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Pamela J. Gallager, Principal, Gallaghers Resulting

Retail newcomers are great for healthcare, but bad for health systems

By Pamela J. Gallagher
Gallaghers Resulting

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Original Publish Date: November 3, 2020

Patients have been begging for affordability for decades, and the healthcare industry’s reluctance to innovate and adapt to patient demands has left a door open for retailers to move into the healthcare business. I believe this will be great for healthcare, but potentially disastrous for health systems.

As retailers like Walmart, Amazon, and Best Buy have forayed into the healthcare space, they have done so with a focus on inexpensive, reliable products with a strong emphasis on well care and prevention.

In line with their corporate mission to “save people money so they can live better,” Walmart has created a “healthcare supercenter” that offers the basic needs for patient health: primary care, dental, behavioral health, x-rays, optometry, audiology and pharmacy. Their pricing model seeks to reduce overall healthcare costs for the consumer, made possible in part by their low administrative costs due to customers paying cash without having to negotiate with insurance companies.

Tech retail giant Best Buy created a “laser-focused strategy on digital health initiatives, moving from selling devices to adding analytics and services to help seniors age in place offering healthcare services in the home,” according to a recent Forbes article.

Retailers entering into the healthcare space having a different business focus than hospitals and health systems. They make money, not from illness or sick care, but only if their employees and customers are healthy. This is creating the right incentives for patients and retailers alike, and will continue to reduce their customers’ healthcare costs in the future, putting hospitals on notice.

“Business” is often considered a dirty word in healthcare, but if health systems are going to have a role in shaping the industry as it continues to evolve, it’s time to evaluate our work through a business lens.

When hospitals look to increase revenue, they too easily gravitate toward adding more beds or expanding their services. Some hospitals focus on bettering their patient experience. According to Gurpreet Singh, a partner with PricewaterhouseCoopers and the leader of its health services segment, “five years ago about 25% to 30% of health systems had chief patient experience officers. Now, that number is 60%.”

But an industry focused on sick care has not produced the desired health outcomes for our patients or our bottom line. Communities will always need hospitals, but I believe it’s time for hospitals and health systems to consider what they can uniquely and specifically offer. Over-extending ourselves to remain competitive will not result in responding to the demands of our consumers to reduce overall healthcare costs.

COVID-19 has shown the adaptability of the healthcare industry, collaborating with government and flexing up services quickly where needed. Health systems need to continue in that innovation mindset as they consider their role in the future of the industry.

A few things for health systems and hospitals to consider: