Walmart and health insurance company Humana are in the early stages of merger talks, according to the Wall Street Journal.
A partnership could help Walmart rein in employee health costs at a time when it’s expanding benefits and would bring Humana more locations for medical services. A Walmart spokesperson declined to comment to Retail Dive, saying only "As you know, we do not comment on rumors and speculation." Humana didn’t immediately return a request for comment.
The report comes not long after Amazon's January announcement that it was partnering with Warren Buffett's Berkshire Hathaway and JPMorgan Chase to form an independent company "free from profit-making incentives and constraints" to explore new ways to deliver and pay for health care and CVS's $69 billion December acquisition of health insurer Aetna.
As one of the country's largest private employers, Walmart is already a formidable player in health care, bringing its considerable clout to hold down hospitalization and other medical costs. Some hospitals expressed concern that Walmart could expand and fortify its bargaining power, the Wall Street Journal reports.
Retail analysts had mixed reactions to the report. Cowen & Co. called the deal "compelling," especially in light of the opportunity to "upgrade access to customer data and drive store traffic and sales, according to comments emailed to Retail Dive. GlobalData Managing Director Neil Saunders also noted the entry to customer data and the opportunity inherent in the sector's massive inefficiencies.
"The U.S. healthcare industry, including insurers, has never been particularly customer-centric. The tendency to overcomplicate options and plans has led to confusion, low satisfaction and a lack of trust. On top of this poor experience, the industry is riddled with inefficiencies. These things are an anathema to most retailers, particularly so to Walmart," Saunders said. "Therein lies a potential opportunity for Walmart to bring some much-needed focus and discipline to the health insurance industry."
But that's an insufficient basis for a merger and analysts expressed skepticism, as well.
"The risks of becoming entangled in the complex U.S. healthcare industry are considerable, especially at a time when Walmart is grappling with the competitive challenges of a rapidly shifting retail market," Saunders told Retail Dive in an email. "The hammering out of any agreement — which would be Walmart's largest ever corporate deal — would, of itself, be an enormous distraction. Integrating and running the business would be even more challenging."
Walmart already functions as a health care provider and payer — it is self-insured and negotiates with heath care providers directly — and in the past has taken steps to deepen its health care services. Just a few years ago Walmart declared its intent to expand access and simplify healthcare options for customers through the "Healthcare Begins Here" program, developed with PwC. The retail giant still provides pharmacy services, health clinics, durable medical equipment, immunizations and wellness days, where customers can have their blood pressure taken. It's move to offer $4 generic drugs was pioneering, according to Spencer Millerberg, CEO at marketplace analytics firm One Click Retail. "But they stopped short by not completely addressing issues the government and private businesses couldn't solve," he told Retail Dive in an email earlier this year. "Where Walmart left off, Amazon is picking up."
That's likely a major driver of the discussions with Humana, Saunders said. "Walmart will have read these reports and will understand the threat of allowing Amazon to get too powerful a grip on the lives of consumers," he said. "Although Walmart is unlikely to initiate any deal merely to fend off future competitive risks, Amazon will be at least part of the consideration."
Any deal remains a long shot, he said, not least because of practical considerations involving financial, regulatory and corporate details, according to Saunders. "However, that the deal is even being discussed shows how much both retail and healthcare are changing."