Host:
Welcome to Insight Exchange, presented by L.E.K. Consulting, a global strategy consultancy that helps business leaders seize competitive advantage and amplify growth. Insight Exchange is our forum dedicated to the free, open, and unbiased exchange of the insights and ideas that are driving business into the future. We exchange insights with the brightest minds of the day, the most daring innovators and the doers who are right now rebuilding the world around us.
Noor Abdel-Samed:
Rapid changes in the health and wellness marketplace are being driven by evolving consumer needs, new product innovation and competition from new entrant in this market. Today we discussed a new and effective strategy needed to make the difference between survival and success in the health and wellness space. Hello everyone. I'm Noor Abdel-Samed, a managing director at L.E.K. Consulting Boston office, and the head of the consumer healthcare practice. Today we are joined by Kevin Grabenstatter, Todd Clark and Joe Johnson to look at changes in the health and wellness marketplace. Would you all please take a moment to introduce yourselves?
Todd Clark:
Sure thing. Hi, this is Todd Clark and I'm a managing director in L.E.K. Consulting San Francisco office. I lead the healthcare IT practice and advise physician and hospital clients as well. Apropos to this discussion, I also spent more than a decade of my career consulting to and working for retail, CPG and restaurant companies. So I draw perspective from both the retail and healthcare arenas as well.
Kevin Grabenstatter:
This is Kevin Grabenstatter, partner, L.E.K. San Francisco, and head of L.E.K.'s North America Provider Practice. I work with a specialization across the care delivery system in US healthcare, and I've got a particular interest in disruptive trends, like the ones we're going to talk about today.
Joe Johnson:
And this is Joe Johnson, managing director based out of New York. I lead our healthcare services practice here at L.E.K.. Working across payers, providers, and healthcare IT companies.
Noor Abdel-Samed:
Thank you, Joe, Todd, and Kevin. Looking forward to your insights. Let's start with some context here. We've witnessed significant moves by retail companies into the healthcare domain. Walmart's acquisition of care clinic and partnership with the United CVS's expansion of MinuteClinic and primary care and acquisition of Signify, and Amazon's acquisition of One Medical. These investments by retail giants signal a massive shift for the overall healthcare ecosystem and an attempt to consumerize healthcare. How are the investments being made now with the likes of Walmart, CVS and Amazon different from what they've already done in healthcare? For example, many of them have already offered audiology or optometry services for years. What makes this new push different? Kevin?
Kevin Grabenstatter:
Well, Noor, I think what's different about these trends, and particularly some of the recent partnerships and acquisitions that you just mentioned, as it starts to move these retail organizations traditionally, perhaps outside of the core US healthcare delivery system, right into the white hot core. Where we're talking about managing difficult populations, perhaps, around their holistic care. Primary care led primarily, but also new ways to leverage access points and technology to perhaps change the game. In my view, I think it is exactly the type of consumer mindset, retail mindset that organizations like Amazon, Walmart, and others can bring to healthcare, which could be truly disruptive here. This is what the industry has been missing for many decades and it is the place where healthcare is most behind other aspects of the consumer experience for the average American. So it'll be exciting to see how this all develops.
Noor Abdel-Samed:
So on that line, what are some of the capabilities that these retail players bring into the healthcare ecosystem? It was great to hear about what they're interested in and what they're going after, but what's going to enable these retail players to make these investments profitable and ultimately offer a better or more compelling experience to customers and patients?
Todd Clark:
Yeah, Noor, I can start off here. Retailers bring important capabilities in terms of category management and customer engagement. One of the more important opportunity areas that we see across providers and payers is patient and member engagement. And retailers operate in a lower margin arena often, where they need to offer a portfolio of services that appeal to their customers. They have closed loop systems that allow them to evaluate their approach to service and products to optimize performance. And I think that that mindset will allow some of these new entrants to generate outsized returns by iterating through different approaches and finding the ones that resonate the most with their appropriate customer bases.
Noor Abdel-Samed:
What are some risks that you foresee due to this influx of retailers into the healthcare market? Specifically, are there more or likely risks around patients' data privacy and or usage of this patient data by retailers?
Joe Johnson:
Yeah, this is Joe here. As Todd was just mentioning, retailers are accustomed to leveraging reams and reams of point of sale customer data and have gotten increasingly sophisticated with customer engagement, particularly around things like prescription fills. So having said that, with a growing footprint in medical care beyond just pharmacy, retailers will need to continue to comply with HIPAA guidelines, giving that they will be dealing with additional protected health information or PHI. So what this means is that it will require additional firewalls and safeguards around who has access to that patient data and for what purposes. And I do think this will lead to additional investment in electronic health record tools to help manage clinical encounters more effectively beyond just the pharmacy workflows. Which I think ultimately will not just help better manage the business, but also minimize data privacy risk, or security concerns.
Noor Abdel-Samed:
Great. Thanks Joe. As a follow up to that, do you think there's a risk of these players focusing only on the healthy population and creating a low risk pool of patients, which then ends up excluding the more at-risk population that might need the care more?
Joe Johnson:
Sure. I think the conversation around consumerization or retailization of healthcare has always led us to ask the question as to whether these alternative sites of care would help reduce total cost of care, versus simply increased utilization. And I think while to date, it makes sense that retailers have largely focused on wellness and preventative and screening services skewed towards a fee for service commercial population. But I'm also pleased to see that a number of the retailers like Walmart and CVS are increasingly looking to programs for populations with a higher risk profile like patients with chronic disease or Medicare patients. And so targeting these higher risk and higher cost populations, I think, will make a much bigger dent in reduction of total cost of care, and hopefully also drive improved outcomes across the full spectrum of patient types. Those that are generally healthy as well as those with higher disease burden.
Noor Abdel-Samed:
What do you think is the role of retail players in advancing patients objective of receiving better care and outcomes? So not just convenience, but being better off for having been served by a retailer. Where do you see retailers adding the most value for patients?
Kevin Grabenstatter:
Well, I think this is a lot about convenience, frankly, and as defined by access to the healthcare system. But also expanding the value equation beyond what traditional US healthcare care delivery has provided to patients and consumers. So where they can access care, in the way that they want, where they want, at the time they want. And in a tech enabled way, I think that is the real opportunity to ultimately change the game. I do think that the availability of specialized care and expertise and specialists across the clinical spectrum, that requirement is not going to go away. So I see in the near term at least, and we can all debate about how long that near term will last. I see these new emergence focusing on in a major way how to help patients navigate the broader system, but also directly how to help them treat things that may have traditionally been primary care or even pre-primary care. And that's where we're going to see the most impact from retailers entering the space.
Todd Clark:
In a lot of our work, we see a consistent theme around the primary care provider being the quarterback.
Kevin Grabenstatter:
I think that's a great point, Todd. Many think not all, but many think we have a physician shortage and particularly a primary care shortage in this country. And we know just again, from our own strategy and diligence work, well oiled primary care platform practices are highly desirable acquisitions. Some of the recent deal making continues to prove that point. There just are not enough to go around. And I think the introduction of alternative methods to help meet some patients lower acuity needs, and again that [inaudible 00:10:16] navigation point, should be welcomed by the average American and is a clear early potential entry point here. And I think the real wild card here is Amazon. I think it'll be very interesting to see how much they commit themselves to some of these patient populations that we're discussing. Is this one medical acquisition for them? Is this about healthcare for the Whole Foods set only? Or do they have some broader view to compete, including head to head perhaps with moves like Walmart and United's announcement and into Medicare Advantage and other populations. So that remains to be seen, in terms of exactly how they intend to disrupt, and how much they intend to try to disrupt, traditional healthcare in the US.
Todd Clark:
Kevin, I know we've talked about this before, but I think that the analogy to financial services here with Amazon is pretty relevant. And I guess when you think about your financial planning decisions, if you think about a 25 year old without a family and no mortgage, the decision to choose a financial services provider is a lot lower risk than let's say a 45 year old with three children and a large mortgage. And so I think that on the one medical side, it's more comparable to the former case. And luckily for Amazon, they have something that's relevant to the latter case as well, which would be the pharmacy assets that give access to patient populations that may have chronic conditions. And so the question is, how can you knit together those two different... How can you be relevant to those two different populations to really cover the healthcare landscape?
Noor Abdel-Samed:
So thinking of all the recent moves by retailers into healthcare, is this convergence of large retail and healthcare here to stay or is this a passing trend?
Joe Johnson:
Sure, Noor, I'll get us started. This is Joe again. I think I'd like to answer this a couple different ways. One, from the demand side, I think the genie's well out of the bottle. Patients have now gotten accustomed to the convenience and access of retailers as a care delivery setting. So that for sure will continue to persist, if not grow. From the supply side, if you look at the retailer's historical activity and success, there have been some false starts. I think we all know Amazon in particular has had some programs and initiatives that have been mothballed in the past. What I think is different with some of the most recent activity, is that I think all of the three big retailers have now discovered and understood the value of either partnering with or owning a primary care delivery network, and or having access to people's homes. I think that will allow for additional success and business models to flourish across the retailers. So I'm optimistic to see that there will be more sustainability in terms of the models that are being developed across the three big players and excited to see what's to come.
Kevin Grabenstatter:
And I would add that the motivation is clearly there on behalf of these organizations. The dollar amounts are big on the recent acquisitions and the partnerships and the promises to Wall Street and investors. So in my view, it's sink or swim time.
Noor Abdel-Samed:
Great. Thank you all so much for joining me today to discuss some of the emerging trends. Those were some great insights. Really appreciate you all sharing from your broad range of experiences. Thank you so much for taking the time today.
Host:
Thank you, our listeners, for joining us today at the Insight Exchange presented by L.E.K. Consulting. Links to resources mentioned in this podcast can be found in the show notes. Please subscribe or follow for future episodes wherever you listen to your podcasts. Also, we encourage you to submit your suggestions for future insights online at L.E.K..com.
