Why is Walmart, which conquered retail as America’s top seller, getting into the health care sector by opening clinics across the country?
The better question, according to Wharton health care management professor emeritus Mark Pauly, is why not?
Health care accounts for 18% of gross domestic product, making it a substantial part of the economy. And the sector hasn’t been reformed or reorganized in 50 years, Pauly said, “so why not give it a shot.”
“To a lot of big companies, Amazon as well as Walmart, this looks like a lot of low-hanging fruit,” he said to Wharton Business Daily on SiriusXM. “Walmart has had success in moving away from its original focus on low-priced clothing and things like that to becoming the No. 1 retailer of groceries in the U.S. If you can do it for potato chips, why can’t you do it for knee replacements?”
Why Walmart Urgent Care?
The professor admits to a bit of facetiousness, saying health care is certainly more complicated than selling socks. Insurance coverage alone makes the provision of service far from a straightforward supply-and-demand affair. But Walmart’s strategy seems to be built on its branding of convenience. Earlier this year, the company announced plans to build a total of 77 health centers across the country by 2024; it currently operates 32.
“They seem to imagine you go out on a Saturday to buy some socks, and you decide to stop by for a shingles vaccine,” Pauly said. “They are setting up something that is very similar to the urgent care centers or retail clinics that already blanket the U.S. Walmart apparently intends to move into the market for episodic primary care.”
“They seem to imagine you go out on a Saturday to buy some socks, and you decide to stop by for a shingles vaccine.”— Mark Pauly
The problem with that strategy is that primary care is not that lucrative for a profit-driven enterprise like Walmart, Pauly said. He said the “big money” in health care is in surgical procedures, some diagnostic procedures, and long-term care for chronic conditions such as heart disease and diabetes.
“That seems to be a little bit trickier because they’re not really set up for continuity of care,” he said. “They appear to be more interested in displacing the place in your neighborhood where you would go if you have a splinter you can’t get out or a rash that doesn’t seem to be going away.”
Walmart Urgent Care Could Succeed — With the Right Niche
Pauly isn’t discounting the possibility that Walmart will find a way to provide quality, long-term care, yet the company has a number of hurdles to get there. Providing adequate staffing is just one of them.
Walmart is well-known for cutting costs through reduced staffing, an approach that would be disastrous in health care, Pauly said. Health care is both labor intensive and requires specialized training, he said, neither of which comes cheap. There’s no self-checkout line for a broken arm.
“A cost-cutting strategy by hiring lower-paid workers doesn’t seem too plausible,” he said.
Pauly said Walmart will need to integrate convenience with coordinated care that treats patients as individuals. “That’s a bit hard to see how that would work in a mass-production setting like Walmart, but maybe they could do it.”
He said Walmart’s greatest success in the health care space will likely be driving out the competition. Other urgent care centers and clinics will be “easy pickings” for Walmart because of its branding, convenience, and economies of scale.
“It’s very complicated to make an appointment with your regular health care system, which is not set up very well to deal with episodic care,” he said. “That may be the niche that they target, which could be a useful adjunct to auto repair and the other kinds of things that Walmart is good for. You can get your oil changed and your fluids changed at the same time.”