Innovation and Disruption

Is Walmart taking a page out of Clayton Christensen’s playbook?

February 7, 2020 5:33 pm
  • Walmart launched its latest health center in Calhoun, a western suburb of Atlanta, which offers primary and urgent care, labs, X-ray and diagnostics, mental health counseling, dental, optical and hearing services under one roof, according to Modern Healthcare.
  • Walmart’s first health center opened in September 2019 in Dallas, Georgia, and appointments have been booked to capacity, Modern Healthcare reported.
  • HFMA’s Chad Mulvany says this latest move by Walmart may signal ambitions to move further into healthcare delivery by offering a low-cost service focused on the uninsured and underinsured segments of the market.


According to Modern Healthcare: “The giant retailer launched its latest Walmart Health center in Calhoun, a western suburb of Atlanta, offering primary and urgent care, labs, x-ray and diagnostics, mental health counseling, dental, optical and hearing services under one roof.”

Walmart says it will offer prices that are 30% to 50% lower than what people currently are paying at doctors’ and dentists’ offices,” according to the Jan. 31 Modern Healthcare article. “Walmart’s price list says a primary care physician office visit costs $40, with annual checkups costing $30 for adults and $20 for children. Mental health counseling sessions cost $45, dental exams including X-rays start at $25 and routine vision exams cost $45. These clinics are the opening shots in what Walmart executives say may be a larger leap into the healthcare delivery business, with a focus on low, transparent pricing for key healthcare services. The freestanding centers, sized at about 1,500 square feet and located adjacent to Walmart stores, go well beyond the in-store clinics previously offered by Walmart, Walgreens, and CVS.”

Modern Healthcare went on to report:

“The first freestanding Walmart Health center opened in Dallas, Georgia — about 30 miles northwest of Atlanta — in September. Walmart says appointments have been booked to capacity. Dr. Rob Schreiner, executive vice president of WellStar Health System, which serves northern Georgia, said Walmart will offer a cheaper alternative for working-class families who may not have health insurance and may not have an established relationship with a primary care provider. It will be an attractive option, he added, because Walmart is a trusted brand.”

“Will the competition prompt primary care physicians to lower their prices? ‘Almost certainly no,’ he predicted. “Rightly or wrongly, most local providers will believe they are providing a different, more comprehensive service with a longitudinal relationship and more attention to preventive care. Whether a mom and dad in a working-class family values that longitudinal, comprehensive care, they’ll make that decision. Others are concerned about whether and how Walmart will integrate its services with traditional providers to enhance continuity of care.”


I see this as both as a play to protect its traditional retail business from Amazon and to expand into healthcare delivery. In terms of protecting its traditional business, we’ve already seen CVS report that same store sales increase significantly at its stores converted to Health Hubs. One must assume that the same trend will hold true for Walmart as they increase foot traffic as patients will likely stop in and pick something up while they’re there as opposed to ordering it from Amazon. Also, 1,500-square-feet isn’t much space and their staffing model will likely rely more on non-physician providers than physicians. So,  depending on how much business Walmart recovers from Amazon, this model might be economically justifiable as a loss leader if it props up the retail business.

But I don’t think that’s the limit of Walmart’s ambitions. By developing a low-cost service focused on a segment of the market that traditional players tend to avoid – the uninsured and underinsured – this scenario is similar to other case studies that Clayton Christensen uses to illustrate his concept of disruptive innovation. In this scenario a new entrant focuses on an ignored or ill-served segment of the market, develops a low-cost, no-frills product (at least as defined by traditional market segments) and then refines that product so that it increasingly meets the needs of existing segments of the market. Right now, the uninsured and underinsured segment of the market is not well served by traditional providers and frequently ends up receiving care in the emergency room for things that should be better managed in the ambulatory setting. And then they get stuck with large bills they can’t afford after the fact.

If you were to pair Walmart’s clinical services with some type of catastrophic coverage product and discounts on more routine things that wouldn’t cross the catastrophic threshold, you might even create a relatively comprehensive benefit. And we know that Walmart, through its Sam’s Club memberships, is already offering care bundles focused on preventative care. Might they expand these relationships to offer more complex services through a bundle? For a health system that has excess capacity – particularly in rural or exurban areas – it could be an interesting partnership opportunity.

The concerns expressed in the Modern Healthcare article, about this fragmented care, trigger a mixed reaction from me. On the one hand, I completely understand the point. Fragmented care is one of the main drivers of higher costs and lower-quality outcomes in the U.S. However, fragmented care is better than no care (or care in the ED, which is a classic indicator of fragmented care).

Although people in the industry understand the value of coordinated care, I’m not sure the average consumer/patient understands it. I think most patients, who haven’t had a significant medical event that has required multiple interactions with the system, assume this type of care just happens. So there’s a bit of a marketing challenge for the industry to convince patients and consumers that its worth paying more for coordinated care to support the cost of it.

Finally, and this is a general comment not specifically directed at the systems quoted in the article, delivery systems need to do a better job of providing coordinated care if we’re going to call into question the “coordinateness” of other models. In a recent survey, HFMA members reported that the average health system’s “ability to engage clinicians in cross-continuum pathway optimization for high-risk patients” was 3.38 on a scale of 1 (no ability) to 5 (significant ability).



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