Welcome to the 103rd installment of The Wal-Mart Weekly, a column dedicated to bringing you insight, wit, facts, results, opinions, and just a bit of everything else when it comes to a very hot topic these days: Wal-Mart.
Wal-Mart Stores, Inc. (NYSE: WMT) has nosed into the health care game before. Just a recently as a year ago, the world's largest retailer wanted to open in-store health clinics as a possible entry point to providing health care inside its retail locations.
The retailer now wants to see if it can become a low-cost provider of health care for small businesses and employers. That's very interesting -- the notion that employers could shop at Wal-Mart for employee health care like consumers do for laundry detergent. Of course, the prices Wal-Mart would offer would be the lowest possible.
What is Wal-Mart's fascination with health care?
The question is not if, but when Wal-Mart will becoming entangled with providing health care products (maybe even services) to either direct consumers or even to businesses. What it knows is this: health care will be one of (if not) the largest economic opportunities in the next few decades. Jobs in that field are expected to be at the top of occupational needs for the foreseeable future and tens of millions of baby boomers are starting to retire now -- and the numbers will continue for a while.
Wal-Mart has already conquered the retail world in a large way. Yes, the company can fix a zillion small problems, a couple of hundred large ones, and still not be satisfied with lowering costs and increasing profit in the standard retail areas where it competes (oops...dominates). What else is left? Creating new markets or re-inventing existing ones where severe inefficiencies exist, that's what.
A recent pilot program with Caterpillar, Inc. to get prescription drugs from Wal-Mart's inventory to Caterpillar's employees showed so much promise that the light bulbs went on over quite a few heads in Bentonville. Mike Struhs, Business Development Director for Wal-Mart, said that "we hope we will drive down costs for the entire health-care industry... that is what we do. We operate efficiently and that allows us to lower costs, and those savings are passed on to our customers." That's the standard Wal-Mart line: we want to lower costs and pass on savings to customers. Nothing new there.
Wal-Mart's desire to re-define the 800-lb. gorilla
The retail sales and growth over the last decade that have made Wal-Mart the largest company in the world are not enough. In effect, the world is not enough (no James Bond pun intended). By trying on several partnerships to use its purchasing clout to give employers better costs to employees, the influence of Wal-Mart's extreme economic power won't do anything but become larger. In the Caterpillar trial, the retailer waived $5 prescription drug co-pays if the customer bought drugs at a Wal-Mart location.
The standard rule applies here: not only will Wal-Mart make more incremental pharmacy sales, but the foot traffic increase alone will mean more in-store purchases that may have not been made at all. But that's just the start: insurance brokers and prescription drug manufacturers stand to lose in a big way if Wal-Mart's increasing demand for health care for actual employers goes up, and with it, demand for lower prices and enhanced coverages. That's the power Wal-Mart has: do business with us, or compete against us and see.
The middleman is slowly drying up in many industries, and this is a victory for some, but a large problem for others. For one, those middlemen make up the crucial go-between that connects a buyer and a seller. Since it's impractical to have manufacturers contact customers directly for commerce, the retailer exists. What if that retailer acted more like a consumer advocate than a profit generator? Therein lies Wal-Mart: a company that wants so many savings for its customers that the profit coming in from the quantity of doing just that has propelled it to the king of the retail hill.
Companies and consumers tired of health-care costs: Advantage, Wal-Mart
Health-care costs have risen to such ridiculous levels and continue to go higher. Customers are tired of the increases, and companies that subsidize much of the coverage have had it too. So, if Wal-Mart can lower these costs, there could be no stopping the retailer's march to take the middleman cut and give much of it back to the customer. If the Caterpillar experiment gets out to corporate America, the pharmacy benefit manager firms and health care brokers are in severe trouble.
It's an economic opportunity for Wal-Mart, but a kick in the face for the inefficient and bloated middleman who add a smattering of value with a whole heap of cost. In 10 years, the economics of health care in the U.S. could be handled by Wal-Mart for a wide variety of citizens and the face of the manufacturer-broker-retailer landscape of health care products may not exist in the form it does today. At the same time, Wal-Mart's power of the purchasing habits of the standard U.S. retailer consumer could be as strong as anything in the history of commerce. Do you long for the day or will you resist it?
Stay tuned right here at BloggingStocks for another edition of the Wal-Mart Weekly at this time. Until then, have a great week.
Nuclear power is on the comeback trail
Apple backs AT&T in continuing spat with Verizon
Closing Bell: The recession is still over, still... do you feel it?
Reader Comments (Page 1 of 1)
3-30-2009 @ 6:24PM
thedude said...
A - I have NEVER gone into a WalMart and met an employee I would personally hire to work at my company.
Do you really want to be forced into being treated by doctors who were at the bottom of their class and were desperate to get a job.
B- WalMarts strategy is by buying massive quantities of cheaply manufactured products and selling them as cheaply as possible. Profiting by volume.
Do you really want to be treated by not only the worst doctor available but also by one that is overworked and underpaid.
Look what happened to the US auto industry when they started building to a budget. Not Good at all
Look what happened to the quality of products when they started to be produced outside the US. I have US made products from the 60's and 70's that are still in better shape than anything that came out of China in the last 15 years.
The best thing for the planet would be the demise of WalMart, and any self respecting citizen would not shop there. Personally I have NEVER bought anything at WalMart but I do go in every once in a while just to confirm my assessments continue to hold true.
The fact that very few people have had positive shopping experiences shopping at WalMart is enough of an argument against WalMart healthcare. They think they have legal trouble now, can you imagine the malpractice suits that their healthcare would generate ?
3-30-2009 @ 9:22PM
Dave said...
Well, given the choice between Walmart and the government.................I'll go with Walmart any day. There isn't one damn thing that the government is good at except burying us in more idiotic regulations. What department of the government do you believe is so superior that you would chose them to do anything over private enterprise? IRS, Immigration, DEA, U.S. Post Office, FEMA, Congress, The Treasury Dept., USDA,..............name just one that you think is even close to effective or efficient. No sir, bungling beurocrats who have completely forgotten the meaning of the term "public servant" will never be my choice to control any part of my healthcare.
3-30-2009 @ 11:34PM
thedude said...
@ Dave - I agree 100%, I would not trust the government to clip my toenails let alone have actual input on the level of health care I receive. But insurance companies are just as inept. Especially when they are publicly traded on the stock market and increasing share value for stock holders is more important than the actual health of the people paying the premiums.
If you have ever been involved in a negotiation between the hospital and the Ins Co during negotiations you would become sick. It is far worse than dealing with a used car salesman.
A- Eliminate insurance companies.
B- Take all the money currently being paid to these cesspools and put it directly into the hospitals and clinics.
What I think needs to be done is that hospitals and clinics should be able to create a full years budget based on the number of patients and the kind of care given (this would have to be monitored stringintly by a consumer advocacy group) Then just let the government give that entire sum to the hospitals and clinics and everyone gets free healthcare (I know not free, funded by taxes, but with no worries of incurring huge medical bills)
Yes some extremely healthy people would gripe that they shouldn't have to pay for the health care of the less healthy, but people without children have to pay property taxes to fund school systems
I myself was in perfect health for 35 years and when I did get sick it ended up costing over $150k , you never know.
There is a better way and the government insurance companies and WalMart are not it. Health care should fall to the medical community - give them full funding - and then keep an eye on them, but not to make sure they are saving money - to make sure that every patient is getting the best possible care available.
Expensive ? Hell yes !
But so very much worth it.
3-31-2009 @ 4:04PM
roudy11z said...
Well here we go again with certain responses posted here. Wal-Mart does lead again as the 800 lb gorilla in this area. It strikes fear to those insurance companies who have had it made so far.It can only help to make some of the medical field more competitive.If WMT can exert the clout it has like when it lowered certain generic drugs, then we average low income people will come out ahead again. I don't care if WMT does make money with this if you get my drift.RoudMan