Most of the current debate over healthcare focuses on which third party will pay for healthcare, instead of focusing on increasing access, improving quality, or decreasing costs for patients. Surprisingly, Walmart has stepped up to help change the conversation by opening a new type of health clinic in one of their stores.
The delivery of high-quality care requires the combination of several components, among them, access to healthcare providers. For those living in impoverished urban or rural areas, access to healthcare providers can be limited. With the closure of 64 rural hospitals between 2013 and 2017, only 82 percent of Americans now live within 10 miles of the nearest hospital.
On the other hand, over 90 percent of Americans live within 10 miles of a Walmart. Walmart has begun the process of rolling out healthcare clinics in stores that would offer patients low cost medical, dental, vision, and mental healthcare.
Walmart’s innovation is to clearly list and compete on prices, something currently missing from the healthcare industry in America. This transparency helps uninsured and low-income patients that are concerned about out of pocket healthcare costs. They currently have prices listed on their website offering $20 flu tests, $30 annual adult checkups, and $45 vision exams. They will be staffed by licensed medical professionals trained to handle a wide array of treatments.
It can feel weird to treat healthcare like just another transaction. For many in the healthcare industry, treating diseases is a form of service for others. Many professionals treat it as a calling rather than just another job—and with people’s health and lives in their hands, that perception is tough to argue. However, consumers shopping around for which services best meets their needs, with both a price and quality comparison, is healthy for competition. Competitive pressure helps incentivize firms to reduce costs, employ new technologies or management techniques, and pass those lower prices on to consumers even as quality improves. This graph from the American Enterprise Institute (AEI) demonstrates how in industries that face stronger competitive pressure, products like automobiles, clothing, TVs, and toys have fallen in price compared to wages, unlike hospital services and medical care which face little price competition.
As the costs of healthcare continue to rise, this transparent pricing will help put downward pressure on prices, now that patients can see them before scheduling an appointment. By removing individuals from the decision-making process through opaque pricing, third-party payers face no pressure to reduce prices for consumers. The bureaucracy of third-party payers adds more people to the payment process, which naturally increases costs as more people are involved in handling the money. While insurance is important for unexpected and expensive procedures, for predicable, routine procedures it simply adds costs. Walmart’s transparent pricing can help fix this.
In healthcare, innovation can take many forms and even new practices that seem impractical to us before implementation can be a valuable test of new management techniques and industrial organization. Countless inventors or business leaders were told their ideas were crazy before they revolutionized their field. Ford laughed at Lee Iacocca’s Minivan idea, and James Dyson was told his idea for a new type of vacuum was ludicrous, but both became incredibly successful.
This experiment by Walmart is a new way to focus on convenient healthcare delivery in a cost-conscious way. Obviously, experimentation in healthcare treatments themselves pose risks for the patient. But rather than experimenting on people, this innovation is an attempt to develop a better method of delivering care. This type of low risk innovation should be encouraged as a means to develop more efficient methods of delivering healthcare.
In addition to helping lower prices, offering healthcare services in a Walmart location could help improve healthcare utilization. How many times have you or your friend gone into a Walmart or Target “just to get one thing” and ended up spending an hour buying things you didn’t come in for? Offering healthcare services in this location could help encourage people who feel a little sick, but wouldn’t make the trip just to the doctor’s office, to stop in for a quick appointment.
Another way that Walmart could encourage healthcare utilization is if their clinics reduced wait times. Long wait times deter patients from scheduling a visit until their symptoms worsen, which can result in serious complications. The expansion of telehealth services provides a poignant example of how more convenient care helps encourage patients to use healthcare services. For instance, when veterans were offered telepsychiatry as an option to treat PTSD, their usage of the services were much greater than when they were forced to schedule a face to face appointment with a psychiatrist during the day.
Walmart’s innovation is not the first of its kind; outside of the U.S., the Narayana hospital system has experienced success with a similar model. Narayana has succeeded by employing different management techniques than those used in the U.S. healthcare system, which has helped them reduce the cost of healthcare services significantly. For instance, a heart bypass surgery that costs $100,000 in the U.S. costs between $1,000-2,000 for Narayana. Like Walmart, they also view medicine as a business, making the prices clear for patients and focusing on reducing costs so that more patients are able to receive medical care.
The thought of low-cost or budget healthcare carries a stigma of low quality to match the reduced price tag. However, when gains in productivity due to innovation are passed on to consumers, lower costs do not translate to lower quality.
By focusing on low, transparent prices, Walmart’s new health clinics have the potential to help slow runaway healthcare costs, which continue to increase. Providing a convenient, low-cost alternative can only help patients. Patients have varying needs, budgets, and locations, and healthcare should reflect that. Walmart’s innovation is a potential welcome disruption that could help bring competition to healthcare, and increase access to the care patients need.