Walmart + Humana = A fantastic Population Health Manager
|Apr 5||Public post|
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Walmart has been the talk of the healthcare world this week as news broke last Thursday that the retail giant is in acquisition talks with Humana. They made headlines again on Monday when their acquisition talks with Pillpack came to public light. While these deals are still very much in the rumor stage, the healthcare world is buzzing with speculation.
Pillpack is a mail order pharmacy with the differentiator of being extremely consumer focused. Their flagship product is the pill pack itself - all your prescription meds, sorted into packets by when you’re supposed to take them. It’s the kind of user friendly design that’s sorely lacking in much of healthcare, and the kind that will be the future of the industry. Whether or not Walmart nabs Humana, Pillpack makes sense as an addition to their already thriving pharmacy business.
So we’ll focus on Humana. Why does Walmart want to get closer to, and possibly take over, a health insurer that’s quickly becoming an integrated delivery network?
Walmart as a Population Health Manager
The larger idea at play, and where I’d argue Walmart has the most potential, is in their ability to manage the health of a population. The broad concept of population health management (PHM hereafter for the sake of brevity), without getting caught up in jargon, is improving the overall health and wellness of a population. This is achieved by ensuring that people are taking care of themselves, and that they are accessing healthcare resources properly.
Good PHM is incentivized with financial rewards for whoever is doing the managing. If you’re managing a population’s health effectively, their utilization of healthcare services (especially expensive ones like the emergency room and inpatient care) should decline. It’s far cheaper in the long run to help someone eat a healthier diet than it is to help them manage their diabetes and obesity, and it’s also cheaper to help someone manage their diabetes than it is to hospitalize them when they crash.
The tricky part of PHM is that it involves capabilities and moving parts that are entirely external to our existing healthcare system. Your physician has no apparatus for helping you control your diet beyond recommending you eat more greens and cut down on the sugar. Typically speaking, your provider has little visibility into what you’re doing in your everyday life, and thus their entire management effort revolves around making sure you come back for visits and interactions. Healthcare provider organizations are adding to their ability to offer less costly and more appropriate PHM through physician extenders, improved scheduling systems, telemedicine, nutritionists, etc, but I’d argue the problem is better solved from the other side.
So, do you teach astronauts how to drill, or do you teach oil drillers how to go into space? I think it’s far more promising to teach retailers (oil drillers) how to manage health (go into space) than it is to teach astronauts (providers) how to influence the behavior of the consumer. (This is a reference to the movie Armageddon - rent it from your nearest Blockbuster if you haven’t seen it.)
From a 2012 profile on the role of behavioral and predictive analytics at Target:
“One Target employee I spoke to provided a hypothetical example. Take a fictional Target shopper named Jenny Ward, who is 23, lives in Atlanta and in March bought cocoa-butter lotion, a purse large enough to double as a diaper bag, zinc and magnesium supplements and a bright blue rug. There’s, say, an 87 percent chance that she’s pregnant and that her delivery date is sometime in late August.”
Target, or any retailer, gains a competitive advantage when they can better understand their customers, and especially when they can do so before another retailer. If Target knows this customer is pregnant, they can put diaper coupons on her receipt. They can suggest pregnancy and baby related items when she shops online. They can lock her into purchasing Target store-brand diapers (and as any parent will tell you, when you find a brand of diapers that works, you stick with them.)
From the same story:
“Almost every major retailer, from grocery chains to investment banks to the U.S. Postal Service, has a “predictive analytics” department devoted to understanding not just consumers’ shopping habits but also their personal habits, so as to more efficiently market to them.”
As a core element of their marketing, these retailers have gotten very good at understanding who their consumers are. And not just demographically, but behaviorally.
These are the type of predictive analytics that could be applied to advanced population health management. Imagine the same analytics as above, but integrated with a patient’s healthcare data. This shopper, who we are 87% certain to be pregnant based on her purchases, hasn’t had any prenatal checkups. They can send an email detailing the benefits of prenatal care with a reminder that their in-store clinics are open for walk-in appointments 16 hours a day.
Walmart, in fact, recently created a Behavioral Science team that “applies research in psychology to customer shopping, business strategy, e-commerce, and more…” How many health systems have fully-funded behavioral science teams?
Retailers, especially those as diversified in their product lines as Walmart and Amazon, have likely unparalleled visibility into consumer (read: patient) behavior, as well as a core existential need to convert this visibility into consumer action. This is the exact same problem that PHMs must solve: How can we tell a patient is sick, and how can we get them to change their behavior to take advantage of the healthcare resources available to them?
When you tightly integrate this predictive ability within a widespread integrated primary care system (which Walmart has stated its intent to build), coupled with a veritable “town square” of services including grocery, pharmacy, apparel, veterinary, banking, ecommerce, and more, you have an organization with a stated mission of “making every day easier for busy families”, and an actually ability to do so.
When evaluating a merger or an acquisition, the question often comes down to whether 1 + 1 can equal 3. Can these organizations, combining their assets and expertise, produce something more valuable than the sum of their parts?
For Walmart to acquire a patient population to manage, especially the higher-need Medicare Advantage population of Humana, I’d argue that it’s likely a 1+1=3 acquisition (provided Walmart fully integrates the health activity).
Financial reward for applying their behavioral data and expertise to manage the risk of a population and bringing down the overall cost of care
Preferred access to this large population of policyholders, as well as deeper insight into their healthcare related product needs, allowing for cross-selling (sales of durable medical equipment and non-durable medical products amounted to roughly $113B in 2016)
Proprietary access to the complete set of healthcare and consumer data for each policyholder
We’ll have to wait and see if this deal actually does go through. Should it happen, it could be a harbinger of change in the way healthcare is delivered in this country. Or more of the same. Definitely one of those two.