Kroger, the largest grocer in America, explains how its turning to healthcare as it takes on Amazon and Whole Foods

• Kroger is the largest grocery-store chain in America, and it has 2,200 pharmacies and more than 200 health clinics.
• The company's goal is to help keep its customers healthier. In that way, it's acting more like a doctor or nurse than ever before.
• Importantly, that also means Kroger wants to fill fewer prescriptions, according to Kroger Health President Colleen Lindholz, who oversees the company's pharmacy and health clinics. It's a counterintuitive idea, given that retail pharmacies typically make money based on how many prescriptions they sell.
• The grocery-store chain is also building a system that combines information about what food customers' buy with information about their prescriptions, so that pharmacists can better counsel patients on healthier habits to treat "food as medicine."

Colleen Lindholz has a counterintuitive idea.

Lindholz is the president of Kroger Health, meaning she oversees 2,200 pharmacies and more than 200 health clinics for the largest grocery-store chain in America. The pharmacy business, just like the grocery business, is a numbers game: the more groceries Kroger sells or the more prescriptions it dispenses, the more money it makes.

But instead, Lindholz has set a goal to fill fewer prescriptions for each patient who shows up at a Kroger pharmacy.

"It's kind of crazy, but we've said, 'Hey, we actually want to fill less prescriptions per person,'" Lindholz said. "We want to decrease the need for healthcare."

Competition is increasing for groceries and for prescriptions

Kroger, the $22 billion company that operates 2,800 grocery stores around the US, has had to get creative to compete with the likes of Walmart and Amazon, which now owns Whole Foods. While online sales of groceries still only make up about 3% of the retail market, they're steadily increasing.

Kroger's pharmacies are also facing digital competition, with Amazon acquiring an online pharmacy that can send pills straight to your door, and venture backed startups building online pharmacies that deliver prescriptions, too.

To stay competitive, companies like Kroger are bulking up on the health services they provide in their stores. The massive drugstore chain CVS Health, for instance, is setting up in-store health hubs after its merger with health insurer Aetna. Walgreens is putting in services like lab tests, hearing screenings, and eye exams.

Read more: We got a look at the slide deck that buzzy startup Devoted Health used to hit a $1.8 billion valuation, before it signed up any customers

Kroger is making other strategic moves, such as partnering with Walgreens on a pilot to put some of Kroger's groceries in Walgreens' pharmacies in Kentucky. The partnership, Lindholz said, is helping Kroger grow its footprint beyond the stores it already operates.

Ultimately, Lindholz is betting the grocery store will be the place where people go for their health.

"For one thing, it's very local and for two, it's very personal," Lindholz said. When it comes to changing patients' habits or intervening when they're about to get sicker, that happens more in-person than it does over the phone in her experience.

How Kroger can get to get to fewer prescriptions

To start filling fewer prescriptions, however, will require some changes to how the pharmacies within Kroger stores operate. For one, Lindholz is working to integrate the healthcare side of the business and the food side. Healthier eating habits could reduce the need for some medications to treat chronic conditions like diabetes or heart disease, and potentially prevent the conditions from progressing to the point where people need additional medications or other care.

"We really believe, because we're inside a grocery store, because we can tie the healthcare side to the food side, that that's the way we're going to change the way healthcare's delivered in the country," Lindholz said.

To accomplish this goal, Kroger's pharmacists will have to go beyond the traditional way we think of that role - as the person who fills a prescription. Instead, they'll need to work more like doctors or nurses.

To help, Kroger is building out software with health IT company Assure Care that has the ability to link its loyalty card to its pharmacy data, as well as to electronical medical records from health systems around the country. The system will be rolled out in Kroger stores by the beginning of the fall, Lindholz said. Kroger also hired on dietitians to work alongside the staff at its Little Clinics and pharmacies.

Kroger's loyalty card already tracks what consumers buy and comes up with a food score that's based on that person or family's eating habits, which users can see if they download Kroger's OptUp app.

When an individual goes to pick up their prescription, they can then be asked if they'd like to share their food score with the pharmacy. The food score is a number that sums up how healthy the food is that you're buying. The pharmacist wouldn't see the exact ice cream and chips a patient has purchased.

If the patient says yes, then she would have to consent to sharing that information with the pharmacist before it starts showing up next to her prescriptions.

Ideally, by putting that food score next to the pharmacy data and patient's medical data (assuming customers opt into sharing their medical information as well with their pharmacist), the hope is that pharmacists will be equipped to intervene in other ways than simply filling the prescription.

For example take a patient with Type 2 diabetes, a common condition in which the body stops properly regulating its blood sugar. When that patient comes in, the pharmacist might now be able to see their blood sugar levels as last reported to the patient's doctor, as well as his or her food score.

If the patient's eating habits and blood sugar levels are not where they should be, the pharmacist can do something about it, including referring them to a dietitian.

"We're training our pharmacists to do more than just open the bottle and say is that the right pill and close it? because they really didn't go to school for that," Lindholz said.

Doing more than dispensing pills

Lindholz isn't alone in this idea. Independent pharmacists, feeling the pressure from declining reimbursements for the prescriptions they dispense, are seeking to get paid more like doctors or nurses, and less like sales clerks.

Read more: Amazon is threatening the future of independent pharmacies. Here's how they're fighting back.

Here's the thinking: You might see your doctor a few times a year. But you probably pop into your local pharmacy once a month, if not more. So why not check in on your health there instead of setting up a separate appointment with your doctor? The visit won't be as comprehensive as a full yearly physical, but could help fill in the gaps in between visits.

Already, when pharmacists dispense medications, their job is not just to put the pills in the tube. It's also to check whether the prescription will mix poorly with any other drugs a patient might be taking, counsel a patient on how to take the medication, and answer any outstanding questions they may have thought of on their way from the doctor's office.

Kroger is now working on signing contracts with employers and insurers to get paid based on how well its pharmacists and dietitians manage the health of a group of patient,s instead of based on how many prescriptions they dispense, known as pay-for-performance contracts. In December, Kroger launched a randomized, 250-person trial with researchers at the University of Cincinnati to see how effective this approach of working with dietitians can be at helping people develop better eating habits.

"It's worth billions to the healthcare system if we can figure out how to delay some of those chronic diseases or prevent them," Lindholz said.

And that could be key as the future of retail stores continues to change.

"We're trying to put together where Kroger is evolving from the industry traditional grocer to being more than that," Lindholz said. "Retail will be here but it just won't be the same. Our stores are transforming into being a destination for people to come to where they can understand the role of food as medicine."

• Read more:
• Walgreens is forging alliances with tech giants like Microsoft as it prepares for war with Amazon
• We got an exclusive look at the 2019 plans for Capsule, a pharmacy startup that could be Amazon's next takeover target and has plans to go national
• Amazon's playbook for upending healthcare is getting clearer, and pharmaceutical companies can't wait for the tech giant to make its move
• Investors including GV just put another $51 million into a startup that's betting prescriptions shipped to your door is the future of healthcare