A Walmart-Humana giant scares hospitals: 5 reasons why

A potential deal between Walmart and Humana would strengthen Walmart's position as a competitive threat to hospitals, industry consultants and executives told The Wall Street Journal.

Reports surfaced March 29 that retail giant Walmart is in preliminary talks with health insurer Humana about developing a closer partnership, and one possibility is Walmart acquiring Humana, people familiar with the matter told WSJ.

Here are five reasons why hospitals fear a possible Walmart-Humana behemoth.

1. Randy Oostra, president and CEO of Toledo, Ohio-based nonprofit health system ProMedica, told the publication the prospect of a Walmart-Humana deal "should be a concern to everybody in healthcare." Competition from inexpensive healthcare options and stagnant growth are among hospitals' chief concerns, with a possible Walmart-Humana deal heightening anxiety.

2. While a deal isn't guaranteed, it comes on the heels of two healthcare mega-deals: CVS Health's $69 billion bid for Aetna and Cigna's $54 billion offer for Express Scripts. These insurer pairings could mean a shift toward cheaper care provided at clinics and pharmacies, cutting into spending on hospital services.

3. Zack Cooper, health economist at Yale University in New Haven, Conn., told WSJ, "These vertical deals are super exciting, mostly for the potential to keep people out of the hospital."

When asked about a possible Walmart-Humana deal, he said, "There is scope for this new entity to, in a sense, offer a product that has less bells and whistles and is more efficient and lower cost."

4. Those efficiencies could partially come through Walmart's 4,700 pharmacies nationwide. However, Walmart's clinic footprint — it operates 19 in Georgia, South Carolina and Texas, and providers operate 50 others — is limited. Given Walmart's colossal retail presence, expanding these outpatient capabilities could make Walmart a direct competitor for low-cost outpatient offerings, the consultants and executives told WSJ.

5. Aside from offering cheaper, more efficient healthcare, industry consultants and executives look to Walmart's negotiating power for employee health benefits as a reason for hospitals to be nervous. Combining Walmart's employee benefit negotiating clout with Humana's data and infrastructure could position a combined entity to offer competitive health plans. Hospitals excluded from those networks would see increased operating pressure, WSJ reports.

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