Costco bets big on healthcare — what it means for hospitals

Hospital officials told Becker's they don't view Costco's entrance into healthcare as a threat to their business but as an opportunity for expanded care to reach new patients. 

Costco is joining competitors such as Walmart, Best Buy and Amazon in breaking into healthcare through a new partnership with virtual care marketplace Sesame.

"Costco getting into healthcare is another example of the general patient consumer audience asking for more availability of care on their terms, when they want it," Aaron Miri, chief information and digital officer of Jacksonville, Fla.-based Baptist Health, told Becker's. "Systems have to learn to work together with the big box retailers and other collaborators in this space to ensure equitable access for all while meeting the general consumer needs of access." 

Through the partnership, Costco members will have access to $29 virtual primary care visits, $72 virtual health check-ups and $79 virtual mental health visits. Sesame does not accept health insurance. 

"The Costco virtual primary care model appears to be a similar teaming model to what a number of other market entrants have targeted e.g. utilizing existing primary care physicians/practices. One would expect referral patterns for hospital based diagnostic follow up or surgical admissions will likely follow the current practices of those physicians," said Chris Coburn, chief innovation officer of Boston-based Mass General Brigham. 

Sesame founder David Goldhill has long been a critic of American healthcare. In a 2009 cover story for The Atlantic titled "How American Health Care Killed My Father," Mr. Goldhill wrote, "There needs to be a business reason why an industry, year in and year out, would be able to get away with poor customer service, unaffordable prices, and uneven results — a reason my father and so many others are unnecessarily killed." 

Almost a decade later, Mr. Goldhill founded Sesame with the goal of "bringing marketplace dynamics to consumer healthcare." In 2022, the company raised $27 million in a series B financing round led by GV (formerly Google Ventures). GV is also an investor in primary care company One Medical, which is now owned by Amazon. 

Previously, Costco maintained a healthcare presence focused on providing pharmaceuticals, not delivering care. In 2020, Costco purchased a minority share in St. Louis-based SSM Health's pharmacy benefits management company, Navitus Health Solutions. 

"Quality, great value and low price are what the Costco brand is known for," Mr. Goldhill said in a Sept. 25 Sesame news release. The company believes that it can take the Costco model to primary care and that retail care is here to stay.

"If the Costco model produces as they would hope, it may potentially reduce demand on emergency care sites. In the near term it is unlikely to have a significant impact on utilization of resources in tertiary and quaternary care urban institutions," said Mr. Coburn. "Longer term impact is more difficult to predict until the effectiveness and efficiency of the care delivery models are solidified. On a separate note, one might think an element of the Costco strategy different from Walmart and Walgreens is to reinforce their pharmacy benefit management investments."

"Judging by the investments and product rollouts in the last year from the likes of Amazon and Walmart, the future of retail shopping will include doctor visits and prescription medications," Sesame said in a Sept. 25 LinkedIn post.

While some hospital officials worry that the growth of retail clinics means more competition, others see it as an opportunity to increase access to care.

"We are focused on the needs of the patient – and if those needs can be met by offering exemplary primary care to a broader spectrum of patients when and where they need it that is a good thing," said Charles Bruce, MD, chief innovation officer of Jacksonville-based Mayo Clinic in Florida. "In this dynamically evolving healthcare ecosystem, we are here to offer hope to those patients who still need an answer or who are found to have serious and complex health issues."

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