Walmart is the latest of retail powerhouses seeking to solidify their position in the future of healthcare, as early-stage talks to acquire the insurer Humana continue. This news comes on the heels of CVS’ acquisition of Aetna, another insurer. Similar to CVS, Walmart already offers low-cost retail health and pharmacy services. In the case of Walmart, its potential acquisition of Humana could position the delivery model it has built as a self-insured employer, coupled with its retail health services, as an entrant into the burgeoning Medicare Advantage market. Ultimately, such a move could enable new growth, for Walmart, in a market that rewards innovative programs that control costs and promote patient health.

Walmart’s self-insured model

Walmart is a fixture in many American towns. With an abundance of products and services, it offers a one-stop shop for residents, in addition to job opportunities for the community. In fact, Walmart is the United States’ largest employer. It holds financial accountability for employee healthcare by independently insuring them, pooling risk and purchasing care on their behalf. This responsibility has prompted Walmart to innovate, and take control of coordinating the provision of its employees’ healthcare between its retail health services and pharmacy care, regional care providers, and multiple Centers of Excellence.

Its Centers of Excellence (COE) program sends employees to the most highly touted healthcare institutions in the U.S., including Geisinger Medical Center and Johns Hopkins Bayview Medical Center, for issues such as hip replacements, knee replacements, spinal care, and transplants. Walmart covers the patients’ flights, stay, and copay if they choose care at these institutions, and pays the providers bundled payments. Under this arrangement, COEs are paid a single, predetermined, capped payment for the total amount of services based on a patient’s episode of care. Why does Walmart encourage its employees to travel to these nationally renown facilities?

It has been shown that Walmart’s COE program may be drastically reducing unnecessary surgeries. Many of the patients who receive a treatment recommendation at one of the highly regarded and vetted institutions find that the recommendation given differs from that of their local providers’ office. For example, among patients originally told they needed a transplant, about 40% were discovered to not need a transplant when sent to the COE.

Impressively, the program has shown to reduce patient out-of-pocket costs and employer healthcare costs, while keeping patient satisfaction scores high. This lasting success is telling of why Walmart would now be seeking to acquire Humana.

Moving into Medicare Advantage

Humana is the second largest insurer in the Medicare Advantage market—a market growing in size year after year with high annual membership retention. The capabilities Walmart has been building while insuring its own employees could set it up for success within the Medicare Advantage market.

The Medicare Advantage market rewards provider networks that innovate to reduce costs while improving health. It does this by paying insurers, such as Humana, a fixed, “capitated” fee for the care of each consumer they cover—incentivizing them to contract with provider networks who innovate to improve health and control costs. Given the capabilities Walmart has built in this area while insuring its employees, it should be ready to work with Humana to create unique offerings that stand out from the competition.

Though CVS and Amazon may be the first to make a splash with their plans to shake up the healthcare industry, Walmart may still come out ahead. It has already developed a network of providers shown to manage care costs over time, and entry into the burgeoning Medicare Advantage market, spurred by the potential acquisition of Humana, would tap huge potential for growth, allowing these players to continue innovating to manage costs and patient health into the future.

For more, see:
Health for hire: Unleashing patient potential to reduce chronic disease costs


  • Ryan Marling
    Ryan Marling