Morgan Stanley on Walmarts growing health ambitions – Business Insider
In the past year, Walmart has been making a push into healthcare, as the giant US retailer vies for a bigger slice of the $3.6 trillion US healthcare industry.
Pharmacy chains like CVS Health, Walgreens, and Rite Aid are betting on healthcare as a key part of the the future of their retailers. As healthcare costs keep rising for Americans, retailers see an opportunity to win patients over with convenience and lower prices. And retailers increasingly have to compete to get people through the door as customers shop for everyday goods on websites like Amazon.
Walmart, already the third-largest pharmacy in the US, could be a big player in that transition to more healthcare services, analysts at Morgan Stanley wrote in a note Friday.
“As the lines between retail, healthcare, and tech blur, Walmart’s growing suite of initiatives make it a sleeping giant to watch,” the analysts Simeon Gutman and Lauren Cassel wrote.
Walmart started by opening “prototype” health centers in northern Georgia that could quickly make Walmart into the largest provider of basic healthcare in the region.
The goal, Slovenski said at the time, is to do for healthcare what Walmart’s supercenter stores did for retail: offer a breadth of services conveniently and at a much cheaper price point than rivals. For instance, a primary care visit costs $40, while a dental visit costs $25.
Slovenski said the clinics are a big piece of the company’s health strategy.
“We see these as being a crown jewel of what we want to accomplish in the physical world, in the home, and in the virtual world as well,” Slovenski said in September.
Why Walmart’s health ambitions make it a ‘sleeping giant’
The Morgan Stanley analysts called Walmarts move into healthcare “sensible.” and said they expect Walmart to pick up more health initiatives over time.
To be sure, Walmart’s foray into insurance sales doesn’t mean it’s getting into the business of offering its own health insurance plans.
That would be a far bigger shift. Had Walmart opted to be an insurer, it would’ve marked “the beginning of seismic changes” to the healthcare industry, the analysts wrote. That could include covering its own 1.5 million employees and then growing to offer the coverage to Walmart’s 160 million customers. If that were the case, Walmart might be able to use its size to negotiate lower prices, the analysts wrote.
Getting into healthcare in a more serious way, the analysts argued, could be Walmart’s “silver bullet” as it goes up against Amazon. However, Walmart+, Walmart’s answer to Amazon Prime, doesn’t include any benefits related to health right now.
The work as a broker could have implications to online brokers like eHealth and SelectQuote. But, the analysts noted, online brokers only made about 7% of the market selling plans to seniors, so likely it won’t have that much of an impact.
The lines between retail, healthcare, and tech are blurring
As healthcare costs keep rising — leaving Americans on the hook for higher bills — retailers see an opportunity to win patients over with more convenient places to get care, often at lower prices.
The lines around what constitutes a healthcare company are being redrawn, with retail pharmacies like CVS Health acquiring insurers, tech companies like Amazon getting into the pharmacy business, and major grocer Kroger investing more in keeping its shoppers healthy with the help of food. Kroger also owns a chain of health clinics.