Walmart Health: Novel or Novelty?

This past week, Walmart fully entered the healthcare fray by opening a primary care and behavioral health clinic called “Walmart Health” in Dallas, GA. As part of their initiative, the company has committed to transparency by posting a list of services provided (including primary care visits, annual checkups, lab work, X-rays, and EKGs) along with the associated cost. The move has been hailed as shot across the bow to existing models of care, in particular the obfuscation of healthcare costs, lack of access, and surprise billing that plague the American medical system. As part of Walmart’s foray in to healthcare delivery, the company has partnered with revenue cycle management company Zotec in an attempt to solve the pain points often associated with receiving care. By creating a true retail experience and embracing transparency, Walmart hopes to offer affordable healthcare services and ensure each patient understands the cost of treatment before services are delivered.

             When taken at face value the company’s ambition to alter failing modes of care delivery are laudable, but the exact impact of Walmart Health remains to be seen. Many questions still remain. Still, many have hailed Walmart’s approach as a wake-up call to healthcare providers often viewed as perpetuators of the current system. Some view Walmart Health as a direct threat to doctors: change the way you bill for and deliver care or risk being put out of business. Such opinions unfortunately display a lack of understanding about how the admittedly flawed American medical system works. Most doctors are as frustrated with the limitations of the current system as patients are. Walmart’s entry in to the business of medicine should not be used to shame physicians on the shortcomings of our current model, and here’s why:

A version of Walmart Health already exists, it’s called Direct Primary Care (DPC)

DPC has been around for a while. In this model,  patients pay their primary care physician a flat rate for services. Most DPC physicians limit their patient panel to ensure a more intimate relationship and enhanced access to care. Pricing is transparent and eliminates third party and/or fee-for-service billing. While DPC is slowly gaining in popularity, its reach could be limited. Many patients still can’t afford to pay for even reasonably priced DPC. Perhaps even more challenging are patients that can afford to pay for basic healthcare services but don’t feel they should have to.

Most doctors would love to adopt a price transparency, direct pay model. Removing health insurance from the equation would radically simplify care delivery, significantly reduce administrative burden, and cut overhead costs. In reality, this model is not feasible for a majority of physicians and patients. By listing its prices and embracing transparency, The Surgery Center of Oklahoma is a notable exception to this rule.

Doctors Don’t Set Healthcare Prices

With some rare exceptions, most physicians don’t directly set the cost of their services. Much of the financial aspect of the American medical system is based on prices set by the government through the Center for Medicare and Medicaid Services’ RVS Update Committee (RUC). The RUC  is a multispecialty committee of physicians designed to help CMS determine the degree of resources required to deliver medical care. The committee assigns Relative Value Units (RVUs) in an attempt to determine the amount of work associated with each aspect of care delivery. The process has its critics, but RVUs set by the RUC are the basis upon which physicians get paid by CMS. Physicians and medical societies can challenge or comment upon the committee’s decisions, but ultimately the government has the final say and there is no direct negotiation. Participating with Medicare and/or Medicaid means accepting prices set by the RUC. While there is room for negotiation with commercial insurers, their rates are commonly set as some percentage above Medicare. 

The Impact of Price Transparency Has Yet to Be Determined

As part of the negotiation process with insurance companies, physicians often set the “price” of their care much higher than what they expect to get paid in an attempt to improve reimbursement. For instance, a surgeon might charge $7,000 for a knee replacement knowing full well they will likely get paid 20-60% above Medicare rates. CMS reimbursement for total knee arthroplasty in Massachusetts (not including Boston) was $1,466.42 in 2019. The amount paid by private insurance varies from one insurance company to another and can be affected by factors such as network status. However, the key point is that a surgeon never gets paid anywhere near full asking price. Insurance companies tout this to their members as a negotiated discount and doctors chalk it up to the nature of the game. However, in this system, it is nearly impossible to have transparent pricing. Listing the $7,000 price charged by the surgeon does not accurately reflect what gets paid when in fact payment is far less than charged price. It is impossible to list the actual reimbursed amount as it varies from one insurance company to the next and is often considered proprietary information not to be shared. In fact, sharing what each insurance company pays would likely further drive down reimbursement as the lowest amount becomes the new standard thus setting off a race to the bottom.

Walmart Health accepts some insurances; however it remains unclear how much reimbursement will be compared to the out-of-pocket costs or whether or not the company will make its insurance payment rates public. 

Walmart Health’s Model Doesn’t Work for Complex Problems or Specialty Care

Office visits for annual checkups and treatment of straightforward medical problems are amenable to a Walmart Health type approach. But when higher levels of care are needed, the model begins to fall apart. Will the company be able to staff multiple locations with specialists, pay them a reasonable rate, and maintain competitive pricing? When a patient has a complex problem that requires a higher level of care, will Walmart simply collect their fee and refer the patient back in to the system they are supposedly disrupting? Will this model of care allow for an acceptable degree of care continuity?

Walmart Health is arguably not trying to solve all of medicine’s problems and it’s model isn’t intended for complex or specialty care. But for this very reason, caution should be used when anointing a new approach as the magic bullet for fixing healthcare. Walmart’s other famous endeavor, its Center of Excellence program, has also been hailed as an innovative approach to solving cost issues that plague medicine. But closer inspection of this model reveals limitations and nuances that remove some of the luster and call in to question its overarching, long term impact.

The Playing Field is Not Level

Walmart is in a unique position when it comes to delivering healthcare. Unlike a physician whose practice viability depends on a financially sound model, Walmart has no pressure to ensure its healthcare business is profitable. In fact, the company could lose money on each patient seen in its clinic and still be successful. Walmart could still benefit if patients use its pharmacy to fill medications, shop for health items in its store, or provide the company with valuable healthcare data. If Walmart Health is an abject failure, it’s overall impact on the bottom line will likely be minimal. 

Such an approach is a luxury most physicians don’t have. Doctors’ practices must account for overhead and have limited ability to leverage ancillary services to offset the cost of running a practice. Walmart has been criticized in the past for undercutting local business on price and driving independent “mom and pop” stores out of business. Could the company do the same to primary care physicians, especially in locations with a high concentration of underinsured, less healthy patients? Doing so could have a significant negative impact on access to care. Walmart also has the ability to leverage its large economies of scale, real estate footprint, and pre-existing relationships in ways not possible for physicians. Put succinctly, Walmart Health is on a vastly different playing field than a traditional medical practice.

Conclusions

The preceding discussion is not meant as a defense of the existing model of American healthcare delivery. There is widespread agreement that change is needed to improve access, affordability, and quality of care. Existing models are failing and traditional medicine has left itself open to disruption from entities not traditionally involved in healthcare. Walmart Health and other similar endeavors may help bring about change. At the same time, care should be taken no to prematurely anoint these efforts as revolutionary. There is much to learn about Walmart Health, whether its approach will be successful, how the company sees its healthcare endeavor evolving, and what the downsides will be. In the meantime, other solutions should continue to be explored. Most physicians understand the need for change and many are trying to be involved in the process. Walmart Health may or may not be a wake-up call, but it is certainly worth following.