THE BLOG

Wal-Mart and the Future of Healthcare

Apr 25, 2009 | Updated May 25, 2011

I gave a speech at a healthcare association last week, and the main topic of questions directed to me concerned the announcement that Wal-Mart will be selling an Electronic Health Records (EHR) software package to physicians at Sam's Club. Priced at $25,000 the EHR system is priced at half the cost of competing systems. The other EHR vendors at the conference were pulling their hair out. The physicians were loving the fact they could save over $20,000. Sounds like Wal-Mart, doesn't it?

Wal-Mart is poised to become one of the largest forces in American healthcare. Ironically, they have formally partnered with the SEIU in trying to address the issue after withstanding withering criticism from the union for years on healthcare issues such as employees depending on Medicaid for their healthcare. In 2006 Wal-Mart identified healthcare related issues as a priority, as a tactical PR move, but principally as a way to control healthcare costs both inside and outside the company. Their efforts are beginning to now come to fruition, and I believe they'll affect us all.

The first move Wal-Mart made was the shot across the bow of prescription drugs when they lowered the price of hundreds of generics to $4. What then happened? Everyone from Rite Aid to Kroger followed their lead. Wal-Mart's customers have saved $1 billion on prescriptions since this happened. But note nobody lowered their prices until Wal-Mart did.

Wal-Mart is planning to open 400 health clinics in stores over the next few years. Why wouldn't they? 130 million people come through their doors every week. They already have the physical space. Wal-Mart will charge around $55 for a visit. Hospital executives around the country I've talked to welcome this because it will relieve the pressure on their ER's to take care of colds, scraped knees and other minor issues. Nurse practitioners are ecstatic because the clinics will be staffed by NPs, creating thousands of new jobs in their field and raising their profile.

It sounded a bit silly a few years back when Wal-Mart opened optometry centers in their stores. Get your eyes checked at the same place you get tires and VapoRub? According to Carol M. Lazo, principal of Method Consulting, more than 13,000 people now work in these centers, and 6 million Americans rely on them for vision care.

I often state that Wal-Mart is not a store, it is an Information Technology company. Their servers in Arkansas have the capacity to store everything on the internet two times over. It is in the area of electronic health records where they may have the most impact, through EHR software sales and applying EHR standards to millions of future customers in their health clinics. If it were king of Wal-Mart, I'd go ahead and store a patient's records on their Wal-Mart Money Card. Why not?

WalMart may also become the largest referrer of medical care in the nation, by sending patients in their clinics to physicians when those patients have more serious healthcare needs. Ask a doctor, referrals are the lifeblood of a medical practice.

In 1990 Wal-Mart hardly sold groceries at all. By 2003, by applying scale and IT to the industry, they were America's largest grocer. They apply these same assets to other industries. Wal-Mart is entering the convenience store market in a big way. They are essentially the record label for the Eagles and AC/DC. They decided the HD-DVD/BluRay battle, and may become the nation's largest electronics retailer. Shopped at a Circuit City lately? Thought not.

Wal-Mart does not always succeed however. They tried to emulate Netflix with a DVD rental-by-mail program and failed when it seemed they had all the assets to dominate. They opened stores in Germany, and then closed them and left the country. My theory for this failure is that Germans don't quite understand greeters.

But in healthcare I think through sheer scale they'll prevail, and change the landscape of the industry as a healthcare "black swan." The 3 characteristics of a Nassim Taleb black swan event are 1) it is unexpected, 2) it changes everything and 3) it can be explained in hindsight. Wal-Mart's healthcare effort fits these criteria, especially the second. It will change everything. The iPod black-swanned the music industry. Craigslist black-swanned newspapers. Twitter is black-swanning Facebook as we speak. In much the same way, WalMart will unexpectedly be a black swan in the future of healthcare. Just ask the SEIU.