Professor Mark J. Perry's Blog for Economics and Finance
"Local hospitals or hospital systems are extending their reach by agreeing to run retail clinics at Walmarts (NYSE: WMT) in their communities. Hospital officials see the clinic as a way to reach customers who need affordable care during extended hours and give those who do not have a family physician access to care."
Dr. Mark J. Perry is a professor of economics and finance in the School of Management at the Flint campus of the University of Michigan. Perry holds two graduate degrees in economics (M.A. and Ph.D.) from George Mason University near Washington, D.C. In addition, he holds an MBA degree in finance from the Curtis L. Carlson School of Management at the University of Minnesota. In addition to a faculty appointment at the University of Michigan-Flint, Perry is also a visiting scholar at The American Enterprise Institute in Washington, D.C.
29 Comments:
Unions, Left, Democrat Party in general, and most of media will be livid to hear this. Their hate of WalMart is splashing all over the aisles.
This reminded me a of the scene in "Idiocracy" where Frito tells Joe he went to law school at Costco and his father, an alumnus, helped him get in.
This sounds great, but the quest for lowest cost usually becomes a race to the lowest service and least value.
Yeah, well, ever buy any fine furniture at WalMart?
If I read the article correctly, local hospitals and clinics are leasing space from Walmart. I don't understand what the problem is. More foot traffic for Walmart,sounds like good business.
Self preservation by the hospitals.
Do it affordably at Walmart or see low-income people in the ER (for free).
The point is not that the clinics are available at Wal-Mart. It’s the delivery system and the availability of the delivery system. Its right down Wal-Mart’s alley and fits the hospital’s hub and spoke delivery concept. Think about accessible value.
the quest for lowest cost usually becomes a race to the lowest service and least value.
What a smug and, at the same time, false comment. Each person decides what terms of trade suit him. There is no "race" to the bottom -- you, for example, are free to exit at any time.
i'm not a huge fan of wal-mart, but i like this.
this is obviously not intended for for open heart surgery. but for much of routine medical care you don't an MRI, operating rooms, CAT scanners and neurosurgeons.
it'll be interesting to see what the prices are.
Craig, sure I can exit - as long as there are other options.
That's kind of my point. If the other options have been eliminated, there isn't much freedom available. Even free markets can become not so free.
Regardless, I don't think Wal-Mart will monopolize medical care. All it will take is one crazy lawsuit...
We have had retail clinics in HyVee stores for a long time. (None in our Walmart yet--may be because there are several "Urgent Care offices in their neighborhood.)
I don't know where these places needing government health care are--I've driven OTR and had need of help several times--the hard part is always finding place to park 70 feet of truck--but that is a problem in this truck hostile world on any given day and isn't much related to healthcare.
What some towns need is not more medical care but truck parking and taxicabs.
Our Walmart has an optometrist-optician shop, a bank, a Subway sandwich shop, a hair salon, and several other shops that seem to come and go--startups, and such--some make it, some don't--all in leased space.
And the perimeter of their lot is full of little shops and restaurants. And fruit and vegetable peddlers all summer.
Some of their furniture is as good as Nebraska Furniture Marts or IKEA.
Lowest service and lowest value does not describe either Walmart here or Sam's Club (or Costco).
And you don't want to start me on how Walmart takes care of OTR drivers. We'd be here all night.
Yeah, well, ever buy any fine furniture at WalMart?
No, but I can buy 23 oz of corn/bean salsa for $1.99. I'll blindfold you and I defy you to tell me the difference between it and a brand that costs twice as much.
Plus, health care is way overpriced. I went to a specialist because I had a sore throat. He told me my sinuses were draining. Gave me a prescription for Flomax. Cleaned out my ears while I was there.
The time spent with him? 10 minutes
The cost? $479.00
My insurance paid half and I paid the rest. Incidentally, my insurance is Tricare and that means the taxpayers (I'm one) paid that share of it.
The point of the salsa/sore throat thing? Do you think WalMart would have charged you, the taxpayer, $479 to look down my throat and clean out my earwax?
I doubt it. That's the point of getting WalMart into the health care game instead of the effing government.
Jason: " the quest for lowest cost usually becomes a race to the lowest service and least value."
Really? So how is it that Southwest Airlines and JetBlue are consistently at the top of consumer preference ratings? Why did consumers consistently rank the quality of Honda, Nissan, and Toyota above that of Ford, GM, and Chrysler back in the 1970s when they were underpricing the Big Three American automakers?
The quest for lowest cost in the profit-seeking sector is almost always a quest for efficiency. Corporations seek to maintain or improve service and value while simultaneously lowering costs. Those that do so - including Southwest Airlines, Walmart, Best Buy, UPS, and Amazon - are usually rewarded with larger market shares than their competitors.
I get so tired of this.
Can we agree that Walmart management (like the management of any right-thinking company) works to maximize profits?
There is a pretty simple formula for "profits" if I remember correctly--profits = revenue - expenses. So they want to increase revenues, or decrease expenses, or both.
There is a limit to how much you can reduce expenses--it might surprise you to learn that it is not zero. But what is important is: THERE IS A LIMIT to how much ypu can reduce expenses.
There is no limit to how much you can increase revenues.
And it probably does not involve increasing prices, and it certainly does not involve driving magnet businesses out of business.
They might not sell the most expensive furniture. But they sell the furniture people buy.
Jet, and what had happened with the airline industry? Service sucks and what will we start paying for next - oxygen? We can't all fly Southwest and Jetblue!
Jason: "Jet, and what had happened with the airline industry? Service sucks ..."
What happened was a boom in air travel such as had never occurred before. In fact, the reduced prices for air travel increased consumption so much that the air traffic control system could not keep up. One of the biggest causes of poor airline on-time performance - perhaps the biggest - is the antiquated air traffic control system the government staffs and operates.
Other aspects of service have proven to be unimportant. The market has demonstrated time and time again that air passengers will not pay for superior service on domestic flights. It's just not important to them. What is important is: flight schedules tailored to passengers preferences; and low fares. The airline industry has implemented the price-quality tradeoff which customers have voted for with their dollars.
Jet, you are correct a out explosion of air travel and the antiquated controller system.
The thing I'm fixating on here is herd mentality of market producers and how, despite consumer sentiment or wishes or choices can be eliminated from the "menu" so to speak. A great example of this is when United Air Lines started to charge for checked bags, so many people said that consumers would not stomach this and reject the policy. Did they? Maybe, but every other full service provider didn't really give them a choice as they all jumped on that bandwagon like baggage fees were crack and they needed the rock. Collusion, or opportunity? Opportunity, I think.
(Southwest, with its bus in the sky model, doesnt charge for the first bag. But then, it's lower cost structure allows for some leeway. But you still "pay" with limited choices for non stop flights, unassigned seats...)
If the producer market moves in unison, consumer sentiment and decision making DON'T ENTER THE PICTURE. Consumers only have the option to "fly or not fly." Not terribly free, sort of an irony in a free market, really.
So what's the takaway here? If low cost is what you want, low cost is what you get. Until you move beyond efficiency and productivity, then you'll just pay a different way with limited choice and freedom.
"One of the biggest causes of poor airline on-time performance - perhaps the biggest - is the antiquated air traffic control system the government staffs and operates."
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Government is now working on the NextGen air traffic control system whic hwill provide much imporved service using GPS and other technolgy rather than radar. Aircraft will automatically negotiate safe passage withtheir nearest neighbors and fly direct from city to city without having to use the radiobeacon waypoints.
The biggest holdup in getting this sytem up and running is complaints and footdragging - from the airlines and airplane manufacturers, and general aviation industry.
Not to mention at least one prime has defaulted on their contract to assist government in solving the associated problems.
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On the ewffing gov't:
Last year there were hundreds of cases of passengers being stuck on an airlplane on the ground for over four hours. Passengers complained mightily to the effing government which issued a new regulation calling for fines of up to $27,000 per passenger for such behavior --- over the objections of industry which said it could not comply in a cost effective and safe manner.
This year there were only five such events, and they were legitimately outside the control of the airline.
Why does the effing government have to write a regulation telling business not to treat their customers like effing cattle?
Jason,
I want to be sure no one misunderstands the basis for Southwest's lower cost structure.
Southwest is more uniuonized than any other carrier, and they pay competitive wages. So it is not unit labor costs which enable them to achieve a lower cost per seat mile.
Where Southwest excels is in utilization of assets and personnel. Southwest aircraft turn times are legendary within the industry. Herb Kelleher always believed that the key to financial success was to keep aircraft and flight crews in the air as much as possible, earning revenue rather than sitting on the ground. So Southwest opted for unassigned seating, which speeds boarding, The airline rejected hub and spoke, which would have forced waits at the gate for arriving feed flights. There are other factors which drive utilization, but I'll not burden readers with all that.
Just wanted to get that in.
Jason: " But you still "pay" with limited choices for non stop flights, unassigned seats...)"
I just explained the reason for unassigned seating. Southwest has continued to gain market share for its entire history. Today they carry more passengers on domestic flights than any other airline. For many millions of passengers, unassigned seating is unimportant.
What did you mean by limited choices for non-stop flights? It is true that Southwest does not offer as many non-stop destinations in cities where it has recently entered. That is changing with time. But Southwest offers many U.S. choices in the cities where it has been able to obtain gates and slots.
Jet, so you agree that you give up something for reduced cost?
"so you agree...."
is troll skat and sure sign that the preceding item asserted quite the opposite.
For me, I agree that suppliers supply what the think, and buyers buy what the want or are willing to pay for.
Or they both disappear. (As I have, pretty much, from the airline industry.)
Troll on, Jason (wheree have I seen that name before?)
I'm out.
Larry, I'm not trolling. I'm making a point. And believe it or not, we agree on one thing: The choice isn't what service you get anymore, it's whether you fly and cope with what you do get or not fly. And I say we are less free as a result. If you're ok with that, fine.
Hmmm, I wonder how Walmart will get around the roadblocks of ObamaCare?
Jason: " so you agree that you give up something for reduced cost?"
I'm sorry, but that statement makes no sense. Do you understand economics? or understand how businesses make money? Of course consumers in the airline industry - and in every other industry as well - "give up" something for reduced prices. Producers decide what features they are willing to offer, and consumers decide what features they are willing to pay for. The beauty of free markets is that - through trial and error - an equilibrium between consumer desires and producer requirements can be met. The simple fact that use of passenger air transportation has reached record levels in recent years is evidence that airlines have given consumers what is most important to them.
Jet, of course, the question was rhetorical. Someone else railed me for it. And, really, I shouldn't have been so short.
My observation is that due to the extreme fixation on sales price our free market does not result in the highest amount of freedom (choices), rather, the point of lowest sales price which MAY BE the point of highest operational profit for companies.
I know this is how markets work. And I'm not some communist tool who thinks business should be government and price should be indexed to income. And I sure as hell don't want more government regulation. Sometimes I don't feel like jumping up and down in joy about the self-regulating success of the marketplace. (Yippee, I get to pay $50 for my checked luggage - The free market works AGAIN!)
Jason: "My observation is that due to the extreme fixation on sales price our free market does not result in the highest amount of freedom ..."
Let's be sure I understand you. You seem to be arguing that, in general, participants in markets focus on price more than any other factor. If that is what you are saying, then I disagree. Consumers and businesses do not seek the absolute lowest price, but rather the lowest price for which they can purchase the quality of good they desire. A free market is exactly the system which provides the largest variety of goods so that the largest number of consumers can obtain their particular quality-price tradeoff.
The free market in airline travel has done exactly that. Prior to deregulation, most of the population was unable to take advantage of leisure airline travel. Today, those persons who desire high quality over low price and convenience can travel in first class cabins of American, Delta, and United. Those persons who desire low prices and are willing to accept no-frills choose Southwest or Airtran. The result is that a much larger percentage of the U.S. population consumes airline travel than did 33 years ago prior to deregulation.
If even more aspects of airline travel were market-driven - if airports, air traffic control, and airport security not government operations - airline travel would be even more accomodating than it is today.
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