Walmart's health care experiment has begun, and an economist is encouraged
Gary North · Sep 24, 2019
Walmart is going into price-competitive health care.
I live in exactly the right location to see the outcome of a grand experiment. The pilot Walmart Supercenter is located in Dallas, Georgia. So am I.
On Friday, September 13, the CEO of Walmart cut the ribbon at the grand opening. Sadly, I only learned about this grand opening on the morning of the 14th. There had been no publicity while the store was being remodeled over the last 12 months.
So, what you are about to read is based on original research conducted on the cheap on the afternoon of September 14. [Pictures are available in the online version of this article at bit.ly/walhealth.]
1. A right-hand turn
I live in a subdivision that is close to a state highway. The subdivision is surrounded by trees. It is quiet. We cannot hear the traffic. But the highway is centrally located ... now more than ever.
My house is about 60 seconds from the highway. When I pull out of the subdivision, I can turn either right or left.
If I turn to the right and drive approximately 1.7 miles, I arrive at the Walmart Supercenter.
I walked into this Supercenter through a new wing: Walmart Health. There, I found a health care delivery system that is far more comprehensive than the standard walk-in clinics that have sprung up in America’s mini-malls. Here is what is available:
- Primary care
- Labs & X-rays
- Health screening
- Fitness & nutrition
I have seen it. I am impressed.
Here is Walmart’s press release:
The Walmart Health center will offer low, transparent pricing for key health services to provide great care at a great value, regardless of insurance coverage. Customers will be notified on the estimated cost of their visit when they book their appointment.
The Walmart Health center will be operated by qualified medical professionals, including physicians, nurse practitioners, dentists, behavioral health providers, and optometrists. Walmart Care Hosts and Community Health Workers onsite will help customers navigate their visit, understand resources and be a familiar presence for regular visits.
Working in partnership with wellness organizations, the Health center will offer specialized community health resources, online education and in-center workshops to educate the community about preventive health and wellness.
You know what a service is going to cost before you sign in.
The waiting room has an on-the-wall game for kids.
It has six tall chairs in front of a long, narrow desk, which has outlets for laptop computers.
On the waiting room’s wall, there is a huge screen. We see a series of repeating promotions for services. There is a woman dressed in a physician’s white smock. On her smock is a name tag: Dr. Price. I get it!
Walmart Health is consistent with Walmart’s USP (unique selling proposition); Save Money. Live Better.
Here is what the center looks like from the inside:
To make room for all this, the Supercenter has reduced the number of checkout lines from 20 to 7. All of them are open, unlike the old Supercenter, which had maybe four or five open at any time. The store has added 26 self-checkout lines.
I asked how many square feet this new addition is. I was told 10,000. Big.
This is one-stop shopping. Are you sick? Go to Walmart. What if you get well? Go to Walmart. Sign up for an exercise program. Want a check-up? Go to Walmart. Sick pet? Go to Walmart. And, as long as you’re there anyway, walk inside and buy something. It’s convenient. There are 26 self-checkout lines.
Selling health care services is going to get extra foot traffic into the store. My associate John Livingston grasped the strategy at once: “Amazon can’t compete against this.”
In addition to all this, there is a veterinary clinic next door.
My suggested USP for Walmart Health is this: Save Money. Live Longer. But the company’s lawyers would never allow it.
2. A left-hand turn
Alternatively, if I turn to the left on the highway and drive approximately 2.6 miles, I arrive at a 5-year-old medical center. It is a major hospital: five stories high, plus a large ER wing on a sixth level downstairs on the back side.
Because of the prices charged for services, this facility caters to people with high-end health insurance policies and Medicare. I was treated for stage III prostate cancer for two years. My PSA score peaked at 77 when I arrived. Any score above 7 is worrisome. It is now down to 0.2. This is good news. I received good care. But I did not pay for it. Medicare-based health insurance paid my bills. Without insurance, few people could afford the treatments, which ran $5,626 per daily radiation session (20 minutes) for two months, plus $947 each week for a consultation: a blood pressure test by a nurse and a brief chat with the oncologist.
I had a fainting spell in late May. I had been on medication, Albuterol, that I had to inhale daily for 10 days to deal with pneumonia. I had been diagnosed at a local walk-in clinic. On the day after I ceased the treatments, I fainted. This had not happened before. My wife drove me to a different walk-in clinic to get an assessment. The first one was not yet open. I was told that I could not get an appointment for about six hours. My wife started to drive me home, but when I fainted in the seat, I agreed to be taken to the ER at the hospital. That was around 10 a.m.
They got me in very fast, since my blood pressure was quite low. I was in an ER bed for several hours. My wife and I both told the ER nurses and physicians about the Albuterol. I was given two different tests involving large scanning machines. Then they assigned me to an overnight room upstairs. The nurses began taking lots of blood tests. This testing lasted all day and all night. I got to talk with a heart specialist about 3 p.m. the next day. He said I was probably OK. He offered no explanation for my fainting spells. Everything had tested normal. He said I could leave in an hour. They took one last blood test. I was released around 4 p.m. Total time in the hospital: about 30 hours.
My insurance company was billed $29,653.20—plus $156 for an EKG. I was sent a copy of the bill.
Had this bill been sent to me to pay, I might have gone into cardiac arrest. I would have had to be taken by ambulance back to the hospital.
If it happens again, I’m going to Walmart Health.
Here we see two rival strategies to marketing health care services. Walmart’s strategy is based on price competition. Patients know what services will cost before they walk into the physician’s office. Prices are rock-bottom. This directly benefits patients, who will come again. Word will get out. In contrast, the hospital’s strategy is based on billing insurance companies for services whose prices are not revealed to patients in advance. Patients have no economic incentive to seek lower-cost services elsewhere.
These two strategies reflect different organizational legal structures. Walmart is a profit-seeking corporation. Profit-seeking enterprises whose business plans seek a growing market, as Walmart’s business plan always has, are forced by price-sensitive consumers to compete by cutting costs and then lowering prices. In contrast, the hospital is a nonprofit enterprise. By law, nonprofit enterprises have no owners. Employees may not profit directly from innovations that lead to higher profits. In nonprofits, people are salaried. There is therefore far less incentive to cut costs and reduce prices.
I hope Walmart’s experiment proves to be profitable. If it does, more people without health insurance who live in poor rural areas will be able to afford basic medical care. Today, they just cannot afford non-profit medical care. It costs too much.
Copyright © 2019 Gary North. Reprinted by permission. <garynorth.com/public/19961.cfm>
Christian historian and economist Gary North is the author of a 27-volume commentary on what the Bible teaches about economics.