In our last couple of blogs, we have expressed our excitement about a potential deal between Walmart (WMT) and Humana (HUM). The latter, a company I have known very well for 20 years, as they are a dominant player in my home market in South Florida. I have had contracts with Humana for most of my 25 years in healthcare, and a company I founded and grew to modest size is part of Humana today.
I think a combination of Walmart and Humana is like none other I have seen in healthcare. We have mentioned a few ideas, some financial; however, in this blog, I want to point out more clinical opportunities. Furthermore, we will discuss why this combination is nothing like the overly hyped relationship or partnership between Amazon, Berkshire and J.P. Morgan Chase.
Walmart is a huge employer, I believe I read the largest private employer in the United States. They also interact with a staggering number of consumers daily – not to mention, they have an envied footprint in every state across America. Just think, 4,700 stores are a huge footprint! Most people don’t realize they are one of the largest private commercial property owners in the USA.
By most standards, Walmart is also one of the best negotiators in the entire world; a reputation they have earned. They have an envied direct from manufacturing to consumer logistic system, that I’ve come to understand is even studied by the U.S. military. As a witness to hurricanes in Florida, I would rather have Walmart handling logistics after a disaster than any other organization on the planet.
In addition to an enormous footprint across the U.S. and their amazing logistics capability is that Walmart already has pharmacies in their centers that includes great programs for low-cost prescriptions, some as low as $4 (USD). Some locations are even taking it a step further by exploring blood lab testing facilities.
Now, as to the other half of this combination, we are convinced that Humana is like no other company in the managed care or insurance space in America. Humana is the second largest provider of Medicare Advantage plans providing care to over 17% of the national market. That means 3.5 million beneficiaries (mostly over 65 years of age) with that number guaranteed to keep growing. Medicare membership is growing nationwide at about 10,000 members per day through the next decade.
What makes Humana so special in my view, and why I think the partnership with Walmart could be so amazing, is that Humana owns two key assets:
- One, is they have their own Pharmacy Benefit Manager (PBM), which is becoming the key asset to disrupt healthcare cost. We could write extensively about the good and bad of PBMs; however, know they are fundamental to pharmacy cost paid by insurance companies and employers.
- Two, is that they have fully-staffed and extremely well-trained medical centers. These are not pocket clinics, these are full-blown ambulatory medical facilities. They have about 250 of those, which I can see quickly expanding to satellite offices in Walmart centers.
Those centers are so valuable, we estimate if they were a separate company (as Humana has announced), they could generate $3.5-4.0 billion (USD) in revenues alone.
Combining Walmart and Humana would have a tectonic impact in healthcare with major consequences everywhere.
My hope and expectation would be that Walmart would use its power to expand the delivery systems, and it would use its experience in technology and logistics to materially improve the technology in Humana, and the entire industry. I see total transformation of inventory management, EHR and supply chain.
I expect an explosion in the connected consumer/patient relationship and expansion of telemedicine and IoT devices – procurement is Walmart’s expertise.
Healthcare has been, and still is, in desperate need of a technology and delivery system change! The union of these two giants would be a huge “shot in the arm,” pun intended. As Americans age, the need to provide remote services, products, and devices will increase. I suspect that is what Walmart is looking at.
I think that a Walmart/Humana combination will threaten even hospitals. In markets like Florida and Texas, the company could just build its own hospitals from the membership they already have in these states!
As a technology company, we see this potential merger positively, as it would advance consumer-based patient records, price transparency, use of IoT wellness devices and a promote a better-connected patient. Other companies (even providers) will have to adapt quickly as this could be a runaway success. Something this groundbreaking has not happened since managed care took root in the late 1980s; however, with this transformation, technology-driven change will move faster than ever before!
-Noel J. Guillama, President