Why big-box retailers want to be one-stop shops for health services

The market is big: According to Grand View Research, the U.S. retail clinic market, which was valued at $1.4 billion in 2016 is expected to grow to $7.3 billion by 2025. And as stores face competition online, figuring out new ways to drive traffic has become critical. Retailers are recognizing that medical services, like other in-store advisory offerings like specialized technical support, can be important traffic and revenue drivers. There’s growing urgency as well: Amazon is breathing down their necks, having shown interests in health and wellness, through its acquisition of online pharmacy PillPack in June and its joint venture with JPMorgan and Berkshire Hathaway to create a new entity to tackle employer-run healthcare. So big-box retailers, including Walmart, want to use retail clinics as a means to drive traffic and create new revenue streams while Amazon continues to add competitive pressure.

The push from the industry for clinics in retail stores
As health insurers encourage patients to look after non-urgent health needs outside of hospitals, retailers see an opportunity. Insurers are increasingly reimbursing for lower-cost services outside of emergency rooms — a boon for retail clinics looking to grow market share.

“Twenty years ago, insurers had a very traditional view of what was reimbursable, including hospitals, emergency outpatient specialty offices and primary care practitioners — they weren’t reimbursing for retail clinics,” said Jeff Becker, senior analyst at Forrester Research, who studies the healthcare industry. “In lockstep with health insurers’ desire to reduce the cost of care, retail clinics became reimbursable, and suddenly, everyone wants retail clinics as part of their floor plan, so you can have CVS, Walmart, Walgreens all moving forward with retail clinic strategies.”

Walmart, which also has an in-store pharmacy, has a network of in-store clinics across Georgia, South Carolina and Texas, vision care, diabetes care, and a “Wellness Day” four times a year where customers can get free health screenings at all store locations. In an email, a company spokeswoman said Walmart’s healthcare offerings are aimed at making healthcare and healthier food more affordable, with an emphasis on preventative care.

The retailer has also taken additional steps to get closer to health insurers this past year, including a partnership with health insurer Anthem, launched in August, to improve over-the-counter drug access for seniors, and reports of early-stage acquisition talks with Humana, a health insurance company, in March.

Becker said Walmart and other retailers have an incentive to add medical services since it’s another revenue stream for the physical store and can grow foot traffic.

“There’s a very low barrier to setting up a retail clinic,” he said. “Hire a mid-level physician assistant or nurse practitioner, clean out an unused room, and start billing insurers — it’s a very profitable use of that floor space.”

According to a 2016 Oliver Wyman survey, consumers are becoming more open to retail as a point of healthcare delivery, and customers who regularly shop at a retail store are more willing to receive health services at that location. Seventy-nine percent of those surveyed found the experience “the same or better” when compared to a traditional healthcare setting. But while retailers tout convenient, lower-cost services at retail clinics, they don’t always bring down individuals’ overall healthcare spending, since customers still go emergency rooms and retail clinics can increase utilization, according to a recent Rand study. Clinics also bring a reputation risk to the brand if services aren’t delivered effectively and efficiently, or if clinics actually turn off consumers.

“For any of these initiatives, the risks would be on the shopper front: Can you live up to and [still] deliver the experience the shopper would want as they walk through the door? They want to make sure they don’t alienate the shopper,” said Bryan Archambault, chief marketing officer of WPP-owned Greyhealth Group.

The industry responds
Rather than see the retail wave as a threat to the traditional model, retail clinics may open opportunities for partnerships with traditional providers. Christopher Cornue, chief strategy and innovation officer of Georgia-based health provider Navicent Health, said traditional providers should see the growth of retail-based clinics as a sign customers want health services to be delivered in a way that fits with the patterns of their daily lives, including those who don’t have a primary care doctor.

“Consumers want better access, more convenience at their own demands, as opposed to having to enter the healthcare system at the demands of the system — it’s something that needs to change,” he said.

Direct-to-consumer brands like Hims, Warby Parker and The Pill Club are also responding to customer needs for digital-first, efficiently delivered health and wellness services, driving new attention and venture funding to the space by rethinking how people get prescription medicine.

Activity is sure to escalate. The growth of retail clinics opens up opportunities for traditional providers to partner with retailers where necessary to better meet customers where they are.

“If we can’t do it ourselves, others are going to need to,” Cornue said. “This creates the opportunity for us to pay attention to what’s coming at us from a disruption perspective and be able to recognize that it’s going to change our business or clinical model, or if we have the opportunity to partner with them to create the solutions we need.”