Walmart makes reducing healthcare costs a top priority—for customers, too

Oct. 12, 2018

Walmart is looking for ways to reduce healthcare costs—for its customers in addition to its employees—as the nation’s largest employer and retailer makes it a top priority this year.

Insuring its 2.2 million workers across the world is the company’s second-largest expense on its profit and loss statement, behind wages, company executive Lori Flees said this week at the Manova Summit in Minneapolis.

Rising health costs are also cutting into its potential sales, she said, because customers have to spend more of their income on medicine and doctor’s visits than on backpacks and home goods. Walmart customers will need to spend an estimated $750 billion more on out-of-pocket healthcare costs in five years than they do today, compared with $250 billion in additional estimated spending on retail goods, Flees said.

Retailers are searching for ways to differentiate their stores as consumers increasingly shop online. Some of them are teaming up with pharmacy companies, adding health clinics, and expanding drug aisles to draw more customers into the stores. Meanwhile, health expenses are rising at a rapid clip, pressuring both employers and employees.

Walmart’s competitors are also investing in healthcare. CVS Health wants to add more options at its retail clinics, known as MinuteClinics, once it closes its acquisition of health insurer Aetna. Walgreens is testing a number of partnerships, including one with UnitedHealth Group to add urgent care centers to some drugstores.

Walmart earlier this year was looking to deepen its partnership with Humana, people familiar with the matter told CNBC. Flees said partnerships are “an essential part” of the strategy to lower the cost of healthcare and to improve the health of the country.

Americans worry more about the availability and affordability of healthcare than other issues, including crime, homelessness, and illegal immigration, according to a Gallup poll conducted this year. When you dig deeper, Flees said, you find about 67% of households are concerned about access and quality of healthcare.

Walmart views itself as uniquely positioned to address Americans’ health needs. Those households typically are in either suburban or rural areas where necessary care is not as good as in urban areas and tend to earn less than $75,000 per year, she said. Walmart’s core shoppers tend to be in both of those demographics, Flees said.

Walmart can make healthcare more affordable, accessible, personalized, and transparent, Flees said. She pointed to Walmart’s decision in 2006 to slash the price of some generic drugs to $4. This helped people without insurance afford prescription medications, she said.

Currently, Walmart operates 17 health clinics, according a spokeswoman. The retailer also offers pharmacies, vision centers, and hosts screening events. Walmart partners with health plans, including Humana, to encourage people to buy healthier foods at Walmart, which is also the nation’s largest grocer.

As an employer, Walmart directly contracts with providers for its Centers of Excellence program. Walmart pays for associates to visit world-renowned centers like the Mayo Clinic and the Cleveland Clinic for some conditions and procedures.

CNBC has the full story

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