Walmart-Humana and the Future of Healthcare

Change and consolidation continue to sweep the insurance industry. Healthcare represents almost 20% of the U.S. economy. Costs are increasing and almost no one is happy. These are ingredients for change.

The retail sales portion of the economy is also under extreme pressure – with thousands of stores closing and wildly-moving stock prices, this market is as ready for drastic change as is healthcare.

So it is no surprise that change is intersecting. Last week, rumors started that Walmart, the nation’s largest retailer, is in talks with Humana, the fifth-largest insurer about a combination or a strategic alliance. To me, this was not a shocker. CVS-Aetna and the Amazon-Berkshire-JP Morgan venture paved the way to this logical new alliance. Humana has been up for sale and following the failed merger with Aetna they clearly needed a new pathway – and Walmart is feeling the same pressure that other retailers do from market disruptor, Amazon.

Walmart is not new to healthcare. It has been almost 12 years since they pioneered the $4 generic drug list and expanding their pharmacy and clinical services is clearly a new avenue to attracting store traffic. But there is no doubt that their expertise at operating efficiency will put a tight squeeze on market inefficiencies.

I like the prospects; however, Walmart – if this moves forward – will soon be facing regulatory and legislative pressure that they are not really accustomed to as they plan to enter the health insurance space. Meanwhile, UnitedHealthcare continues to pursue integration in the other direction, purchasing providers like the DaVita Medical Group.

The biggest players are staying a step ahead of the market and are a good lens to focus on the future of healthcare.

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