1 November 2019
Dear Interested Readers,
What’s Up at Walmart, Walgreens, CVS, and Amazon?
I was ten years old in 1955 when Volkswagen began marketing its cute “bugs” in America. It was probably the summer of 1956 before I saw my first “VW Beetle.” It was parked at the curb in front of the First Baptist Church of Waco, Texas where my father was the minister. I got a good look at the car because it was owned by the son of my father’s administrative assistant. It was nothing like a car from Ford, General Motors, or Chrysler, the “big three” of the American automobile industry. At that time you could still see a few cars from American Motors, formed by a 1954 merger of Nash-Klevinator and Hudson Motors. AMC was still making products like Nash Ramblers and later “Gremlins” but their days were numbered. There were still a few funny looking Studebakers and once grand Packards on the road, but not for long. By 1961, I was driving my father’s bright yellow bug. Thinking back to 1955, who would have thought that one of our most stable industries was facing several decades of “chronic disease” and a near death experience. It would not be long until Opals, Peugeots, Toyotas, Datsuns, Fiats, Citroens, Saabs, Volvos, BMWs, Mercedes, Audis, and the list goes on and on, would be undermining one of our most stable industries. By 1960 no one was singing “See the USA in Your Chevrolet.”
When looking forward fifteen years, the perspective is that it is a long time. Looking back, fifteen years seems like only yesterday. I had that thought watching the World Series this week and realizing that it was fifteen years ago that I attended the 2004 World Series with one of my son’s to watch the Red Sox finally shake the curse of the Babe. I don’t think many people in Detroit saw the foreign car invasion coming in 1955, but fifteen years later it was a fact. In a New York Times article in 1970 entitled “Foreign Car Invasion,” the author, William Smith, reported that foreign car sales were up to 13.5 % of the market, and had grown 224% between 1962 and 1969. The author of the article looked to a Mercedes executive for the explanation:
Leo Levine of Mercedes explains the changing situation this way:
“The population explosion and urbanization has led to a real need for smaller and smaller cars, just for the sake of convenience. The average car in the United States carries 1.3 people so why does every car have to be built to carry six people?
“And, finally, the automobile is becoming less and less of a sex‐and‐success symbol and more and more of a utilitarian device that complements other modes of transportation — for example, driving a small car to the station to catch the commuter‐special.”
Perhaps that is too long an introduction for a discussion of the future of Primary Care, but I am trying to make the point that things are changing, even when we are not thinking about change, and then one day you wake up in a whole new world, and you realize that what you thought was as unchangeable as the laws of physics, has changed. Change is easy to see in hindsight, and oh so hard to see coming at you. “Disruptive Innovation” as described by Clay Christensen is a concept that most of us think that we understand, but in reference to our own practices and health systems, we act as if it is a disease from which we are immune. Maybe we imagine that our patients are so loyal to either us as professionals, or to the “brand” of our organization, that we are protected from the way disruption works in other industries. As many who object to Lean in healthcare will say, healthcare is nothing like the automotive industry. If you clicked on the link you read that Christensen thinks the term has been misused, and I may be misusing it also. In the article he defines disruption:
“Disruption” describes a process whereby a smaller company with fewer resources is able to successfully challenge established incumbent businesses. Specifically, as incumbents focus on improving their products and services for their most demanding (and usually most profitable) customers, they exceed the needs of some segments and ignore the needs of others. Entrants that prove disruptive begin by successfully targeting those overlooked segments, gaining a foothold by delivering more-suitable functionality—frequently at a lower price. Incumbents, chasing higher profitability in more-demanding segments, tend not to respond vigorously. Entrants then move upmarket, delivering the performance that incumbents’ mainstream customers require, while preserving the advantages that drove their early success. When mainstream customers start adopting the entrants’ offerings in volume, disruption has occurred.
I am not sure whether Christensen would accept my example of disruption as demonstrated by the challenges faced by the American auto industry when cheaper, more mechanically reliable, and more fuel efficient competitors began to invade our market from well established foreign manufacturers because I am not sure that those foreign companies were really “smaller companies” with fewer resources. It may be true that what is happening in primary care delivery would also not exactly match Christensen’s strict definition of disruption, but just as Detroit was totally redesigned by the influence of foreign manufacturers that offered products that were more attractive to consumers, we may be seeing the same “faux” disruption in healthcare as very large, very well capitalized, and very capable companies that have not previously been significant providers of healthcare begin to think about expanding their businesses into the new territory for them of healthcare. The potential “disruptors” are not hiding their intentions, or their strategies, and as Christensen describes in his presentation, the established industry has exceed[ed] the needs of some segments and ignore[d] the needs of others.
The core of healthcare delivery is focused on providing expensive procedures, and the treatment of complex diseases on the advanced edges of medical science and practice while the work that touches the huge majority of customers is essentially taken for granted or ignored. I can remember that several years ago I was attending a workgroup of healthcare leaders in Boston. Ostensibly, our objective was to collaborate in ways that might lower the cost of care. The representative from the most academic and most expensive provider commented that he did not see a compelling need for primary care. As far as he was concerned, patients could do quite well just picking the specialist that they thought they needed to see from the roster of professionals in his organization. To compound the problem, healthcare systems are often funding expensive procedures, and the very expensive resources and infrastructure needed to provide the marvelous high tech advanced treatments, by charging excessive rates for the “mundane” healthcare needs that constitute much of primary care and routine hospital care.
Back in April, I wrote about the thinking behind CVS’ Health Hubs, as described by its CMO, Dr. Troy Brennan. Dr. Brennan announced then that CVS will be providing primary care and chronic disease management in the 1,000 “Health Hubs” that it hopes to have up and running soon. Following Christensen’s map CVS has moved from being pharmacies to being providers by first offering urgent care for the least complicated problems. They now have diagnostic labs, Epic, and are positioned to deliver cheaper, more timely, and equally reliable care for chronic diseases. They are betting on the fact that with superior customer service, and their extensive network of outlets, they will have significant market share in just a few years. Now that they own Aetna, and have billions of dollars of capital, would you bet against them? Does your practice or hospital have a strategy that factors in a loss of revenue to CVS? Detroit was betting on Americans sticking with gas guzzlers, but they did not.
When I think of CVS, I reflexively wonder about Walgreens. What’s up with them? They are doing their own thing, as they have announced on their website:
Expert Care For Minor Illness and More.
They invite you to click on the Expert Care to “learn more.” If you do, you will be surprised to discover that they are well on their way to disrupting primary care. What surprises me is that so few practices, and not many more hospitals, realize how much of their total revenue comes from the activities that CVS and Walgreens are delighted to do more conveniently and for less than your overhead will allow.
So far most of us have not been impacted by, or paid much attention to, Haven Health, the Atul Gawande led collaboration of Amazon, Berkshire Hathaway, and JP Morgan Chase. We know they are doing something, but I have not been hearing of anyone asking, “So how will what Haven does ever impact me?” Did you know their tag line is,
IT’S TIME FOR BETTER.
They go on to say:
Our mission is to transform health care to create better outcomes and overall experience, as well as lower costs for you and your family.
We want you to get the right care, every time so that you can live your best life possible.
Well that is interesting copy that is used disingenuously by so many organizations that we pay it little attention. But Haven may really mean it. With perhaps the best medical writer alive, and one of our most creative thinkers as their CEO, I would not blow off their statement as meaningless. It’s interesting to read what Gawande says about their intentions. Dr. Gawande writes:
As a surgeon, I’ve devoted my career to caring for my patients and working to make the health care system better. I believe all people deserve quality health care that is both affordable and accessible.
Haven was formed by the leaders of Amazon, Berkshire Hathaway, and JPMorgan Chase because they have been frustrated by the quality, service, and high costs that their employees and families have experienced in the U.S. health system. They believe that we can do better, and in taking this step to form this new organization, they have committed to being a part of the solution.
We know that this work will take time, and we’ll need the help of others, but we will tackle problems step-by-step and make sure that patients remain our top priority. These are our guiding principles:
- We will be an advocate for the patient and an ally to anyone – clinicians, industry leaders, innovators, policymakers, and others – who makes patient care and costs better.
- We will create new solutions and work to change systems, technologies, contracts, policy, and whatever else is in the way of better health care.
- We will be relentless. We will insure our work has high impact and is sustainable. And we are committed to doing this work for the long-term.
Atul Gawande, MD, MPH
CEO, Haven Health
Maybe your strategy is wait and see. It takes a lot of coordinated effort to affect change that might be a challenge to you. I don’t need a strategy now because I am just a consumer hoping for a better product, but experience tells me that in less than fifteen years you may wish that the leaders of your organization had been doing more than adopting a “wait and see” philosophy in determining how they will coexist with the tens of billions in assets that CVS, Walgreens and Dr. Gawande have at their disposal. The situation reminds me of my childhood when I thought that a 1954 Cadillac with GM’s revolutionary “panoramic wrap around windshield” was, and subsequent new models of the Cadillac in every year to come would always be, the ultimate cars to own. The “forever” of the American automobile industry depended on the loyalty of the American care buyers and that loyalty lasted only until the Germans, Japanese, and Scandinavians began to show American consumers what they could do. If you are going to believe in “market power” and innovation, you must also be ready for the uncomfortable challenges of “disruption” and “creative destruction.”
For some time I have been looking forward to having dinner with one of my favorite “Interested Readers.” We made plans to meet in Boston this week since he was in town on business. As I was driving down to meet him for dinner he texted me to say that he wanted to “talk about Amazon and Walmart” over dinner. What I learned from my friend and “Interested Reader” was that he had recently gone to Atlanta for the sole reason of having a physical at the new Primary Care practice in Dallas, Georgia, a suburb of Atlanta, that Walmart opened in September. You do not read about Walmart’s project in the New England Journal, JAMA, or HealthAffairs but there are plenty of articles about Walmart in the “throw away” electronic journals like Becker’s Hospital Review, or business related magazines like Forbes. You can also just go to Walmart’s own description of its new business to get a good idea of what is coming.
My friend consults with healthcare systems across the country. His job is to convince doctors and healthcare administrators who aren’t that inclined to want to change that they are should listen to the concerns of their customers/patients. He tells them that they should also look around at what is being offered by others who are interested in capturing more business with a better approach to care. He thinks that if the organizations he tries to help would pay attention to what is happening, they would “give change a chance.”
At dinner he showed me a picture of the new Walmart site that he had on his cell phone. The focus of the picture was the sign on the front of the building. It leads with “Primary Care,” but as they say on their website, they do even more:
By partnering with local providers, the new Walmart Health center will deliver services including primary care, labs, X-ray and EKG, counseling, dental, optical, hearing, community health (nutritional services, fitness) and health insurance education and enrollment all in one facility, conveniently located outside the store with a separate entrance for customers. The clinic will provide low, transparent pricing for key health services for local families, regardless of insurance status.
Walmart has other sites in Atlanta and the South where urgent care is provided by NPs, but this new delivery prototype is populated by PCPs and it uses an Athena EMR. Walmart is famous for managing its “supply chain” and vendors. It looks like that category will soon include “local providers” across the country because you can expect that Walmart will soon try to do to primary care it has already done for other retail commodities in much of suburban and “flyover” America.
I learned from my friend that he has already created a PowerPoint presentation of his Walmart experience which he was generously willing to share with me. What he reports is that he visited other Walmarts in the Atlanta area that have health kiosks and clinics that are connected to the Walmart Primary Care practice and provide an easy flow “up the chain of care.” Scheduling was easy, but not necessary, because “walkins” are welcome. His original idea was just to get a flu shot, but he found it immediately possible to get his “annual physical.” He did note some areas where the process could be improved, but he has no doubt that Walmart will be ironing out those wrinkles soon.
The system is already sophisticated and more efficient than many medical offices. My friend reports that 50% of care is provided online. When it came time for the flu shot the physician suggested that he stop by the pharmacy on his way out where he would be charged less! The Kaiser Foundation reports that the average American family spends over 10% of its income on healthcare. The bite of that reality is that it is an “average.” Many of the regular customers of Walmart have incomes that are below average. Their healthcare costs often must be balanced against other essential expenses like their rent and utilities. A lower priced product delivered with convenience and apparent quality will appeal to many Walmart customers who may find that Walmart appears to care more about their cost than their doctor does. Walmart has made billions on very low margins and low prices that attract customers who are looking for the lowest price. Do not bet against their ability to continue their success as they move up the chain of services in healthcare.
If the migration of primary care to a discount retailer does not match your sense of where the future of healthcare should lie, you should be very involved with developing alternative ways of providing care along the lines that Dr. Gawande describes. You might want to hire my friend and Interested Reader. He could definitely help you design a strategy for success in the era of care care where non traditional providers are attracting your patients with a product that offers improved cost, quality, and patient service. You should also be trying to decide which future president will support policies that will address our healthcare needs in ways that does not drive more and more people to new providers where they can get a little care for their families at a cost they can cover. Gas guzzlers were dinosaurs that could not survive. I do not see how our current dysfunctional system of care can continue without change. Disruption is not only a possibility; it is already in progress.
The View From Mount Moosilauke
If you read to the end of last Friday’s post, you know that on Friday I was attempting to go up and down Mount Moosilauke with Tom Congoran, my friend and former colleague at Atrius Health. We were accompanied by our mentor in all things related to mountains, Steve Allenby. Steve has come to healthcare issues late in life. He has recently joined the board of our local hospital which is affiliated with the Dartmouth Hitchcock Medical Center. Today’s header is evidence that we made it to the top of the mountain. I had to decide whether to give you a picture of the sign at the top that says 4802 feet or the view of some of the other “White Mountains.” I picked the view.
I have decided that climbing mountains is easy. It’s coming down the mountain that is hard. Going up, all the boulders are like stairs and stepping stones. Going down those same boulders are barriers that make my knees scream. I have a friend who likes to climb mountains in the summer, if they have operating ski lifts. He walks up, and then he rides down. Some very talented and skilled people carry their skis up Moosilauke in the winter and then ski down. There is no lift. The toughest part of the process for me is watching younger people, say folks in their mid fifties, go breezing by while I step aside to let them pass. Each time I step aside, I am reminded of what George Bernard Shaw is reported to have said, “It is a pity that youth is wasted on the young!” With a little resentment, I mutter under my breath,”Enjoy it while you can! Your knees won’t last forever.”
I think we may have enjoyed the last nice day of fall. The end of the World Series–wasn’t the finish amazing?–may be the true beginning of winter. If the warmer days of fall are not over, there can’t be many more, so I am headed west. If you are reading this on Friday, know that while you are reading, once again I will be up high. I will be flying to Kauai and Maui. Perhaps, next week the header will be a shot from the top of Haleakalā, 10,000 feet above the Pacific. There is a road to the top. I hope that wherever you are this weekend you will get a chance to enjoy some nice fall weather.
Be well, take good care of yourself, let me hear from you often, and don’t let anything keep you from doing the good that you can do every day,
Gene
