Consumer / Employer, Health Tech

Costco Takes On Healthcare, Though Differently From Other Retailers, Experts Say

Costco is partnering with Sesame to offer Costco Members discounted pricing on virtual health services, including primary care and mental health. But the move is a little different from other retailers like CVS Health and Walgreens.

Yet another retailer is making moves in healthcare. This time it’s Costco, which announced Monday that it is partnering with virtual health marketplace Sesame to provide Costco members with discount pricing for medical care. But its move is a little different from other retailers like Walgreens and CVS Health, one expert said.

Sesame’s platform provides access to thousands of independent clinicians across all 50 states. Through the partnership, Costco members will have access to $29 per virtual primary care visit and $79 per virtual mental health therapy visit. They’ll also have access to health checkups — which include a standard lab panel and a virtual follow-up consultation — for $72. In addition, they’ll receive 10% off on other Sesame services, including in-person care. Sesame’s usual prices (for those accessing the company outside of Costco) varies, but a primary care visit can often be around $45, said Michael Botta, co-founder and president of Sesame.

Sesame does not accept insurance, so all of the services are offered via cash pay, meaning the partnership will mostly benefit patients who are uninsured or enrolled in high-deductible health plans.

On the surface, this partnership is “another example of a retailer leveraging its relationship with customers to enter the healthcare services market,” said Ellen Herlacher, principal of LRV Health, in an email. But it is actually very different from plays like the CVS Health acquisition of Oak Street Health and Walgreens’ majority ownership of VillageMD.

“When you look at the Oak/CVS relationship or the VillageMD/Walgreens relationship, you have retailers that are aiming to grow their enterprises and achieve various synergies by entering primary care and assuming premium dollar risk,” Herlacher said. “They are establishing a provider/patient relationship with their customers, their goal is to become the primary care provider of record, and they are leveraging the insurance system to get paid.

“None of that exists with Sesame/Costco,” she continued. “In this case, Costco is driving incremental revenue by connecting its members to a marketplace of available appointments. From what I can tell, neither Sesame nor Costco have ambitions around a longitudinal relationship with the patient, and definitely no intentions of assuming risk, as it’s a cash pay offering. This is really a story around convenience and incremental growth.”

Rachel Zeldin, partner of health and life sciences at Oliver Wyman, agreed that Costco’s move is different from other retailers in the space. She noted that more than half of retail pharmacy customers have used health and wellness services at their pharmacy in the last year. However, most of those services have been in the actual stores and have been “a way to drive foot traffic and optimize existing square footage,” she said. 

“This news represents an evolution from retailers providing in-person care within their stores, to making virtual care available to their customers online,” Zeldin said in an email.

She added that telehealth is a “natural place” for Costco to go. Telehealth allows for more “predictable pricing” and is easier to access.

“Providers across healthcare see telehealth as an opportunity to increase access to care and improve the patient experience,” Zeldin said. “This is particularly true for the arrangement between Costco and Sesame, because the telehealth visits are not covered by insurance. This means it’s much easier to say, ‘This is how much the visit will cost.’ Overall, it’s a much more consistent experience with what retailers like Costco offer to their customers across all of the other services they provide.”

Another industry observer hinted that Costco’s decision to partner with Sesame was likely driven by seeing what Walmart is doing in the space. Over recent years, Walmart has been opening several health centers and announced a value-based partnership with UnitedHealth Group last year.

“Obviously, Costco is aware that Walmart has been stepping things up,” said Nathan Ray, partner of healthcare and life sciences at West Monroe, in an interview. “I think retail is a place where you want to be either in front and leading the pack and waiting for them to follow your actions, or vice versa, paying attention to your competitors and nearing them.”

Ray added that the partnership shows the importance of collaboration with major players for companies like Sesame.

“It’s a sign that companies like Sesame, and so forth, really need a foothold to become established,” Ray said. “I think we spent a good amount of time through Covid being really excited with telehealth and virtual care and all of the money that went into these platforms. But a lot of these platforms don’t necessarily succeed by just having a good web presence and a brand alone. They often need a reason for why [consumers] would do something different, go away from the way they’ve gotten care before.”

Botta of Sesame said that ultimately, the partnership comes down to expanding access to care.

“Since the passage of the Affordable Care Act, more people have insurance, but in many ways, insurance is less generous, so it pays for less than what it used to. … There are more people who spend their own money for care,” Botta said. “You may think that letting your insurance send you the bill is going to get you to the best pricing, but that’s generally not true. It turns out that if you go directly to a doctor, to a medical practice, to a lab, you can often get better pricing. When I think about shopping around for better pricing, I think of Costco.”

Costco did not return a request for comment.

Photo: metamorworks, Getty Images