Sometimes, industry news breaks that is both shocking and not surprising at the same time. That happened yesterday when Walmart Health announced a major change to its retail health strategy. Specifically, ending primary care services.
Walmart will close all its health care clinics across the country. The change will impact 51 health centers across five states and shut down Walmart’s virtual care offering as well. The company will continue to operate nearly 4,600 pharmacies and more than 3,000 vision centers.
Along with Amazon Health, Walmart was one of the big, original “disruptive” forces to traditional health care. This decision obviously casts doubt over the future of that space.
To many of us with long careers working in health care, Walmart’s announcement was shocking, but it’s actually not surprising for several reasons.
Why did this happen?
Walmart believed it could use its financial scale and retail locations to offer convenient, low-cost services to patients in mostly rural and underserved areas that lacked adequate primary care services. It was a compelling proposition, but not without clear challenges.
The simplest answer to what happened to the company’s vision is probably the most likely. Primary care is a low-margin service with very high labor and supply costs. It’s tough to do well and make it sustainable.
Primary care is a challenging fit for retailers who prefer high-margins and have historically been able to tap into a readily available, low-skilled workforce to meet labor needs.
Walmart’s statement makes that clear: “The challenging reimbursement environment and escalating operating costs create a lack of profitability that make the care business unsustainable for us at this time.”
In short, Walmart realized that profitability wasn’t going to happen and cut its losses.
Traditional health care providers have struggled with this situation for at least the last two decades. There was much speculation that retailers like Walmart might be able to finally crack the code. In this instance, that proved to be incorrect.
Nevertheless, to see Walmart Health close everything at once was a genuine surprise.
A slowdown in growth wouldn't have surprised me. I constantly wondered about low profit margins and staffing costs every time I saw news about a new Walmart Health expansion. The math for expenses versus revenues just didn’t pencil out for me.
What comes next?
A timeline for when things will shut down has not been released, but already we’re seeing employees post about the unwinding on social media. Patient concerns will follow.
Walmart acknowledged those impacts in its statement, “We understand this change affects lives – the patients who receive care, the associates and providers who deliver care and the communities who supported us along the way … our priority will be ensuring the people and communities who are impacted are treated with the utmost respect, compassion and support throughout the transition.”
Sadly, this abrupt shutdown means the immediate access to primary care will suffer in many communities. A big question is how much this could help other providers shore up their services. Almost all health systems have more openings for primary care providers than they can fill.
That could be a bit of a silver lining.
The key takeaway
This will probably not be the last news like this given how challenging the primary care space is proving to be for disruptors. Solutions that address the issues of access and pricing that spelled the end of this venture for Walmart Health won’t be easy to come by.
Health care is hard. Health care disruption is harder.
It’s a long game, and we’re seeing who is most serious about playing it.