Walmart to change healthcare

Walmart hopes to make changes within the healthcare system to drive customers to its stores.

The nation’s largest retailer has made reducing health-care costs one of its top priorities.

According to CNBC, health insurance is Walmart’s second-largest expense on its profit and loss statement (behind wages), Walmart executive Lori Flees said at a Minneapolis conference on the future on health care.

Rising health costs are also cutting into its potential sales, she said, because customers have to spend more of their income on medicine and doctor’s visits than on backpacks and home goods, according to CNBC. Walmart customers will need to spend an estimated $750 billion more on out-of-pocket health-care costs in five years than they do today, compared with $250 billion in additional estimated spending on retail goods, Flees said.

When consumers spend more of their paychecks on health care, they have less money to spend at Walmart. And when people use Walmart’s pharmacy or health services, she said, they tend to shop for other items in stores, too.

Retailers are searching for ways to differentiate their stores as consumers increasingly shop online, according to CNBC. Some of them are teaming up with pharmacy companies, adding health clinics and expanding drug aisles to draw more customers into the stores. Meanwhile, health expenses are rising at a rapid clip, pressuring both employers and employees.

“So these are the things that drive us to be interested in health care: Our customers need help,” Flees said. “Our associates need and want to be healthy. And it’s good for our business.”

Walmart’s competitors are also investing in health care. CVS Health wants to add more options at its retail clinics, known as MinuteClinics, once it closes its acquisition of health insurer Aetna. Walgreens is testing a number of partnerships, including one with UnitedHealth Group to add urgent care centers to some drugstores, according to CNBC.

Walmart earlier this year was looking to deepen its partnership with Humana, people familiar with the matter told CNBC. Flees said partnerships are “an essential part” of the strategy to lower the cost of healthcare and to improve the health of the country.

To read CNBC’s full article, click here.