In the opening pages of Leading the Revolution, Gary Hamil invites readers to conduct a thought experiment on business innovation. “Which group has taken best advantages of all the changes that have taken place over the last decade or so: political, economic, social or technical”, he asks; “traditional players or newcomers”? Most instinctively realize that the evidence suggests “newcomers”. He then asks if these newcomers prevailed by “executing better on traditional rules of engagement or creating new ones”? You see where this is going, I’m sure. Industries change from the outside; health care is not exempt.
Several months ago I posted on healthcare’s changing ecosystem. The precipitating event was the chance to get up close and personal with the hundreds of mobility devices coming into health care from outside the industry: smart band-aids, smart pill bottles, fashion forward monitors, etc. The big news was not just the devices, but the analytics they made possible.
Now we’ve gotten a peek at an even more revolutionary incursion from retail as Wal-Mart sent out a nationwide
request for partners to help it “dramatically … lower the cost of healthcare … by becoming the largest provider of primary healthcare services in the nation.” In a 14 page RFP, the company asks firms as diverse as Kaiser and DaVita to spell out their expertise and to provide information on how they would oversee patients with complicated chronic conditions like asthma, HIV, arthritis, depression and sleep apnea. Partners are to be selected in January. The company declined to elaborate on specifics, calling it simply an effort to determine “strategic next steps.”
I’ve seen this play. I was involved in pharmaceutical distribution strategy when Wal-Mart set this Big Hairy Audacious Goal of providing retail pharmacy services at mail-order costs. Think of all the traditional retailer expenses that would have to go away to accomplish that. Try to imagine the value chain that might make that possible. Yet within three years, the company was offering generic drugs at $4 for a month’s supply. Its low-cost pharmacy has become hugely popular with employers and seniors. It’s not a far stretch to see Wal-Mart exercising its massive purchasing power to medical supplies, diabetes test strips or even durable medical equipment. Whatever shape the move takes, it will capitalize on the growing demand for primary care likely to surge beyond 2014.
As you might expect, there was no shortage of detractors. Analysts suggested that this RFP amounts to conceding defeat and rooting around proposals for answers. Wal-Mart was the nation’s leader in opening clinics, but with a footprint of 140 has dropped to third place, well behind CVS Caremark’s 550 Minute Clinics and Walgreens’ 355 Take Care clinics.
Physicians have been critics of in-store clinics, arguing that patients need a regular source of care from someone who knows their medical history. They would argue that retail health care takes “care” in the wrong direction through further fragmentation. Health policy mavens concede that Wal-Mart can deliver “stuff” more cheaply but caution that health care is not a widget. They also argue that primary care isn’t really the main driver of costs, so doubt any retail move can “bend the trend”.
Hmmmm. Anybody remember what the Swiss watch makers thought about the Timex?
My guess is that Wal-Mart is discovering its way toward a new business model. They can’t look at their 3,500 US stores along the 17% of GDP committed to health care and sit this one out. Only a fool would bet on traditional players with traditional rules of engagement. Expect the 5.1 upgrade on the “doc-in-the-box”. More to come
{ 1 comment }
Loading ...
