Can Wal-Mart Stores, Inc. Compete With Other Health Care Clinics?

The recent move by Wal-Mart Stores, Inc. WMT to open low-cost in-store health care clinics had some observers suggesting the company’s ability to offer competitive prices could hurt others in the space.

Jennifer LaPerre, Wal-Mart U.S. senior director for health and wellness stated the company’s goals succinctly: "It was important to Wal-Mart that we be able to maintain or be a price leader in this space."

At $40 a visit for customers and $4 for Wal-Mart employees the competition, including CVS Corporation CVS, Target Corporation TGT and Walgreen Co. WAG could have a rough time keeping up.

Related Link: How Wal-Mart Is Disrupting The Dollar Store Space

The Nurse Practitioner Solution

Wal-Mart would be able to keep prices low, in part by staffing clinics with nurse practitioners instead of physicians. Wal-Mart said its nurse practitioners would come from Quadmed, a company that staffs on-site workplace clinics.

According to Dr. David Severance, Quadmed’s corporate medical director, "These particular set of services that are going to be provided are really ideal for a nurse practitioner to manage."

Managing Ongoing Conditions

The ability to manage ongoing conditions like diabetes and high blood pressure at a low cost could drive patients to Wal-Mart.

According to Severance, "If a patient has a fairly sizable co-pay, just to see the provider for each one of those visits, there's a much greater likelihood that they won't follow through with what the prescribed treatment is."

Location is Key

Timothy Hoff, Ph.D., associate professor of management, health care systems and health policy at Northeastern University in Boston, told Benzinga that retail clinics like Wal-Mart's offer a lower-cost overhead model able to deliver basic care and chronic disease management in otherwise underserved parts of the United States.

"Not all areas of the country … have a traditional, physician-centric primary care practice within reach," Dr. Hoff said. "Rural areas in particular suffer from a lack of physicians. But every part of the country has a Wal-Mart or Target or Walgreens or CVS — which means these organizations have a competitive advantage by already being in the location that needs basic primary care service delivery.”

Driving Traffic

Being in the right place is not the only advantage enjoyed by companies like Wal-Mart.

According to Hoff, "Many organizations like Wal-Mart and CVS may use retail clinics as a ‘loss leader’, e.g., they don’t expect to reap a lot of profit from their clinic operations but it helps their branding in the community, enhances consumer loyalty (which guarantees repeat business), and brings foot traffic into the store that will likely shop for and buy other things."

A Call For More Action

By putting itself in the health care spotlight, however, Wal-Mart has also drawn the attention of people like Dr. Holly Harner, director of the graduate program in public health at La Salle University in Philadelphia.

Dr. Harner would like to see Wal-Mart do more to promote wellness than simply offer low-cost in-store health care services.

"If Wal-Mart is so worried about health," Dr. Harner told Benzinga, "why are they still selling guns and tobacco? I think the recent CVS changes [no tobacco] help us see that for-profit companies can be partners in health."

Related Link: 5 Ways Walmart's Care Clinics Could Disrupt Medical Care

The Future Of Health Care

Beyond competing with other health care clinics, Wal-Mart's real future may lie in the world of primary care physician medical coverage, according to Hoff.

"I think they have real potential to compete with traditional, physician-focused primary care for more and more primary care services, and in this sense the model represents a future competitor for some types of patient care."

At the time of this writing, Jim Probasco had no position in any mentioned securities.