ need to access the secondary and tertiary parts of the health ecosystem at all. We’re not here to “feed the beast” in some underhanded referral arrangement to the high cost local health system; we’re here to slay the health cost dragon through rationalization (lowering the need for referrals), privation (better managing care in lower cost settings), and ultimately starvation (remove the need for specialist care). 

While the imagery may be provocative, the concept of creating a business model whereby Advanced Primary Care can be paid for by redirecting as needed (referral management) and rightsizing as appropriate (care management / focus on health and wellbeing).  I always revert back to the landmark study on Primary Care, the National Academy of Engineering, Science, and Medicine (NAS) on Implementing High Quality Primary Care (“IHQPC”), which spoke to the chronic underinvestment in Primary Care and the serious economic and health implications which result. 

I wonder if the Big Retailers had looked at their Primary Care investments as part of a larger narrative to create foundational Primary Care in the US, would they have looked at these investments and the time horizons differently? Could their investments have been made as part of a broader health infrastructure investment, instead of a retail monetization play? What if they viewed their role as being a catalyst to attract more providers and more capital into the type of high quality Primary Care defined so clearly in the IHQPC report? 

My guess is that this reframing of the investment could have led to their continuing to lead, rather than exit, the story about revitalizing Primary Care in the US.  One thing is for certain, the solution to the Primary Care challenge in the US will not be found on Aisle 3.