Retail giants are making strategic moves into the healthcare industry with new mergers and acquisitions making constant headlines. Can payers compete with the scale and innovation of the retail industry? Trends show that legacy processes and consumer friction paint an uncertain future for payers going up against the wave of retail’s push into healthcare. However, payers still have a significant advantage in competing against retail giants. To truly compete, payers will have to tap into what retail does best, while deepening existing connections to thrive in the future of healthcare payments.
It’s hard to ignore retail’s push into healthcare. In the last decade, large corporations have made an increasing number of strategic investments in the healthcare space. Retail giants, in particular, have made many large deals in recent years to break into the healthcare industry. More recently, there has been an influx of primary care offerings in retail locations across the country. In fact, the retail clinic market is estimated to grow to more than $4 billion by the end of this decade.
While retail has moved into healthcare, payers have yet to scale administrative workflows or drastically reduce friction and dissatisfaction with their organizations. For example, overall satisfaction among members is falling by double digit percentages. At the same time, retail giants have focused considerable amounts of time and money on brand recognition and reputation by focusing on every touchpoint with their organization. These dynamics set up intense competition between key healthcare organizations such as payers and retail giants.
Why Retail Giants Are Focused on Healthcare
The competition for a piece of the healthcare economy is fierce. Healthcare spending represents nearly one-fifth of the U.S. economy and has consistently exceeded the gross domestic product growth in recent years. This growth is exactly why retail giants are eyeing healthcare and its potential for future business growth.
From recent news of acquisitions, investments and expansions, there seems to be a race in retail to answer the needs of healthcare consumers. If retail can connect with members and patients, there is potential to tap into the healthcare economy’s current size and future growth. Retail corporations seem to be well-positioned to achieve consumer loyalty with vast and established physical and digital channels to offer personalized and integrated healthcare touchpoints to consumers.
How the COVID-19 Pandemic Accelerated Retail’s Healthcare Push
The pandemic created upheaval in many areas of daily life. None more so than for the healthcare industry. Retail clinics helped to answer some of the strain on healthcare with solutions like wider availability of COVID-19 testing. Additionally, the clinics served as an alternative treatment option for consumers to avoid overburdened hospitals during this time. These factors led to significant growth of more than 20% for retail clinics from 2019 to 2020.
The Healthcare Consumer and the Retail Experience
While these recent trends continue, consumer demands and the retailization of healthcare have only accelerated. Consumers value convenience in every aspect of their daily lives. The pandemic gave consumers more convenience in new virtual and self-service channels than they have ever had before. Now, most consumers expect to have this newfound convenience at their fingertips, including in healthcare.
Digital and self-service experiences have become the norm throughout the economy. Yet while retail has invested heavily in digital experiences, healthcare has been slow to make the necessary changes to cater to consumer convenience. At the same time, consumers are faced with higher out-of-pocket costs for their healthcare premiums and care. This creates a concerning combination of increasing payment responsibility with highly inconvenient experiences.
Why Healthcare Payers Should Pay Attention to Retail Moves
High costs are not only a consumer trend. Employers are also feeling the higher costs of healthcare. The payer relationship with employers has been plagued by increasing healthcare costs in the last decade. Almost all employers are focused on managing costs related to health benefits for their workers. Employers represent a key segment of the payer businesses and have been under extreme pressure in recent years – struggling with macroeconomic trends and staffing fluctuations.
Payers have deep ties to consumers and employers though as health plan coverage is historically tied to employment in this country. As retail continues to push into healthcare, payers will have to find ways to increase their ties to all stakeholders in the industry which could be their true advantage in the competition.
The Key for Payers to Compete With Retail: Employers
It should be noted that retail’s growth in healthcare has been slow. Also, consumer loyalty has come up short. According to a recent survey, more than half of Americans say they would use a retail clinic but only one in ten have actually used a retail clinic. This slow rate of adoption may not last forever, considering the immense footprint of retail and consumer frustration with the healthcare industry.
The time for payers to act is now. Payers have deep connections with providers and employers through the existing healthcare fee-for-service model and employer-sponsored health plans. This model has been built over the last century and is unlikely to go away in the very near future. To truly compete with retail in healthcare, payers should take what retail does best and apply it to every relationship and experience with their brand. Prioritizing convenience can help payers to improve satisfaction among all stakeholders, but especially with consumers. Additionally, tapping into existing innovation and scaling existing processes will help to optimize operations for payers to accelerate growth without the heavy lift.