If Walmart Can’t Do It, Who Can?

MHE PublicationMHE July 2024
Volume 34
Issue 7

The retail giant shuttered its primary healthcare clinics, and CVS and Walgreens are cutting back. Is retail healthcare doomed for failure?

Some experts wonder how retailers can be successful in providing primary care after Walmart announced in late April that it was shuttering both its 51 health clinics and its telehealth operations.

Arielle Trzcinski

Arielle Trzcinski

The clinics, which were up and running in five states, have provided a wide array of services, including primary care, laboratory tests and X-rays. “Primary care is generally a loss leader for hospitals and healthcare systems,” Arielle Trzcinski, a principal analyst at Forrester, says. But it can serve as a means to get patients in the door and seek further care, such as more lucrative specialty care, something that Walmart did not offer.

“Primary care is a really difficult tier in the supply chain,” David Dobrzykowski, MBA, a professor of supply chain management at the Sam M. Walton College of Business at the University of Arkansas in Fayetteville, says. Even “health systems struggle to make primary care work.” Providing primary care services is costly because it is labor-intensive, Dobrzykowski notes.

When compared with health systems, “retailers don’t create a repeated need to go in for care,” Trzcinski says. Instead, it’s “transactional. You’re not necessarily building up a relationship like you might with a primary
care doctor.”

Hal Andrews

Hal Andrews

In announcing the closure of Walmart Health, the company issued a news release, saying, “The challenging reimbursement environment and escalating operating costs create a lack of profitability that makes the care business unsustainable for us at this time.” Hal Andrews, CEO of Trilliant Health, a healthcare analytics company, says, “I have a lot of skepticism about that notion,” as thousands of primary care physicians have been able to remain in private practice. Instead, he says, Walmart may have simply decided “it wasn’t worth the effort to be in the business.”

Walmart isn’t the only retailer that has struggled with providing primary care services. CVS Health has announced it is closing dozens of MinuteClinic locations this year, with many of the closures in Southern California, while Walgreens is shuttering 160 VillageMD locations. Part of the challenge for retailers that serve primary care patients has been “how to sell you other things in the store,” notes Trzcinski. CVS Health and Walgreens are also closing their retail pharmacies, not just their healthcare clinics, in what some have called "pharmageddon." In an interview with the Wall Street Journal in late June, Walgreens CEO Tim Wentworth said the company would close a significant proportion of its 8,600 outlets over the next several years without specifying a number.

Same problems

Until recently, Walmart’s healthcare units appeared to have some momentum. In November 2023, Walmart Health announced it was partnering with Ambetter from Sunshine Health, which sells insurance to individuals using Florida’s state health exchange. The health plan, which is part of Centene, included Walmart Health centers as preferred providers in seven Florida counties in the Jacksonville, Orlando and Tampa areas. At about the same time, Walmart Health said it was partnering with Orlando Health, a not-for-profit Florida hospital network, with a focus on improving referral management, patient engagement and care coordination. “That was very positive,” Dobrzykowski says.

Robert Field, Ph.D., J.D., M.P.H., a professor of law and health management and policy at Drexel University in Philadelphia, says he thought that an organization “with the resources of Walmart would be able to make it [primary care] work.” Field notes Walmart and other providers have been affected by staffing shortages, which have resulted in
lower profit margins.

Patients who turn to retailers for primary care services often are looking for such things as lower costs and increased convenience, Trzcinski says. Retail clinics tend to be close to a patient’s home and offer more appointment availability during a wider range of hours than traditional primary care physicians’ offices, and patients can pick up a prescription when they wrap up their visit to a retail clinic, she says. But for such clinics to succeed, “it’s imperative that you have the [patient] volume to support it,” Dobrzykowski says.

A February 2024 report by EY (formerly Ernst & Young) says that retail healthcare use has not accelerated as it had been projected to do. More than $115 billion has been invested in retail health since 2018, EY reports. In 2020, as the COVID-19 pandemic took off, retail health clinics were used about 62 million times, according to EY. In 2021, retail healthcare use shot up
to 75 million. But then growth slowed, with 80 million visits in 2022 and 84 million in 2023. For this year, 88 million visits are projected. The EY report says that “as the supply of retail health offerings increased, demand did not materialize,” the EY report says.

Medical deserts

Walmart opened its first health clinic in Dallas, Georgia, northwest of Atlanta. It then opened clinics in Arkansas, Florida, Illinois and Texas. Many of them were located in more rural areas.

In 2021, Walmart announced it was acquiring the telehealth provider MeMD and renamed it Walmart Health Virtual Care.

It’s not clear when Walmart made the decision to close the clinics and its telehealth services. The announcement of the shutdown came less than a month after the retailer opened three clinics in the Houston area. Walmart has said it would continue to operate almost 4,600 pharmacies and more than 3,000 vision centers. A company press release cast the services provided by pharmacies in a favorable light: “Over the years, the importance of pharmacies has continued to grow, and we have expanded the clinical capabilities of the services we provide. We continue to offer immunizations and have grown to provide testing and treatment services, access to specialty pharmacy medication and care, as well as other essential services such as medication therapy management and a variety of health screenings.”

The decision to shut down the primary care services has some concerned, especially in areas with few primary care services. In those “medical deserts, Walmart helped fill the gap,” Trzcinski says. Andrews says his hope had been that “Walmart had the scale to deliver a consistent primary care model to rural America.”

The lack of good primary care in rural areas will force residents to again drive to bigger towns and cities for care, Andrews says. That creates “friction” because residents need access to transportation, have to pay travel costs and require more time to access healthcare, all of which“makes people wait [for care] when they probably shouldn’t be waiting,” he says.

Part of the challenge for retailers such as Walmart and CVS has been “how to sell you other things in the store,” Trzcinski says.

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