Telehealth providers and retail clinics have been battling turbulent waters in recent years, a fact reflected in the declining stock prices of Teladoc and Amwell. This turbulence proved to be too much even for retail giant Walmart. Despite the company’s impressive maintenance of its presence across American urban and rural regions, Walmart recently announced the closing of its healthcare division, Walmart Health, citing the venture’s unsustainable business model.
Walmart had established its healthcare division in 2019, which included 51 retail primary care clinics across five states and a virtual care business. However, this initiative faced numerous challenges, such as escalating operating costs and a difficult reimbursement environment, which pointed to a lack of profitability in the venture. In a statement, Walmart recognized the impact on patients who relied on these services, the providers who delivered care, and the supportive communities.
The decision reflects the inherent challenges in achieving profitability in the primary care and telehealth markets. The hurdles are further compounded by rising healthcare costs, labor shortages, and outdated business models.
Building primary care clinics from scratch has always been a challenging and capital-intensive endeavor, according to Rebecca Springer, lead private equity analyst at PitchBook. These difficulties have raised questions about the ability of retailers to effectively integrate healthcare assets and profitably operate them.
Certain trends suggest that many retailers might not succeed. Amazon, for example, exited its hybrid primary and urgent care business two years ago. This year, CVS Health began closing numerous pharmacies in Target stores, while Walgreens announced plans to shut down 160 of its VillageMD primary care clinics. These instances suggest that the retail healthcare setting may struggle to support the kind of long-term patient relationships necessary for success in value-based primary care.
The decision by Walmart to close down its healthcare services is in line with industry trends, suggests Springer, reflecting on the current state of retail care delivery and virtual primary care. She also noted that administrative burdens and costs from health insurers have significantly increased, resulting in large health systems dropping major insurers and plans.
Looking to the future, large retailers might have to rethink their role in healthcare, potentially turning their focus to more employer-centered solutions. Despite the challenges, some see the recent developments as a call for a new era of modern healthcare, characterized by more personalized solutions and a deep focus on longitudinal patient support. Regardless, the challenges faced by Walmart serve as a reminder of the complexities of America’s healthcare system and an indicator that there’s still a long way to go before the industry fully embraces telehealth and retail healthcare.