White flags are flying left and right, with Walmart announcing its retreat from care delivery less than a full week after Optum made a similar surrender.
Walmart’s five-year foray into primary care is ending with the closure of 51 health centers, the shuttering of its telehealth service, and the cancellation of any active ambitions in the space.
- The press release chalked up the “difficult decision” to a challenging reimbursement environment and high operating costs, which ultimately made the business unsustainable.
The abrupt finale arrives shortly after Walmart laid out plans to nearly double its footprint to 75+ health centers by the end of 2024, as well as several other marquee announcements.
- As recently as November, Walmart was inking health system partnerships with the likes of Orlando Health, and Bloomberg was even reporting on a potential acquisition of ChenMed that would have opened the doors to the Medicare Advantage market.
So what happened, and why couldn’t the nation’s largest retailer succeed in delivering care to the millions of underserved patients where it already has a presence? Mainly because retail clinics aren’t set up to succeed.
- Scaling brick-and-mortar clinics is simply a low margin endeavor. Reimbursement is low, provider costs are high, and the telehealth piece looks more commoditized every day.
- Even with Walmart’s economies of scale and armies of foot traffic, the system it was operating in doesn’t incentivize preventative care, but rather expensive procedures that it didn’t offer in-house.
The perfect storm of inflating costs and shiny technology that fails to actually reduce those costs is proving too much for retailers and telehealth companies alike. The only ones succeeding seem to have an edge that makes it possible:
- They have access to better rates (One Medical’s health system relationships)
- They have boosted margins from marking up generics (Hims & Hers)
- They control premium through value-based care arrangements
- They have some form of subscription revenue
The Takeaway
The moral of Walmart’s story is that even if you have all the best ingredients, the meal is still only going to be as good as the recipe. Having groceries and doctors under one roof doesn’t lead to more health visits if people don’t want to see a doctor where they get their groceries.
