Retail Giants Ready to Disrupt the Home-Based Care Ecosystem

As I tried to fall asleep the other night doing the 21st century version of counting sheep – listening to a podcast, of course – I heard an advertisement about home care.

The ad was placed on a popular sports show from CVS Health (NYSE: CVS). Among a few other things, it featured the idea of “home care” and how the retailer could deliver that to you.

I immediately thought two points: The first one – which I think most of you will empathize with – was that I need to get a life. I was now wide awake thinking about CVS Health’s future in-home care strategy, after all.

The second one, after I quickly disregarded the first, was, “Wow, they are really going to make a play here.”

Just a couple days later during its 2021 investor day, the company announced that it was looking to “expand home health services.”

Specifically, CVS executives said they’ll be launching new “all-payer health products and services” to diversify the company’s growth portfolio, including home health services. They also expressed their desire to “enhance omnichannel health services” that meet the needs of consumers “at home, virtually and in the community.”

This trend isn’t new. CVS, Walgreens (Nasdaq: WBA), Walmart (NYSE: WMT), Amazon (Nasdaq: AMZN) and others have all recently made demonstrable moves to further their home-based care capabilities. We’ve reported on just about every one of those on Home Health Care News.

Thanks to their existing infrastructure and health care assets, CVS and Walgreens are best positioned to disrupt the nation’s in-home care ecosystem, in my view.

CVS Health executives had already said in February that they were building out “home health hubs” for seniors as part of its strategy beyond the COVID-19 pandemic. The company additionally plans to have 1,500 community-based HealthHubs – its in-store centers for primary care, urgent care, specialty care and more – open by the end of this year.

Aetna, CVS Health’s insurance arm, also has partnerships with in-home care groups Papa and Contessa Health locked in for 2022.

“Nothing is off the books,” Dr. Jamie Sharp, chief medical officer for Aetna Medicare, told HHCN earlier this month. “One of our JVs coming up for 2022 is with Contessa and Prisma Health in South Carolina for hospital at home. And I don’t think any of us were thinking about that, you know, five years ago.”

Meanwhile, Walgreens has invested over $6 billion in VillageMD, a primary care company with a home-centric approach and a home care division within its network. I recently spoke with VillageMD co-founder and Chief Growth Officer Paul Martino for TALKS – and came away from that conversation extremely impressed with what the two organizations are building.

“I just think this notion of retail neighborhoods and the convergence of health care, … I think it’s going to be the future,” Martino told me. “And I want to personally participate in driving that future because I do think it’s the right thing.”

And Walmart partnered with Amedisys Inc. (Nasdaq: AMED) in 2019 at one of its first health care hubs. It has asserted constantly over the last two years its desire to help support seniors aging in place.

How far they’ll go

Despite these and other developments, no one has gotten a clear sense of how far along in the process these retailers are in the shift toward the home – or more importantly, how far they ultimately want to go.

Amazon does everything quickly, for better or worse. It was so confident it could enter into home-based care within the last year that it reportedly aggressively pitched Aetna on its services.

Aetna reportedly turned down Amazon, though the reasoning at the time was not clear.

Here is what I speculated in July:

Right now, though, it appears that Amazon Care is not set up in a way that insurers find desirable. It could be that, or it could be that the service and platform is new enough that insurers aren’t convinced yet that they can lower costs in value-based arrangements.

That still could be true. But with recent developments from each of these retailers, along with paid ads to general consumers on popular podcasts, I think it could be something else as well.

It could be, instead, that CVS Health has lofty expectations for its own in-home capabilities in the next year, which would make paying Amazon for those services nonsensical.

A mere months after that report, Alan Lotvin, the executive vice president of CVS Health, commented on Amazon’s strategy at the HLTH conference.

“Underestimate Amazon at one’s own peril,” he said. “That would be an obvious statement. I’m sure that they can [build a lot of things], but the question is always going to be, ‘How do you break into the big leagues?’ And I don’t mean that disparagingly.”

Amazon isn’t going to let one denial deter its aggressiveness. Look no further than its involvement as a flagship organization in Moving Health Home – a coalition that vies for favorable home-based legislation in Washington, D.C. – to find out that it plans to be in the business for the foreseeable future.

By the end of 2022, its goal is to expand its home and virtual care services through Amazon Care to 20 additional cities. Right now, the service is only offered in a few areas in the country.

Amazon Care began as an employee-only service, but it has been expanding to the general population.

Where existing providers fit in

The question is, then, while these retailers are in this arms race with each other, will they be partnering with traditional home health and home care agencies? Or will they leave them on the outside, looking in?

To date, their involvement in the space has not worried home care and home health providers.

“They face what we all face,” Kerin Zuger, the chief of strategic growth at Right at Home, told me in September. “Amazon will need to get reimbursement to follow care into the home, but that won’t be an exclusive arrangement. Other providers will be able to get into the home for seniors with that reimbursement as well. So if Amazon gets care into the home, it will be alongside other providers. In this way, they are a great partner.”

But while that sentiment may be held in the home health and home care industries, outsiders see that thought process as naive.

Robin Gaster, the author of a book on the power of Amazon and a visiting scholar at George Washington, believes the path that Amazon has taken into home-based care is strikingly similar to others it has taken during its history.

And those generally ended in Amazon dominance.

“I think Amazon is going to be a classic disruptor in the space,” Gaster told me. “Amazon has made a business out of disintermediating existing businesses and existing markets. And as far as I can see, that’s exactly what they’re going to do here. It just seems that the health care space is pretty well set up for what they want to do, … and businesses are absolutely desperate to try and find cheaper ways to address health issues.”

The same could be true for CVS Health, Walmart and Walgreens.

Even the largest players in the home-based care space right now own just a fraction of the market share overall, a situation ripe for a takeover. Plus, these companies have ample resources to overcome aspects of the business that can hurt traditional providers, such as labor costs. They also have as strong of data and analytical capabilities as anyone, an area where many home-based care providers are just starting to improve.

And still, the case that these retailers have bigger fish to fry remains a strong possibility. Their advocacy, in the end, could only lead to good things to the industry – and may just be a part of their adaptation to a newer and improved health care system in the U.S.

“I don’t actually believe that Amazon [and others] are going to offer a wholesale disruption in the way health care is delivered,” Medically Home CEO Rami Karjian told HHCN. “I think they’re going to be able to support the disruption that health care providers are leading. I think they’re going to help accelerate it, but I don’t think that they’re going to be the ones driving the disruption. Only hospitals and health providers can actually be the ones that drive a disruption to how care is delivered.”