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Walmart Decelerates Health Center Expansion Plans

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Walmart launched Walmart Health in 2019, as a one-store pilot in Georgia. Since then, Walmart Health has grown to 48 locations in five states, as of late last year.

The medical centers, which are geared at patients with no or poor insurance coverage in underserved areas, are located next to or inside Walmart Supercenters. They offer a range of services, including primary and urgent care, labs, X-rays and diagnostics, dental, optical, hearing and behavioral health and counseling in one facility.

Walmart says a key differentiator of its centers is their inexpensive and transparent pricing at the point of service. The cost of services at a specific center vary based on factors like the baseline cost of healthcare services in a specific region, patient demographics and underlying area health needs.

The Arkansas-based company is one of a spate of retail giants racing to build up their primary care presence amid growing demand for affordable and convenient medical care. However, some companies have struggled to harmonize the size of their medical networks with the demand of building and operating the clinics.

Walmart says it is taking a more deliberate approach to expansion. However, the company did ratchet up its expansion plans last year before its more recent slowdown. Last March, Walmart said it would open 28 health centers in two new states, Missouri and Arizona, this year. One month later, Walmart said it would open an additional four centers in Oklahoma this year, entering that state for the first time, along with expanding its presence in Texas. Walmart previously said it planned to have more than 75 health centers operational by the end of this year.

Now, Walmart plans to hit that target in early 2025. The company delayed six planned openings in Phoenix, Arizona, due to “significant pressure on construction resources,” the Walmart spokesperson said. Those openings have been pushed back to early 2025. Four additional openings in Oklahoma City have also been paused, the spokesperson said.

Retailers are increasingly angling to snap up a larger slice of the $4.5 trillion healthcare system. Integrating primary care capabilities, whether physical or via telemedicine, allows the companies to provide a front door to the medical system for consumers and nudge them toward other services, like pharmacy capabilities, urgent care clinics, insurance offerings or medical devices for sale in stores.

As a result, the space has seen a number of multi-billion-dollar deals. Last year, CVS purchased value-based medical chain Oak Street Health for $10.6 billion and home care provider Signify Health for $8 billion, while Amazon closed its acquisition of primary care company One Medical for $3.9 billion.

Meanwhile, VillageMD — a primary care operator majority owned by Walgreens — has been actively pursuing deals with provider groups, including an $8.9 billion acquisition of New Jersey-based chain Summit Health. There was also speculation that Walmart was exploring a buy of value-based medical chain ChenMed late last year, though no deal emerged.

As a result of the activity, some 30% of the primary market could belong to nontraditional players by 2030, according to estimates from consultancy Bain. However, some retailers are struggling to manage their swelling networks. Despite a number of provider group acquisitions after gaining control of VillageMD, Walgreens recently pivoted to closing underperforming stores.

Walgreens had closed 140 of the health clinics as of March — more than double its previous goal of 60 closures to hasten the profitability of its health division. Along with its health centers, Walmart has made a number of other plays in the healthcare space, including partnering with an insurer and health system on care coordination in Florida. The company also brokers Medicare Advantage plans and offers co-branded MA plans with insurance giant UnitedHealth.

Walmart also bought a telehealth provider in 2021 and a chronic condition management tech platform in 2020.

 

Source: yahoo!finance

Amazon’s One Medical Ramps Up Its Expansion In Primary Care

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Amazon’s One Medical membership-based primary care unit that provides on-demand 24/7 access to telehealth services and offers in-person care continues to report steady growth.

Having recently added two new health system partners and leveraged the Amazon Prime membership model, One Medical is connecting with employers and the roughly one-third of consumers who do not have a primary care doctor.

Below are three ways One Medical is extending its reach.

1. Forging More Employer Relationships

So far, more than 8,500 employers have engaged with One Medical’s services throughout the 20 regions the company now serves nationally. And just last week, news came that One Medical will serve as the primary care provider for the Health Transformation Alliance, a cooperative of nearly 60 employers including Coca-Cola, American Express, Marriott, Boeing and J.P. Morgan.

Takeaway

Amazon hopes to build momentum for lower-priced, primary care services that offer convenient access and give employers more choices to help manage health care benefits for their employees.

2. Building Health System Partnerships

New Jersey-based Hackensack Meridian Health and CommonSpirit’s Virginia Mason Franciscan Health recently became the latest health systems to partner with One Medical, bringing the company’s number of health system partners to 12. Virginia Mason will become One Medical’s specialty referral partner for its eight primary care clinics in the Seattle area. Meanwhile, One Medical plans to enter New Jersey this year, building new clinics in partnership with Hackensack Meridian Health. One Medical will manage and staff the clinics, which will become part of Hackensack’s clinically integrated network. The first clinic is slated to open by the end of 2024 at a location to be determined.

Takeaway

Some health care executives believe One Medical is taking a wise approach by partnering with health systems on specialty referrals and working with a company that has a digital-first, consumer-centric mindset.

“This new offering from Amazon is smart and certainly supports the way we all need to think about delivering better services,” Jeffrey Sturman, senior vice president and chief digital officer at Memorial Healthcare System in Hollywood, Florida, recently told Becker’s Health IT.

3. Extending the Prime Membership Model to Medical Care

Earlier this month, Amazon stated that it would begin offering a One Medical Prime membership for $9 per month or $99 per year — $100 less than the standard One Medical membership fee. Prime members also can add up to five additional memberships, each for $6 per month or $66 per year. In-office visits to One Medical Clinics are not included in the membership fee. Amazon also is leveraging its pharmacy business to provide greater convenience to members. Amazon’s RxPass will deliver prescriptions to customers’ homes for $5 per month. In addition, Amazon has developed a new feature to make it easier for consumers to use manufacturer discounts on branded medications by integrating coupons into the checkout process.

Takeaway

The long-anticipated move by Amazon to come up with a Prime membership model for health care services appears to be taking shape. With an estimated 167 million Amazon Prime members in the U.S., this could be a significant source of new patients for One Medical and its partners. How effectively One Medical manages these patient relationships and consumer expectations will go a long way toward determining the long-term scope and reach of its operations.

 

Source: American Hospital Association

MOB’s Low Vacancies, Longer Leases Boost Investor Appeal

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Vacancies? What vacancies? As medical offices go, the idea of unleased space is practically a foreign concept.

Thanks to an aging population that requires more care and the need for medical office visits when a patient is ill or has a chronic disease, medical offices remain in demand. As a result, in the first quarter of 2023, the national medical office vacancy rate was only 9.2% — just under half the 17.5% vacancy rate for traditional offices.

“From 2019 through the first quarter of 2023, vacancy in medical office properties has only risen 50 basis points nationally,” Marcus & Millichap reported in June.

The future outlook also seems healthy as the number of senior citizens increases and the amount of new medical office space being built remains limited. As of June, less than 12 million SF – or 1% of current inventory — was slated for 2023 delivery.

The report acknowledges, however, that availability depends on location-specific factors, such as resident demographics, existing local stock and metro-level construction pipelines.

Vacancy rates are especially low in warm weather markets which are experiencing an influx of retirees escaping cold-weather climates like Chicago or New York. The report cites a 190 basis-point drop in medical vacancy in the Dallas-Fort Worth area from 2019 to March 2023 “coinciding with a 17% surge in the metro’s age 65-plus cohort.” There was a similar pattern in other areas where the senior population grew more than 15%, such as West Palm Beach, San Antonio and Phoenix. Each saw vacancy falling by more than 200 basis points in the same period.

The strength of the medical office market is being bolstered by the entry of large retail chains such as Walmart Health. Walgreens has expanded into primary, specialty and urgent care following its $8.9 billion acquisition of Summit Health, while Amazon snapped up One Medical’s virtual, in-office and lab services. Other retailers entering the market could also boost demand for medical office space.

Post-Covid, medical office space has maintained an average sale price of just under $300 per SF. However, the report notes, dealmaking has slowed since the Fed began to raise interest rates. Uncertainty in the banking sector, which supplied over 75% of medical office financing in 2022, could also tighten lending.

On the other hand, medical office leases are generally signed for longer periods, reducing erratic swings, and healthcare is often non-discretionary. These factors, as well as telehealth and fewer labor challenges “could boost investor confidence in the long-term growth potential of the sector,” the report states.

 

Source: GlobeSt.