Last week, the Wall Street Journal reported that Walmart is in early talks to buy insurer Humana, according to sources familiar with the discussions.

A combined company would transform Walmart from a retail giant with significant healthcare interests into one of the nation's largest health insurers. Walmart:

  • Has annual revenue of about $500 billion and a market value of about $264 billion, according to the Journal.
  • Is the nation's largest private employer, with about 1.5 million U.S. employees.
  • Has a large pharmacy business, with pharmacies in most of its roughly 4,700 stores.
  • Owns some primary care clinics.
  • Recently announced plans to work with a major laboratory company to offer lab testing in certain locations.
  • Has been testing ACOs for two years, according to Bloomberg News.

Meanwhile, Humana:

  • Has annual revenue of about $54 billion and a market value of about $37 billion, according to the Journal.
  • Is the second-largest provider of the Medicare Advantage plans, with about 17 percent market share, with an estimated 3.5 million beneficiaries, according to Wells Fargo.
  • Is the third-largest provider of Medicare Part D drug plans and currently partners with Walmart on such plans, according to the Journal.
  • Owns its own pharmacy-benefit manager.
  • Has struck a deal to buy Kindred Healthcare, which provides home health, long-term acute care and rehabilitation services.

According to the Journal, "there is no guarantee" that the two companies will move forward with any agreement. In fact, a person familiar with the talks told Bloomberg that a deeper partnership is more likely than an outright acquisition.

Here are some thoughts about the potential deal and what its implications could be for the healthcare industry, particularly providers and health plans.

Amid the slew of deals sweeping the healthcare industry, what stands out about a potential Walmart-Humana deal?
A Walmart-Humana pairing would stand alone in two notable ways.

First, the sheer scale and size of the deal would far outpace other recently-announced mega-mergers. The combined revenue of the two organizations is just the start—Walmart's near-ubiquitous presence in America puts it in a unique position to impact the industry at a national scale. While Walmart has fewer locations than fellow retailer CVS (which is currently pursuing the acquisition of Aetna), Walmart's broader product portfolio means that it ultimately touches more consumers. One recent survey found that 95 percent of American consumers reported shopping at Walmart at least once in the past year, and 90 percent of Americans live within a 15-minute drive of one of the company's stores.

Second, such a deal could signal a particular focus on integrating healthcare services and controlling cost within a specific demographic group—seniors. While Humana has a range of business lines spanning nearly every segment of the health insurance marketplace, it has long been a leader in Medicare Advantage. Across the past few years, the company has doubled down on its Medicare Advantage business, most recently with its proposed acquisition of Kindred Healthcare in a bid to improve its ability to deliver home health services to its Medicare population.

How could a potential deal could affect hospital and health systems?
A combined company could be a formidable competitor both in the direct provision of healthcare services and as a different-in-kind population health manager. Walmart has a primary care business that has grown more slowly than expected, but owning a health plan could provide an incentive to reinvigorate those efforts. And Humana's proposed acquisition of Kindred is not the insurer's first foray into healthcare delivery—it already owns and operates primary care clinics in Florida and Texas through its recently rebranded Conviva arm.

If Walmart does acquire Humana, it won't be an easy task to successfully expand their care delivery and pop health efforts, especially for Medicare. Integrating the required data assets and establishing the necessary processes to inflect utilization patterns won't happen overnight.

But as employers, retailers and health plans across the country continue to pursue a variety of deals, ventures and partnerships intended to bend the healthcare spending curve and redirect consumers to lower-cost care sites, health systems cannot afford to sit back and wait. Future success will depend on providers' ability to dramatically improve their existing cost structures and prove their value to an increasingly skeptical marketplace looking for low-cost primary care options.

From a health plan perspective, how can a potential deal be viewed—and what capabilities could Walmart be looking to gain from Humana?
This potential deal is different in kind than the other proposed mega-mergers. At the same time, it does fit into a broader trend. For many months, we've watched the silos between traditional industry participants disintegrate. The rumored discussions between Walmart and Humana represent one more crack in the foundation of the 20th century healthcare model.

Like others in the healthcare industry, Walmart knows that consumers want convenience and lower costs. It just so happens that Walmart is uniquely positioned to deliver on that—there is no more accessible physical brand in America than Walmart. There is also no physical retail space—not healthcare space, but retail space—less expensive than Walmart's. They've already run pilots to help diabetic patients get eye exams. And they understand that more foot traffic results in more retail sales.

That Humana is a major player in the Medicare Advantage market makes a deal only more attractive. Aging customers require frequent visits to their providers, and frequent purchases for medications and supplies. Picking up a loaf of bread with a prescription after an office visit may soon become a convenience millions of Americans come to expect. Demographic trends make this a deal that makes sense for the next 30 years.

What are the potential implications of a Walmart-Humana deal for other health plans?
A deal between Walmart and Humana would have at least three major implications for other health plans.

First, it would put further downward pressure on pharmacy prices. Walmart isn't just the world's largest retailer—it's also the fourth-largest provider of prescription drugs. The company made noise a few years ago with selling $4 drugs, and it's known for pressuring suppliers (pharma included) to drastically lower their wholesale prices. A combined Walmart-Humana company could go even further, which might lower drug prices for health plans across the industry.

Second, a combined Walmart-Humana company would raise the standard for incentives that extend beyond premium reductions. Walmart, Humana and many other providers offer gift cards or other financial incentives for completing healthy actions. Extending these to an integrated system under a combined deal would mean faster rewards, greater bonuses and a new standard for member value.

Third, a combined company would compete on many, many fronts. Should such an acquisition be finalized and go through, plans would need to compete not just with the insurance aspect of the combined company, but with its entire healthcare ecosystem to stay top-of-mind for members. Walmart could be part retailer, primary care clinic network, pharmacy and health plan—and competing with such an integrated company, particularly one with such a national footprint, would present a host of new challenges for plans.

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