Retail health is evolving. It’s more than retail clinics, fitness apps, nutrition and home devices. It’s a platform that has the potential to fundamentally re-shape the entire U.S. healthcare industry.
LAST WEEK’S NEWS CYCLE ILLUSTRATES THE GROWING SIGNIFICANCE OF RETAIL HEALTH
Google acquiring Fitbit: Friday, wearable device company Fitbit Inc. announced it is being acquired by Alphabet Inc.’s Google for approximately $2.1 billion. Apple has 46% of the wearable market: at the end Fitbit is next at 10% with 27.3 million users.
Walgreens repositioning its Clinics: Walgreens announced it will close 157 of its 1100 clinics and add 100 Jenny Craig sites to stores nationwide.
Facebook promotes its Preventive Health App: Last week, Facebook CEO Mark Zuckerberg testified before Congress to address their concerns about the social media giant’s role in elections. The billionaire CEO took the opportunity to promote the company’s new Preventive Health App to illustrate its commitment to innovations that serve a social purpose. FYI: the Facebook app lets users search for preventive services for heart disease, cancer and the flu based on content attested by the American Heart Association and CDC at no cost for its searches.
THE EVOLVING RETAIL HEALTH INDUSTRY
Every day, the parameters of retail health are expanding. More than 28 million have purchased a genotype test kits from Ancestry DNA, 23&Me, Family Tree DNA and My Heritage. Walmart Health opened its clinic prototype in Dallas GA. Amazon is digesting Pill Pack and Whole Foods to create a new consumer experience for health foods and medication management, Kroger is partnering with Target, Clover and are challenging insurer incumbents, and between Microsoft, Google and Tencent, investments in more than 200 digital health start-ups have been made. It’s an industry whose time has come. Why?
Healthcare is notoriously secretive in its business dealings. Its patient experiences rank among the worst among all service industries. Price transparency is minimal at best. Facilities are designed to accommodate caregiver preferences with little regard for the “consumer experience”. And digital solutions have faced slow adoption in healthcare: that’s why investors put $11 billion in digital health ventures last year.
Retail health is growing at 10% year—twice as fast as conventional healthcare. It includes 2700 retail clinics, 36,000 fitness facilities, 40 nationally advertised weight loss systems, 200,000 alternative health providers, 70 manufacturers of over-the-counter medicines and dietary supplements and much more.
The fundamental difference between the retail health industry and conventional providers and insurers is the centrality of self-care in their business models. Retail health promotes self-care aggressively, believing consumers are capable purchasers when given access to useful information. Incumbents think they’re misguided: for them, self-care is peripheral to transforming the health system.
But retail health is not without risks: As an emergent industry, it faces three near-term challenges:
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Product Safety and Program Effectiveness: The expansive number of products, services and providers in retail health is a daunting challenge for regulators. Caution is requisite. Some are bona fide; many are not.
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Lack of a Unifying Voice: Retail health is currently a collection of independent sectors that lacks a unifying voice. Each sector is represented by a trade groups that advance the sector’s interest: the Convenient Care Association represents retail clinics, the Consumer Health Products Association promotes over the counter medicines and dietary supplements, the Global Self-care Association advances solutions to consumer awareness, the Personal Care Products Association advocates for the daily-use products like tooth paste and sunscreen, the Organic Trade Association advances policies about the use of “organic” in labelling, and so on. At some point, the industry must speak with one voice to address the two biggest challenges facing all: 1-establishing consumer trust in the products and services they sell; and 2-mainstreaming their products and services into the health system.
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Dealing with Business Risk: Staying competitive in retailing is tough. Blockbuster, Toys R Us, and others failed. Walmart, Target and Costco adapted. And Amazon is certain to face its own disruptor. That’s the nature of the business risk.
Retail health is an industry of growing importance to the future of healthcare in the U.S. It’s not peripheral. Consumers are fed up with the status quo and receptive to fresh approaches that retail health offers.
-Paul
OTHER NEWS FROM THE WEEK
Medicare for All Update: Last week, the nonpartisan Committee for a Responsible Federal Budget released its preliminary analysis of possible ways to finance a universal, single-payer health plan. “By most estimates, Medicare for All would cost the federal government about $30 trillion over the next decade.” The report provided several funding options: a 32% payroll tax, a 25% income surtax, a 42% value-added tax (VAT), a mandatory public premium averaging $7,500 per capita – the equivalent of $12,000 per individual not otherwise on public insurance, doubling all individual and corporate income tax rates, an 80% reduction in non-health federal spending, a 108% of Gross Domestic Product (GDP) increase in the national debt, higher taxes on high earners, corporations, and the financial sector.
Note: Most estimates of Medicare for All find it would cost the federal government $25 trillion to $36 trillion over ten years on top of the $16 trillion the federal government is already projected to spend on major health programs over the next decade.
Hospital funding cuts: Last Monday, the Federation of American Hospitals (FAH) and the American Hospital Association (AHA) released a study showing how 12 legislative Acts combined with numerous regulatory changes would reduce hospital funding by $252.6 billion between 2010 and 2029. The study suggests sequestration ($85.6 billion) and MS-DRG documentation ($85.7 billion) are the two most significant cuts. Other reductions noted in the report were: Medicaid Disproportionate Share Hospital Payment reductions, $25.6 billion; Off-campus provider-based department payment cuts, $23.7 billion; Long-term care hospital cuts, $8.1 billion; Post-acute care payment updates, $7.3 billion and others.
Telehealth use low: Only 10% of healthcare consumers are using telehealth services, according to a new study from J.D. Power. On a 1,000-point scale, overall customer satisfaction scored 851. Nearly half of consumers (46%) scored it 900 points or more. Other findings: 37% say they do not know if it is offered by their health provider or health system, 29% say that telehealth is not available to them. This combination totals 66% of those surveyed. In rural areas, only 25% say that they have access to virtual care.
RESOURCES
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“What’s Behind the Surge in Retail Healthcare Deals? Strong growth and high margins are attracting private equity and corporate investors” Bain May 09, 2018 https://www.bain.com/insights/whats-behind-the-surge-in-retail-healthcare-deals/
“Google Gets in Shape With Fitbit Acquisition” Yahoo Finance, Nov.1, 2019 https://finance.yahoo.com/news/google-gets-shape-fitbit-acquisition-164823722.html;
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“Estimate of Federal Payment Reductions to Hospitals Following the ACA: 2010-2029 Estimates and Methodology” The Federation of American Hospitals (FAH), The American Hospital Association (AHA) October 15, 2019 https://www.fah.org/fah-ee2-uploads/website/documents/AHA-Federal-Payment-Cuts.pdf
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