4 Questions to Answer on Retail Care Wave

What’s New?

Walgreens Boots Alliance and McLaren Health Care, which operates 14 hospitals, are collaborating on a plan to expand pharmacy and outpatient care services throughout Michigan. McLaren will offer services ranging from retail health clinics to urgent care centers and primary care sites in select Walgreens stores. Also, Walgreens will buy the prescription files and pharmacy inventory assets of McLaren pharmacies in Michigan and certain on-site pharmacies operated by the health system. That will enable McLaren Pharmacy patients and McLaren Health Plan members, including the health system’s employees, to access Walgreens prescription services at any McLaren or Walgreens location.

What’s Going On?

This deal is the latest example of partnerships among large retailers and providers that will enable them to make care delivery more convenient, accessible and affordable. In another example, BayCare Health System in Florida and the Publix grocery store chain plan to launch 26 Walk-In Care telehealth centers at in-store Publix Pharmacy locations by year end. Shoppers can receive nonurgent medical care from BayCare physicians through teleconferencing and diagnostic equipment housed in kiosks at the pharmacy.

Partnerships like these enable hospitals and health systems to serve patients where it’s most convenient for the consumer without incurring significant investments to acquire or build facilities. The deals also enable huge retailers to expand their footprints in health care and enhance their value to consumers. This latter issue is of growing significance as retailers like Walgreens, CVS, Walmart and others move aggressively to build stronger margins through increased pharmacy sales and services by establishing health clinics in their facilities. Walmart has installed health checkup kiosks in thousands of its store and medical clinics in a handful of others. Marcus Osborne, Walmart VP of health and wellness transformation, says the retailer sees a need to create a “true front door for health care that hasn’t existed.” Industry analysts argue these moves are designed to help retailers reshape their business strategy as sales and margins on non-pharmacy product lines soften due to greater market competition.

And retailers are aligning with another willing partner — payers. By expanding into direct ambulatory care services, retailers and insurers can build their businesses beyond traditional lines of service. As HealthLeaders recently noted, the CVS-Aetna merger allows the retailer to broaden its health services focus beyond the 1,100 MinuteClinics they’ve established to concentrate more on leveraging relationships with Aetna’s patients who fill their prescriptions at CVS stores. Walgreens is following suit, looking to provide more physician services such as X-rays and procedures by partnering with UnitedHealth Group’s Optum to connect its MedExpress urgent care centers to adjacent Walgreens stores. In addition, Walgreens and Humana this fall plan to open senior-focused primary care clinics inside drugstores in the Kansas City area, while the insurer is working with Walmart on a primary care partnership. Walgreens also recently announced that it will expand its partnership with LabCorp to open 600 new blood-draw centers in its stores over the next four years.

These more expansive ventures are what Ken Kaufman, managing director and chair of Kaufman, Hall & Associates, calls an attempt by retailers and some payers to “loosen the bolts connecting hospitals with their outpatient services.”

4 Questions to Answer

As Kaufman has emphasized in many of his talks this year about disruption in health care, these new marketplace realities pose critical questions for hospital executives and boards. Here are four he poses to consider:

1. How will we achieve a broad and strong market footprint large enough to advance our organization?
2. How will we compete for limited assets and talent?
3. How will we gain access to a different level of intellectual capital?
4. How will we enhance our cash flow and access to capital?