Amazon, Apple, Google and other tech giants are executing on health care strategies that could disrupt senior living, but to my mind, the industry could be affected most quickly and directly by a more traditional retailer: Best Buy.
The Richfield, Minnesota-based company is known for its big-box stores that sell tech products, from smartphones to dishwashers. But Best Buy also has launched Best Buy Health and in the last few years has made major investments — totaling about $1 billion — to build up this part of the company, which is laser-focused on tech and services for the older adult population.
As one signal of how the company is staking its future on Best Buy Health, the architect of the health strategy — Corie Barry — became CEO in 2019. That same year, analysts with Morgan Stanley estimated that Best Buy’s health care play could unlock between $11 billion and $46 billion in long-term revenue, with up to $2 billion in revenue by 2025.
As is the case with Amazon, some senior living providers are already working with Best Buy, using the company’s GreatCall technology. But given Best Buy’s ambitions in the space, senior living providers should be thinking of the company as much more than a tech vendor and preparing for where Best Buy is going next.
A senior-focused strategy
Among all the other potential disruptors, senior living providers should be paying special attention to Best Buy for one main reason: The company’s health strategy revolves around older adults.
“Like Best Buy, tech companies are also propelling the shift toward tech-enabled consumer-centric healthcare and trying to eliminate cost inefficiencies in the health care system,” Morgan Stanley analysts wrote in their 2019 report. “Yet few if any potential competitors are as keenly focused on serving the aging population as Best Buy.”
Best Buy already has been going after the older adult market for years. In 2017, the company introduced Assured Living, through which consumers can purchase a package of remote monitoring equipment such as sensors to track movement and sleep patterns, and smart home technology such as voice-enabled thermostats. The idea is to enable aging-in-place through unobtrusive sensors that can flag emerging problems based on when an older adult’s activity patterns change.
About a year after launching Assured Living, Best Buy made a major investment in its health strategy with the $800 million acquisition of GreatCall, which develops and sells senior-friendly smartphones, smartwatches, medical alert devices and other technology.
The acquisition amped up sales of GreatCall products in Best Buy stores, while also providing GreatCall with more resources to develop new offerings and broaden commercial sales to clients including senior living providers.
Best Buy has also been doing smaller acquisitions, including buying Critical Signal Technologies (CST) in 2019. CST is focused on enabling aging in place and chronic disease management through addressing social determinants of health, utilizing remote patient monitoring and services such as social work.
CST’s user base consists of more than 100,000 older adults, and 98% come through “direct referrals from physicians, nurses, case managers, physical therapists, and senior housing managers,” the company’s website states.
Furthermore, CST works with about 1,500 payers, including Medicare Advantage and managed Medicaid insurers, who see the service as a way to keep costs down by improving care management for older adults at high risk of expensive interventions, such as hospitalizations. GreatCall also is partnered with payers, such as insurance company CNA, to provide policyholders with remote monitoring and emergency response tech.
Clearly, Best Buy is trying to dominate remote monitoring as its pathway toward reaching the older adult market, using various channels: direct-to-consumer sales; commercial sales to health care providers, including senior living; and partnerships with health systems and insurance companies, with the potential to share in financial upside if Best Buy Health’s products and services lower costs.
Given Best Buy’s first-mover advantage and scale, the company could eventually achieve 10% to 15% market share, Morgan Stanley estimated. Analysts used a baseline of about 100,000 subscribers as of 2020, representing 4% of the addressable market, and calculated that adding 300,000 to 400,000 users a year is a reasonable forecast. Best Buy has a goal of serving 5 million seniors by 2025.
Since Morgan Stanley released its report in 2019, Covid-19 swept across the globe. Best Buy’s leaders believe that the pandemic has only strengthened the case for their health strategy.
“Everyone is very interested in health care in the home,” CEO Barry said on Best Buy’s Q4 2020 earnings call. “There isn’t a partner we talked to who’s not interested.”
Senior living implications
Senior living providers might see Best Buy as a threat, insofar as the company is dedicating enormous amounts of money and manpower with the goal of helping millions of older adults age in place in their single-family homes — and put off moves into senior living communities.
This is a valid concern, and senior living providers need to confront the reality that technology is making it easier than ever for older adults to age in whatever setting they prefer, and Best Buy’s direct-to-consumer prowess is substantial. Most recently, Best Buy Health collaborated with Apple to roll out an app on the Apple Watch, through which older adults can access urgent response agents, clinicians, and keep in touch with friends and family.
But, as is the case with Amazon, Best Buy surely grasps that senior living communities are residential settings, and when the company’s leaders speak of transforming and enabling home care, that extends to independent living and even assisted living apartments.
David Inns, who was CEO of GreatCall until the company’s acquisition and now is president of active aging at Best Buy, certainly views senior living providers as customers rather than competitors, and companies such as Holiday Retirement are already clients. More than 74,000 seniors in independent living are served by Best Buy Health, with 18,000 assisted living residents served.
“An overlooked area where there is significant opportunity for growth and change is connected health for seniors, especially in senior living communities,” Inns told me in 2019, during an interview for our Changemakers series. “… By using technology, we can help the senior living facilities reduce the health care costs of the people that are in their care. That earns the senior living group the right to some of the health care risk value chain, which is a very significant monetary opportunity, in my opinion.”
Inns’ comment raises an issue that is increasingly pressing for senior living providers: Where will they fall on that health care risk value chain, and just how much financial upside will they gain by helping keep residents healthy and costs down, and living longer in their buildings.
Best Buy itself is vying to get a chunk of change from insurers, if the company’s health products and services succeed in keeping costs down. Best Buy might keep 20% to 40% of that savings, the Morgan Stanley analysts calculated. On the high end, that could mean about $3,300 per member per year going into Best Buy’s pocket, resulting in up to $2 billion in annual revenue by 2025.
Best Buy already is working with some of the biggest U.S. insurance companies. For example, when Assured Living rolled out, the offering was used in concert with a wellness coach sponsored by UnitedHealthcare.
And Best Buy is creating value not only through products like GreatCall but through its services; its Geek Squad teams and In-Home Advisors provide guidance and troubleshooting for customers, and Best Buy Health provides around-the-clock access to “social care experts,” with services such as “loneliness calls” and help with appointment scheduling. The company is not only selling technology but is creating an ecosystem to address social determinants of health.
So, I believe senior living providers may see several benefits from working with Best Buy Health. Increased length of stay is the most obvious, as Best Buy technology and service ecosystem flags issues earlier and helps address them before residents’ conditions decline and force a move. Staff might be able to work more efficiently, informed by the data captured through the tech. And as Inns described, senior living providers may also get a share of the savings that they help achieve for payers.
Furthermore, prospective residents and their loved ones may be drawn to a senior living community that is partnered with Best Buy Health. As Best Buy Health gains market share among older adults living in their single-family homes, an increasing number of prospects will already be familiar with the offering. They might move into senior living wearing an Apple Watch that they’ve owned for years, with Best Buy Health’s Lively app.
On the other hand, senior living providers should be asking themselves — and Best Buy Health — just how much financial upside they will see from Medicare Advantage insurers or other payers working with Best Buy. Historically, senior care providers have not always been well-rewarded by MA insurers for driving savings. And in this case, I imagine senior living providers would be left with just a percentage of the gainshare earned by Best Buy Health, if they see any of that upside at all. It’s worth keeping in mind that some senior living providers are starting their own MA plans, to create their own provider networks and collect what they see as their fair share of the cost savings related to enhanced care management.
Furthermore, senior living providers might welcome the service components of Best Buy Health, seeing them as valuable resources for residents, while further freeing up their staff members to focus on other areas.
But, senior living providers themselves are adept at meeting the social determinants of health for their residents, some are positioning themselves as care coordinators, and they are seeking and deserve payment for these skills and services. If they work with Best Buy Health, providers will need to ensure that the offering appropriately supplements their value proposition, and that they are not ceding too much operational ground and potential revenue.
In other words, I think every senior living operator should be evolving their operational models so as to work productively with Best Buy Health or similar entities if they choose to do so, and not to be outflanked by them in any case.
“Evolving” might mean finding more ways of serving older adults before they move into a senior living community, given that technology and services from Best Buy — and Amazon, and other companies — is quickly making aging in place more achievable. Senior living providers might branch into home care, act as consultants or care coordinators, or partner with PACE and other programs to reach older adults in the community.
And, evolving means maximizing the advantages that senior living communities have, by virtue of being people’s homes as well as health care settings. That means simultaneously elevating the resident experience — as organizations such as Holiday are doing — while also building up robust health and wellness capabilities. Providers must also collect data to show how these capabilities translate to fewer hospitalizations or other costly medical interventions. If providers cannot bring that data to the table, they certainly will not be able to negotiate effectively to get their share of cost savings achieved by working with the likes of Best Buy Health.
In other words, senior living providers must recognize their place in the health care ecosystem, make changes to maximize the value of that position, and collect data so that they know and can demonstrate that value. Or, they should expect that disruptors from other sectors will come in, change how buildings operate, and extract significant dollars from the industry.
