Courtesy of Walmart
What Can Be Learned From Walmart Closing All of Its Health Clinics?
In a recent announcement, retailer Walmart disclosed its decision to close down all 51 of its health clinics across five states and cease its virtual healthcare operations within the next 30-90 days. This move, attributed to financial challenges, raises pertinent questions about the viability of corporate ventures into the healthcare sector. However, the closures won’t affect the retailer’s over 4,600 pharmacies and over 3,000 vision centers.
Walmart first began to launch Walmart Health centers in 2019, providing affordable services in underserved areas. This announcement was unexpected for many, and the retailer noted it was a “difficult decision,” citing financial struggles that led to a “lack of profitability” and made the care business unsustainable.
This decision leaves a gap in healthcare access for lower-income and uninsured individuals, according to CNN, drawing attention to the broader struggles in primary care highlighted by experts like Ateev Mehrotra, a professor of healthcare policy and medicine at Harvard Medical School. “One of [the] unique things was they were focused on stores located in underserved communities,” Mehrotra stated. “It’s disappointing that Walmart wasn’t able to make it work because these patients need care and don’t have as many options.”
Despite Walmart’s successful retail operations, its foray into healthcare faced obstacles such as staffing shortages. The closure underscores the complexities of healthcare provision and the need for sustainable models to address nationwide demand for primary care.
The decision comes amidst a trend of retail giants, including Walmart, Walgreens, Amazon, and CVS, diversifying into healthcare services over the past few years. These companies initially saw opportunities in addressing the gaps within the U.S. healthcare system.
Marilee McInnis, a spokesperson for Walmart, told Reuters, “Healthcare is expensive to run. We were finding that the increased labor and operating costs environment, like with reimbursement, both public and private, made it difficult (to run the business) and obvious we had to close.” This admission highlights the intricate financial landscape of the healthcare industry, where profit margins are often razor-thin.
Walmart’s move is not an isolated incident. Competitor Walgreens recently announced plans to shut down 160 of its VillageMD primary care clinics after recording significant impairment charges. Similarly, Amazon disclosed job cuts across its healthcare units, including clinic operator One Medical, acquired for $3.5 billion last year.
These developments prompt a critical examination of the intersection between commerce and healthcare. While retail giants possess vast resources and extensive reach, their foray into healthcare has been met with mixed results. Questions linger about whether consumers prefer receiving healthcare services from traditional providers rather than retailers and whether such ventures can indeed be financially sustainable.
Walmart originally planned to double its health center locations, according to a press release from March 2023, so this decision marks a major shift away from its previous ambitions. At the time, David Carmouche, Walmart’s senior vice president of healthcare delivery, discussed the company’s vision to provide affordable healthcare services conveniently, leveraging its widespread presence.
However, Walmart’s decision to shutter its health clinics raises concerns about the accessibility of healthcare services, particularly for underserved communities. With approximately 90% of the U.S. population residing within 10 miles of a Walmart store, the closure of these clinics could exacerbate existing healthcare disparities.
As Walmart and other corporations recalibrate their strategies in the healthcare landscape, stakeholders must engage in a nuanced dialogue to ensure that healthcare remains accessible, equitable, and financially viable for all.
Discussion Questions
What implications does the closure of Walmart’s health clinics hold for healthcare access and equity, and how can stakeholders collaborate to address these challenges?
How can retail giants effectively navigate the intersection between commerce and healthcare, balancing profit with accessible and sustainable healthcare services?
Amid setbacks experienced by retail giants in healthcare, what lessons can inform future strategies for both retailers and traditional healthcare providers?
Poll
Loading …BrainTrust
David Spear
VP, Professional Services, Retail, NCR
Cathy Hotka
Principal, Cathy Hotka & Associates
Walmart isn’t the first, and it won’t be the last, retailer to stumble in the healthcare market. While, in theory, Walmart should have had a shot in primary care because of its convenient locations, making the business work financially is extremely challenging. Walmart is used to serving consumers directly and having them pay for products and services. Healthcare isn’t like that. It’s a complex web of interested parties and Walmart having to deal with insurers for reimbursements has been problematic. I think Walmart has looked at the numbers and concluded that this is too much of a hassle for little to no return. With the top line under more pressure, they’re laser focused on profits and can’t afford this costly distraction. In some ways, there are shades of Amazon about this: experimenting and testing things and withdrawing quickly from initiatives that don’t work.
There are plenty of plausible explanations for Walmart’s clinic and virtual care walk-backs, but the suddenness of the closures in the wake of recent clinic opening announcements is jarring. Either something pushed Walmart over the edge quite recently or there was a disconnect between its Health division and Corporate. Perhaps a major healthcare partnership or acquisition announcement is in the offing. Either way, Walmart (being Walmart) could afford to keep its clinics running at a loss yet obviously doesn’t foresee a long-term uptick in the business. In the meantime, opportunities to invest in new technology, store upgrades, and the people who make Walmart’s core business hum are near endless. Failing (relatively) fast beats wishful thinking.
This is truly a disappointing outcome given the state of the US healthcare system. Like many observers, I was hopeful that Walmart’s entry into the healthcare space would expand coverage to people who couldn’t easily access medical care and that they would find a way to deliver these services profitably. Furthermore, I expected that if anyone could find a way to make money at this, it would be Walmart. This announcement makes it clear that it’s a lot harder to make money at this than anyone expected. Not only is Walmart’s exit disappointing, especially for the people who were using their services, but it also sends a strong signal to other would-be players – this market is not for the faint of heart.
I agree entirely. The healthcare market needs disruption. And Walmart surrendering isn’t a good sign that it will happen. Amazon is the other hope, but even they have struggled. Too many vested interests in an overly complicated market.
I don’t think it really tells us much that we didn’t alredy know: healhcare is an expensive – and tough – field, and companies that (try to) enter it with naive ideas about how they’re going to apply their non-medical expertise are likely to exit, sooner rather than later. I’m not necessarily saying that was the case with WalMart, but it’s not particularly surprising that a company that made it’s fortune on ruthlessly cuttiing costs didn’t fare well in a field that seems designed to spend as much as possible…wisely or not.
This is a huge disappointment. I truly felt that corporate ventures into healthcare would help fix a massively deficient and embarrassing system. The United States is ranked last anmong developed countries and some lower than some developing countries in healthcare. Once upon a time, the U.S. was first.
As Neil Saunders notes, there is a complex web of interested parties. “Interested parties” is another description for those more interested in profits than healthcare. I have had incidents to experience in healthcare in Italy, France, Canada, and China. In “each case, my experience was exceptional (versus my American expectation) and inexpensive. To add an adjective, “unbelievably” inexpensive.
I hope Walgreens, CVS, et al. continue to work on a solution. But the real solution is fairly simple: copy the best of the many systems that work better than ours. Sadly, getting that done is not simple.
It’s really shocking that Walmart, with all its size, was no match for the “interested parties” – for me most notably the insurance companies. Our system is starting to implode across many dimensions.
This was after recently announcing their expansion. They can’t be everywhere, but only where they are needed and relevant. I see like clinics pop up near me to do physicals, regular or school team, treat colds, etc. They do well. There is an investment but I hope a large chain finds the “secret sauce” to making these successful.
I was hopeful the Walmart Health Clinics would prevail and deliver high-quality, affordable care to both insured and uninsured consumers. However, the reality is that Walmart is a retailer, not a healthcare corporation. Moreover, the US healthcare system is a tangled web of many parties who fight for limited reimbursement dollars, which makes the end game of making money extremely difficult. I’m assuming Walmart leadership looked at this equation and decided to put their efforts into lines of business that deliver much higher return.
Profitability versus access and affordability. Turns out it is impossible, in the current market, to go 3 for 3 in this equation. Somehow access and affordability must win out. This is basic health care, not discretionary consumable ‘stuff’. Healthcare…and even Walmart couldn’t breakthrough. One of the biggest and most efficient retailers on the planet couldn’t engineer a breakthrough. Where is the stranglehold? Insurance companies? Drug companies? If only there was a country or two across the globe that have efficient and affordable healthcare systems where we could learn a lesson or two. Oh, right……
I still think (and I felt this way when the original announcement was made) that there is a disconnect between the Walmart brand image (cheaper but not necessarily better) and great health care. It’s hard to know what pushed Walmart over the edge here, but talk of labor shortages suggests that the company wasn’t prepared to offer competitive salaries in a tight labor market for medical services. (Even my neighborhood Walgreens pharmacy is closed on weekends.)
I can see Amazon — with its history of overinvestment to gain market share — being better prepared to make “corporate” health care work, especially given the complexity of insurance reimbursement baked into our system.
The insurance companies are ruling the roost. Until some kind of changes can be made, there’s no point.
Imagine? They call themselves “Health” insurance companies.
There’s no doubt that this is the main issue. Insurance companies se no benefit from Walmart entering healthcare.
The whole system is ridiculous. The game playing over charges, the web of organizations. So unnecessary complicated! But it’s like that closet that is absolutely crammed full of random stuff: no on wants to get in there and sort it out!
Walmart knows how to fail fast, which helps it recover from ventures that don’t work. I have high hopes for CVS, though, which seems to have staked its future on health.
CVS is the last bastion of hope for a retailer to disrupt healthcare (especially given they have more of the ‘interested parties’ in their ecosystem. Very disappointing to see this announcement from WMT.
Let’s hope CVS does a better job with healthcare than they’ve done with retail!
The complexities of managing healthcare services in the US are mind-boggling. At one time, I worked on the redesign of pharmacy systems for a big box retailer. They felt that since prescriptions were merchandise, they could apply merchandising tools to selling and managing the inventory of drugs. I realized pretty fast this was a bad idea- this is a business where you have 100’s of SKUs and millions of customers and transactions every day, and almost every customer pays a different price for the product based on their insurance. The insurance billing and chargebacks alone were a nightmare for a system. And, even at six-sigma levels of accuracy, there were still people who could be seriously injured or worse by a simple mistake.
Compound this with procedures, medical coding, and billing, not to mention exposure to lawsuits if something goes wrong. Walmart and others leaving this business are more testament to just how bad our healthcare system in the US has become. Sadly, our health outcomes in this country, compared to other industrialized nations, are near the bottom of the scale, especially for the very people Walmart was trying to serve.
We need to do better.
Health care is a not an industry well suited for Retailers. I took years for retailers to figure out how to manage Pharmacist and Pharmacy staff that often have salaries higher than the store manager. Trying to manage the HR side of hiring and staffing these individuals in Walmarts very divers locations. The best approach would be to rent the location space in the store to a 3rd party Company that specializes in staffing and managing all of the diverse insurance challenges.
Walmart’s abrupt exit is unfortunate and unexpected, given growing demand for care due to an aging population, mental health crisis and wellness as a priority.
Healthcare is a tangle of fragmented systems and entrenched stakeholder groups who may feel threatened by new entrants offering improved access and efficiency for patient care.
If powerhouses like Walmart, Amazon and Walgreens stumble over the barriers to entry, it suggests the healthcare sector is inhospitable.
Running a profitable and scalable health clinic within a retail operation is an extraordinarily complex and dynamic challenge. Walmart’s services and product diversification strategies have been impressive, to be the retailer of choice to serve the customer’s every need. When Walmart entered the healthcare arena, it was a welcome development where underserved communities could access services and capabilities they might not have access to.
With any new investments or innovation, there is a cycle where upper management decides where to de-invest and where to invest in driving profitable and sustainable growth. Theoretically, Walmart, with its infinite scale and countless locations, could have disrupted the primary care operating model. Unfortunately, the complexities of running a healthcare operation include all the challenges of working with third-party providers, collaborating with insurers for reimbursement processes, and other issues.
Walmart’s ambitions and growth plans remain intact. While this is disappointing, we should expect Walmart to continue experimenting and innovating for growth.
The implications of Walmart closing its health clinics are clear; many rural markets will have fewer available options with a reasonable driving range. Walmart fell afoul of the same issues that other healthcare organizations faced when attempting to address in the underserved market — the challenges of authorization and reimbursement from health insurance companies. Low customer volume and lack of staff would have exacerbated those issues.
It is surprising that WalMart abandoned the initiative due to cost when the test had only 51 locations. Given WalMart’s size, the cost of those locations had to be trivial. Staffing availability, customer volume, and cost may have driven those decisions. In effect, WalMart needed help to make the business model work.
Public and private stakeholders may need to get involved to help expedite a cumbersome process and subsidize such an initiative until volumes and staffing issues can be addressed.
A healthcare service business is complex, and retailers’ getting into it effectively is not easy. It requires training and expertise, regulatory compliance, and the right resources and capabilities to provide quality services. Ultimately, the question is, will it be financially viable to get into it, and how much risk does it bring to the retailer brand. Partnering with an established provider might make more sense due to the complexities of our healthcare systems or a total rethink taking it on in little chunks that revolutionize the way we think about healthcare.
First, let’s applaud Walmart for trying something, recognizing it isn’t working, and moving on. They gave the healthcare concept a good shot and found out what worked and didn’t work. There is always a chance to come back to the concept, but for now, they have chosen to cut losses.
It’s not that there isn’t room for a corporate retail giant to get into healthcare – but it didn’t work for Walmart.
I remain convinced that the healthcare opportunity across the retail sector holds unrealized opportunities. Walmart must have determined that going it alone to navigate this complex playing field, penetrate existing legacy operations, and balance staffing expenses with other activities created an irrevocable tipping point.
My prediction is that Walmart isn’t abandoning its desire to disrupt access to healthcare and affordability of services — I can only imagine that there is another approach already in the works.
Walmart’s closing of health clinics doesn’t completely surprise me because I had anticipated the issues that are triggering the closure, and I’m sure I wasn’t alone. What does surprise me is that Walmart didn’t anticipate these challenge’s because they would have seemed pretty obvious. Big government programs don’t play nicely with private sector ventures.
Walmart’s intent to help underserved communities might have been noble, but these types of efforts seem always to fail. Underserved markets are “underserved” or legitimate reasons.
Many grocery chains have tried serving underserved markets, time and time again, but almost always end up boarding these stores up, but without success. Same reason, different issue. Government is inefficient at reimbursements for food vouchers and other related programs.
Truth of the matter is that big government programs are never operated or managed like a business, and therefore, don’t work well for private sector companies that need to make profits, and have proper cash flow. Social programs don’t work well in a capital environment. Db
The big lesson: Focus on food and other consumer packaged goods. Forget about everything else, even healthcare. If not, what could be next? Selling car insurance and offering tarot-card readings by fortune tellers?
We have warehouse operations in rural Arkansas – these closures will really hurt the local communities. Health care in these areas was sketchy at best. Now these people will need to drive long distances for health care.