Walmart announced Tuesday that it would close all of its health care clinics across the country, a stunning reversal of its plans to bring its reputation for low prices to dentist and doctor offices as well as the grocery aisle.
The big-box retailer announced it would also shutter its telehealth provider, which it acquired for an undisclosed amount in 2021.
Walmart will close 51 clinics in Arkansas, Florida, Georgia, Illinois and Texas, plans that will not affect the company’s 4,600 pharmacies and more than 3,000 vision centers, the company said. company in a press release. The clinic will close in the next 45 to 90 days, two people familiar with the matter told CNBC.
Walmart blamed its plan to close clinics on a failing business model. In the release, the company describes the move as “a difficult decision” but says it cannot operate a profitable business due to the “challenging reimbursement environment and increasing operating costs.” .
The shortage of healthcare workers in the United States has also increased the company’s labor costs, according to people familiar with the matter.
The announcement comes just a month after Walmart announced plans to double the size of its clinic by opening 22 new locations this year and more in 2025.
Walmart’s announcement is also another sign of how difficult it is to disrupt and radically improve American health care – an expensive, complicated and entrenched system of doctors, insurers, drugmakers and other players which costs the nation more than $4 trillion per year.
Walmart opened its first Walmart Health clinic in Georgia in 2019, then gradually opened other clinics alongside its big box stores. Customers, who typically shopped for groceries or household items in Walmart’s aisles, could also stop by for a doctor or dentist appointment or therapy session. The clinics also offered other services, such as flu tests, x-rays and stitches.
These health services were offered at a low price, such as $30 for an annual exam for adults, $45 for a 45-minute counseling session, or as little as $25 for an adult teeth cleaning.
At a conference in fall 2019, Brett Biggs, then Walmart’s chief financial officer, touted the company’s ambitions to investors. He talked about how Walmart had used its large size to reduce the price of many common generic drugs to as little as $4 at its pharmacies and planned to do so for other health care sectors.
“It’s more than test and learn, because we know this is a place where we can make a huge difference to the way people live,” he told investors at the time. “When we think about ‘Save Money, Live Better,’ we can do both with what we can do in health care. So we plan to be a major player in the future in what’s happening in healthcare. »
Yet over the next few years, Walmart opened new clinics at a slow pace and faced new challenges and competitive dynamics, including keeping its store shelves stocked and its locations staffed during the pandemic. of Covid-19. Walmart has struggled with high employee turnover and brought in many Walmart Health executives. And CVS Health, Walgreens Boots Alliance and Amazon have all announced their own ambitions to open or acquire medical practices. Amazon struck a $3.9 billion deal last year to buy primary care provider One Medical.
Meanwhile, on earnings calls and at investor meetings, Walmart CEO Doug McMillon and other company executives instead highlighted other emerging, higher-margin businesses, such as its growing advertising business and third-party marketplace.
Going forward, Walmart will return to the health services it offered before the Walmart Health push: it will continue to operate its thousands of pharmacies and vision centers.
Walmart said its clinics will continue to see patients with scheduled appointments until they close their doors, people familiar with the matter told CNBC. The company will also help patients find high-quality providers within their insurance networks to ensure they continue to receive care, the sources said.
Walmart Health marks the latest failure of a leading healthcare company, following the dissolution of a joint venture between JPMorgan Chase, Berkshire Hathaway And Amazon in 2021.
Before announcing the closures, Walmart was among a list of retail giants that rushed to strengthen their presence in primary health care amid growing demand for convenient and affordable medical care. Walmart has grown its clinical operations at a slower pace than its competitors, but some companies have struggled to balance their expansion plans with the expansion of their patient networks.
Walgreens said in March that it had closed 140 of its VillageMD primary care clinics and planned to close 20 more to increase the profitability of its broader healthcare division. Walgreens also recorded a nearly $6 billion charge in the first quarter related to the decline in the value of VillageMD, which has generated disappointing returns since the company became majority owner of the business in 2021.
In the meantime, AmazonHealth clinic operator One Medical now has more than 125 locations nationwide.
Walmart has made several other moves in the health care space, including partnering with an insurer and the health system for care coordination in Florida. But Walmart will not see any more patients under this partnership moving forward, according to the two sources familiar with the matter.
Walmart purchased a chronic disease management platform called CareZone in 2020 for an undisclosed amount.
cnbc
