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How retailers like Walgreens and healthcare startups aim to make inroads in underserved markets

AUSTIN, Texas—As competition in primary care heats up, retail pharmacies and healthcare startups see a ripe opportunity to reach consumers who are falling through the cracks of the traditional healthcare system.

In 2011, the baby boom generation began aging into Medicare. That started happening at about 10,000 people per day, and that rate is expected to continue until 2030, according to a MedPac report. While today there are about 54 million Medicare beneficiaries, in the next seven years that number is projected to grow to 80 million.

At the same time, the U.S. faces a shortage of doctors in many areas of the country. “The biggest opportunity for healthcare innovation and for businesses like ours is to play an additional extension and partner role," said John Driscoll, executive vice president and president of U.S. Healthcare at Walgreens, during a panel at SXSW 2023. "There's a big opportunity not just to provide that extra capacity but also do so in a more patient-centered, consumer way, leveraging data and technology and some of the skills that retail brings, which are convenience and trust that sometimes healthcare lacks."

Driscoll noted that 40% of Walgreens stores are in medically underserved areas.

"You have to build where there is need. That’s why we think we have a right to win and a right to serve those populations,” he said. “Investing in teams and talent who reflect and are employed and a part of that community, things that we feel are very important. You have to build on the institutions that are there.”

Retail drugstore giant Walgreens is bullish on scaling up its primary, post-acute and home care businesses as part of its long-term strategy to become a consumer-centric healthcare company. The company’s U.S. healthcare unit encompasses VillageMD, specialty pharmacy Shields Health Solutions and home health company CareCentrix, as well as the organic Walgreens Health business, which focuses on population health through initiatives such as Walgreens Health Corners.

VillageMD shelled out nearly $9 billion to pick up medical practice Summit Health, the parent company of urgent care clinic chain CityMD. That deal created one of the largest independent provider groups in the U.S., according to the press release announcing the deal. Combined, VillageMD and Summit Health now operate more than 680 provider locations in 26 markets.

Many populations in the U.S. don’t have convenient access to healthcare and that extends beyond the over-65 demographic, noted Jennifer Schneider, M.D., a former Livongo executive during the same SXSW panel. “If you live in a zip code where the last three digits designate it as a rural zip code, you have half as many primary care doctors per capita and one-eighth the number of specialists. Critical access hospitals are closing and doctors are leaving rural America, so it’s not getting better, it’s getting worse.".

A year ago, Schneider launched healthcare startup Homeward with a focus on rural markets. The company strives to reach patients where they are through in-home visits, telehealth and community care delivered through mobile clinics in vans and RVs. Homeward is currently serving populations in Michigan and Minnesota.

Approximately 77% of rural counties in this country are so-called medical deserts, owing to a shortage of primary care professionals, according to the National Rural Health Association.

Beyond the lack of medical services, there are also “understanding deserts” in this country where populations have less awareness and information about healthcare issues, according to Driscoll.

Singer and actress Mary J. Blige has talked publicly about how she didn’t know about breast cancer and mammograms until she was 40 years old. "If Mary J. Blige doesn’t know about getting a mammogram, then we’re all in trouble because she has resources," noted Dr. Geeta Nayyar, who was moderating the SXSW panel.

Many communities of color and underserved populations don’t trust the traditional healthcare system and rely on relatable "messengers" in their own communities for health information, panelists said. “One thing that unifies all these populations is the issue of misinformation and disinformation. These populations are more vulnerable and more prone to the wrong information,” said Nayyar, senior vice president and chief medical officer at Salesforce, a big tech company that is also making inroads in healthcare with its cloud offerings.

The key is to find individuals and organizations in certain populations and communities that are trusted and relatable to disseminate healthcare information, she noted. Nontraditional healthcare players like pharmacies and retailers like Walmart often are more ingrained in local communities and can gain trust with consumers, the panelists noted.

During the public health emergency, retail pharmacies delivered two-thirds of COVID-19 vaccines into people’s arms, Driscoll said. "We were the front door of the public health system. We should honor that and build on it in a meaningful way and allow people to connect where and how they want to, digitally and in-person, and make it easier for patients."

Walgreens is historically more consumer-centric than traditional healthcare providers, Driscoll noted, and the company uses data to profile customers based on culture, language and psychographics. “We try to go deep and then broad and then narrowly specific about who we want to serve and how we want to serve them. It’s a different orientation, and it’s not embedded in the healthcare medical industrial complex,” he said.

At the same time, retailers and healthcare startups can focus more on preventive care services to help improve health outcomes and bend the cost curve. “Retail does a better job of serving us as consumers than traditional healthcare,” said Lee Shapiro, co-founder and managing partner of venture capital firm 7wireVentures.

To prove out his point, Shapiro recalled a recent conversation with the CEO of a large health system serving a market with roughly 9 million people. The clinicians in that health system provided care to about 6 million of those people for individual encounters over the course of a few years. “Retailers would use that data to say, ‘What else do we know about these people and how else can we serve them?’ [Health systems] don’t think about, ‘What else could we be doing? These people came to us with one problem and how can we surround them with other services to keep them healthy?” he said.

But healthcare organizations need to build services for the communities they are trying to serve and consider cultural and socioeconomic differences that impact how populations interact with healthcare. “We need to think about the cultural journey of the individuals you are trying to treat,” Shapiro said.

“There are times when you’ll have someone in a family coming in for care, and they’ll be accompanied by an aunt or other siblings. Why think about it as a single appointment but instead we could use it as an opportunity to address care for everyone in the family and build trust in that group. Building trust requires bridges as opposed to walls.”

Primary care writ large won’t work unless organizations are building solutions for specific primary care for different populations, Schneider said. “That's where you start to make advances in the populations that haven’t been served today," she said.

Healthcare startups are often nimble enough to build out these population-specific solutions.

Technology like telehealth, digital health tools and remote patient monitoring can help extend the reach of healthcare providers into underserved communities. "The duality around in-person presence and technology and how to use both and use those for the unique population that you’re serving is going to be critical to our success," Schneider said. "Technology won’t do it all, people won’t do it all, and we’ll have to be able to rely on both. And the way we rely on both is going to be very different for different populations."

But, she added that economic incentives also need to be aligned for efforts to be successful. “Value-based care is the only way you can get there. In rural markets, we’re doing global capitation, not just value-based care, and that holds your feet to the fire to deploy different care delivery models,” she said.

Partnerships are critical to reach underserved populations and many organizations are beginning to partner outside of the existing healthcare ecosystem, Schneider pointed out. “Partnership in rural America is critical. If you come in and try to compete, there are not enough resources and you are dead on arrival,” she said.

And these are big challenges to tackle in the next decade. People living in rural areas die at higher rates than those living in urban areas—and the gap has been widening, according to a 2021 U.S. Centers for Disease Control and Prevention report on mortality data from 1999 to 2019.

"I believe and I hope that over the next decade, we can narrow that," Schneider said. "One piece of health equity is to leverage and use technologies to reach the population at scale rather than continue on with advanced science for a small population."