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Healthcare is tough — a notion reinforced this week when Walmart (NYSE: WMT) announced the abandonment of its previously grand healthcare ambitions.
There may come a day when the nation’s largest retailers, including Walmart, become major players in home care, but today is not that day. And other recent developments suggest that tomorrow won’t be the case either.
Over the past half-decade, retailers like Walgreens Boots Alliance (Nasdaq: WBA), CVS Health (NYSE: CVS), Amazon (Nasdaq: AMZN), Walmart and Best Buy (NYSE: BBY) have jumped headfirst into home health care.
Each company tried an entry into some form of home health care and then responded quickly. One initiative after another was announced.
But Walmart and Amazon — two of the most powerful and largest companies in the U.S. — have already pulled out.
Walmart first partnered with home health provider Amedisys Inc. (Nasdaq: AMED) in 2019, the same year the company opened its Walmart Health Centers, with a plan to make home care easier for customers to access and a more meaningful role to play in the elderly health travel of Americans.
“We want to support people as they stay at home and age in place,” Marcus Osborne, senior vice president of Walmart Health, said in 2021. “We also want to address social isolation and … what role Technology plays there.”
On Tuesday, Walmart announced the closure of its 51 health centers and virtual care services.
“Back in 2019, we opened Walmart Health Centers,” Walmart wrote in a company statement. “Throughout our five-year journey, we have made a meaningful impact on patients while continuing to learn, change and evolve. While our mission to help people save money and live better lives remains, today we are announcing the difficult decision to close Walmart Health and Walmart Health Virtual Care.”
Amazon, meanwhile, conceded in 2022. The company promoted “Amazon Care” as a disruptive healthcare platform that would enable home and virtual care services for patients, but quickly changed course. Shortly thereafter, the decision was made to purchase the primary care platform One Medical.
In light of Walmart’s exit, it’s worth taking stock of retailers’ arms race into home care.
In this week’s exclusive, members-only HHCN+ update, I dive into:
– A quick update on the history of retailers engaged in healthcare services
– Which retailer(s) are most likely to be successful in the long term?
– And what this all means for traditional home care providers
From disruptions to table stakes and closures
In December 2021, I wrote that retailers were on a mission to revolutionize home care. Before long, each retailer’s plans became crystal clear. The following September, I wrote that home care had become an important issue for these retailers.
That’s when home care leaders began thinking about what the business would look like once these retailers got involved.
Broadly speaking, I would divide their thought processes into three distinct camps: The first was the genuine concern that these companies would disrupt traditional home health and home care models; The second was a lack of concern, more intrigue and some thinking about partnership possibilities. The third was more of a rejection of this trend and an assurance that health care was and would remain local and intimate.
It’s still early in the game, but for now I’d say the latter camps are closer to correction.
Best Buy has taken a slower and steadier approach to its entry, aiming to elevate home care — and especially hospital home care — through its capabilities. It has formed some impressive partnerships with health systems such as Mass General Brigham, Geisinger, Atrium Health and others.
Through home care technology company Current Health — which Best Buy acquired in 2021 — and its existing capabilities (like Geek Squad), Best Buy has sought to bring more care to home care. But the goal wasn’t necessarily to disrupt the space in the future.
CVS Health and Walgreens, on the other hand, have really shifted their company-wide strategies to focus on the capabilities of healthcare providers. CVS Health has CVS Healthspire and Walgreens has its US healthcare segment, both of which include primary care and home care services.
With CVS Health’s acquisition of Oak Street Health and Signify Health, as well as Walgreens’ support of VillageMD and its acquisition of CareCentrix, both companies have completed the three-piece puzzle that companies across the country are trying to achieve.
This puzzle: pharmacy, primary care and home care.
Humana Inc. (NYSE: HUM) and UnitedHealth Group’s Optum (NYSE: UNH) have taken similar paths.
CVS Health and Walgreens were able to vaccinate hundreds of millions of Americans in 2021 and 2022. As vaccinations slowed, a revenue gap had to be filled. At the same time, a simultaneous enlightenment emerged.
Both companies recognized that Americans trusted them with their health care and that health services would be a logical path as retail stores became less profitable.
While Best Buy has been on a slow recovery — and Amazon and Walmart have been in and out — CVS Health and Walgreens have most of their proverbial eggs in one basket.
The CVS Healthspire and US Healthcare segments got off to a slow start, but after spending more than $18 billion and nearly $7 billion, respectively, on these initiatives, CVS Health and Walgreens have no choice but to stay the course .
The dirty work
Home care in particular is a difficult undertaking. Yes, there is an overwhelming demand for this type of care, a demand that will only increase in the future.
But there is an equal need for staff, a lot of logistics to manage, and acceptance and trust to gain.
Neither CVS Health nor Walgreens has yet acquired a pure-play home care or home care product, but many saw this as a logical next step. However, building a successful healthcare provider has so far been a difficult task for both of them.
Since Walgreens committed to its transformation, the company has already encountered significant problems. Former Walgreens CEO Roz Brewer was replaced by Tim Wentworth, a more experienced healthcare veteran.
In March, the company announced it was conducting a strategic review of its assets. John Driscoll – the former CEO of health-at-home technology platform CareCentrix – has been replaced as head of the US healthcare segment.
“We are now looking at the full portfolio of assets available to us to ensure everything we have is driving the growth we seek,” Wentworth said in March. “This doesn’t just happen overnight. Broadly speaking, it will probably take a few years for the broader questions we need to answer to really come to fruition.”
CVS Health is now in the same boat, cutting its profit outlook amid its own shift this week. CVS Healthspire generated revenue of about $40 billion in the first quarter, down nearly 10% from a year earlier.
As Wentworth said, these things don’t happen overnight. And like Walgreens, CVS Health isn’t backing down. At this point this is not possible.
“Between Signify and some of the capabilities that we have at Oak Street, there are a lot of market capabilities that we need to really transform the health trajectory of patients, whether that’s getting readmitted to the hospital or treating your most complex chronic disease patients,” said CVS Health CFO Tom Cowhey on Wednesday at the company’s first-quarter earnings call. “We have the resources, we have the program, we have the know-how, … and so I think both Signify and Oak Street will have a lot to say in the coming years about how we can really drive those costs down.”
Year-over-year, Walgreens shares are down nearly 50%. CVS Health stock is down about 25% after a sharp decline following its results.
What’s next
In its statement this week, Walmart was open about its decision to close all 51 health centers in five states.
“Based on our experience managing Walmart Health centers and Walmart Health Virtual Care, we determined that there was no sustainable business model with which to proceed,” the company noted.
Even though Walmart and Amazon are losers due to losses, it is still difficult to pick a winner.
While CVS Health and Walgreens regret the shift toward healthcare services, as noted above, it is now too late to turn back.
It’s possible that a Hail Mary acquisition could happen in the future, but for now it’s likely that these companies are just trying to get to the other side of the turmoil.
However, one key difference remains between Walgreens, Walmart, Amazon and CVS Health. The latter owns Aetna, one of the largest healthcare payers in the country. In fact, one side of the house controls the lifeblood of every healthcare company: payment/reimbursement.
In the meantime, CVS Health can highlight all the benefits Signify Health’s home visits have for Aetna members, as well as all the primary care referrals the company has turned over to Oak Street Health.
CVS Health’s ultimate goal is to achieve maximum synergies between its pharmacy, Signify Health, Oak Street Health and Aetna. This will also take some time, but positive signs will likely appear sooner.
There may also be an opportunity for home care providers to intervene. The legacy local providers have capabilities that CVS Health and Walgreens do not yet have.
“We don’t do that [yet work with those providers]” Paymon Farazi, president of Signify Health, told HHCN last month. “But this is possible through the Care Coordination Pathways product. There is nothing stopping us from doing this other than discussions with our health insurance partners and these entities to ensure this is enabled. I have had partnership discussions with various home health providers. And as we move into 2024, we will begin to explore more of this.”
Instead of CVS Health and Walgreens revolutionizing home care, they could be the biggest and newest partners in a growing industry.
All in all, this is the best-case scenario for legacy home care providers.