Historically, healthcare hasn’t necessarily viewed patients as consumers—but perhaps that viewpoint is changing, as big-time retailers like CVS, Walgreens, Target, and Amazon.com explore the benefits of devoting greater resources to the healthcare industry.
Blending retail and healthcare isn’t a new concept. For decades, Sears offered in-store optical and dental services. Target added in-store pharmacies in the early 2000s, and in 2016, CVS paid $1.9 billion to acquire the Target Pharmacy business. Walmart also participates in the CVS Caremark program; Walmart and its owned and operated Sam’s Club feature on-site optometrists.
Do retail and healthcare have many similarities?
On the surface, it would appear that healthcare and retail share few commonalities. Rules and regulations govern the healthcare, whereas retail operates with much less oversight. Healthcare organizations deal with significant risk and considerable failure costs. But retail has also suffered recent, significant declines in its brick-and-mortar stores. Current shopping trends have driven a large number of stores to close as consumer behavior relies more heavily on online shopping. In fact, store closures surpassed an earlier 105 million ft2 record in 2018. Meanwhile, mergers and acquisitions among healthcare organizations continue to change the landscape.
Both industries are at a crossroads and face similar challenges:
- Enhancing their brands
- Growing their revenue
- Delivering what consumers want
- Embracing technology to enhance operational effectiveness
Whereas competition among retailers is driven by price and quality, competition among healthcare providers—and health insurance—is determined by price, value, and outcomes. Retail clinics have redefined how consumers shop for and access services, where they spend their dollars, and how they choose the services they need.
A report by Oliver Wyman confirms that as consumers build personal markets and make multiple in-year healthcare decisions, retail marketplaces have moved healthcare away from B2B and towards B2C.
The profile of healthcare consumers has also evolved. More consumers are price sensitive, technologically savvy, and interested in convenience. Other findings of a 2017 report, A Consumer Survey of US Healthcare, indicated that:
- More segments are open-minded about paying more for additional services.
- Millennials—now the nation’s largest generation—are most interested in new healthcare offers.
- Millennials expect to engage with the healthcare system in more routine ways, not just crisis situations, and want health and wellness services that incorporate easily into everyday life.
The patient-as-consumer dynamic is pressuring insurers and healthcare providers to improve transparency, offer more flexibility and choice, and make available more detailed information so that the consumers can make better-informed decisions about their care.
Institutional investors like private equity firms, hedge funds, and venture capitalists have been investing significantly in the healthcare industry—about $50 billion in total transactions—according to a report from McKinsey & Company. Total deals grew from 225 in 2012 to 510 in 2017, a compound annual growth rate of 18%. Investors see the fragmentation within the industry as offering many opportunities to invest—especially as healthcare spending increases about 6% each year.
The report identified several key areas investors are targeting:
- Consumer-driven healthcare services
- Alternative sites of healthcare, like retail care, home care, and telehealth
- Medical management such as clinical decision support tools
- Technology-based payment solutions
Like retail giants, investors see value in continuing healthcare’s transformation to a service industry that increases automation, shifts post-acute care to the home, digitalizes chronic disease management, and moves lower-risk elective services out of hospitals.
A shopper’s approach to healthcare
Consider a new service—HealthHub®—launched by CVS after acquiring Aetna in November 2018. The company’s plan? To simplify the patient healthcare experience by putting the patient at the center of their health care delivery. Currently, CVS is piloting three HealthHub® locations in Houston that offer a range of healthcare services, personalized care, advice, new product categories, and digital tools. Similar to the pharmacy giant’s MinuteClinic services, this new service elevates healthcare to the next level by establishing a health care model that provides a better consumer experience.
Walgreens has partnered with Village MD to operate primary-care clinics—the Village Medical at Walgreens—which will pilot near five Houston stores by the end of 2019. These clinics will provide comprehensive primary care services and offer healthcare teams comprised of pharmacists, nurses, and social workers.
These two retailers have applied the shopping mentality to healthcare and created a health-and-wellness ecosystem.
What might the future look like?
Past collaborations that blend healthcare services with large retailers have worked well enough that the future may see more innovative partnerships. Both industries could benefit from outside-the-box thinking.
While more malls find themselves replacing retail space with healthcare “businesses,” the model might not be sustainable. Sprawling parking lots and immense open spaces present their own problems for the elderly or those who with significant health problems. Some real estate developers have begun to shift their focus from malls to comprehensive lifestyle centers, like Easton Town Center, in Columbus, Ohio. Mixed-use properties—some of which include museum experiences, retail and office space, green space, and residences—could support wellness centers, clinics, and specialty care providers. The potential is endless.
Consider the “shopping experience” offered by the typical hospital—it’s most likely a gift shop with magazines, balloons, cards, and stuffed animals. Perhaps a florist or bookstore has a storefront, too, but the options are usually quite limited. When healthcare systems consider the financial benefits of including a more diverse mix of retailers—toy stores, maternity clothing, fitness brands, a tech store—they open up the possibilities of generating more revenue from the regular, guaranteed foot traffic of hospital staff, patients, and visitors.
Retailers struggling to maintain brick-and-mortar stores could benefit from renting space within the hospitals, too. A brand can test new formats or experiences, shrink a store footprint to save costs, or test a kiosk or pop-up on a medical campus—all with a captive audience readily available.
Customer-based strategies that retail can teach to healthcare
The tool boxes of successful retail brands include customer-centric service, interaction, and engagement. When healthcare providers and systems apply these principles to the services they provide, they’re better able to engage and serve current populations and expand their reach.
The healthcare industry can learn a lot from retail:
- In both sectors, people have choices. With the plethora of healthcare campuses and providers, consumers—especially the millennial generation—are willing to take the time to research the best choice for their needs.
- Each sector depends on technology. The omini-channel user experience has integrated technology into everyday lives. Kaiser Permanente adopted a telemedicine model to provide a more convenient, seamless patient experience.
- Rewards programs. Fitbit offers badges and rewards for completing tasks. And it’s not the only wearable that offers gamifying experiences. CareFirst BlueCross BlueShield has Blue Rewards, a program that rewards patients up to $600 for taking a more active role in their health care. Humana’s Go365 program offers extrinsic rewards including gift cards and fitness-related electronics.
- Retailers track everything—from web traffic to social media, the brands seek and analyze all available customer data. Healthcare systems use qualitative and quantitative studies to find and analyze patient insights—and then apply them to drive improvement that boosts patient experience and satisfaction.
One thing is certain: consumers want a higher-quality healthcare experience at the best available price because currently, the system isn’t working as well as it could—or should—for many people. The retail industry offers a wealth of insight and ideas with potential to inspire innovation in how the healthcare industry serves its customers.