The landscape of retail healthcare has seen tumultuous waters in recent years, as evidenced by the struggles of telehealth providers and retail clinics. Walmart, a major player in the retail sector, recently made headlines with its decision to close down its Walmart Health division. This move by the retail giant sheds light on the formidable challenges facing companies attempting to integrate healthcare into their business models.
Established in 2019, Walmart’s healthcare division encompassed 51 retail primary care clinics across five states and a virtual care business. However, Walmart announced its decision to shutter the division, citing the lack of a sustainable business model due to challenging reimbursement environment and escalating operating costs.
The closure of Walmart Health reflects the difficulty in achieving profitability in the primary care and telehealth markets. This challenge is further compounded by rising healthcare costs, labor shortages, and outdated business models. Retail healthcare providers face an uphill battle in not only achieving profitability but also in effectively integrating and running healthcare assets.
While the potential for success in retail healthcare remains uncertain, industry observers acknowledge that companies such as CVS and Amazon may yet succeed in this space. However, recent market trends — including Amazon’s withdrawal from its hybrid primary and urgent care business and CVS Health’s closure of pharmacies in Target stores — raise questions about the feasibility of retail entrants in the healthcare arena.
The challenges extend beyond profitability, touching on the ability of retail healthcare settings to support longitudinal patient relationships and achieve a holistic view of the patient through leveraging consumer data. Retailers have found it difficult to navigate the complexities of delivering care in a manner that is both convenient and highly accessible while ensuring sustainability.
Furthermore, the closure of Walmart’s healthcare division highlights the limitations of an encounter-centric model in managing chronic conditions that require consistent, asynchronous communication between visits. Retailers are faced with the dilemma of investing in costly care coordination technologies to expand margins.
The difficulties facing retail healthcare providers are not unique to this sector alone. The telehealth market has also faced setbacks, with major providers such as Optum and Teladoc Health announcing the discontinuation of their virtual care units. The challenges in achieving widespread adoption in telehealth services are indicative of broader market dynamics where the supply of services exceeds demand.
Walmart’s decision to shutter its healthcare unit underscores the need for a fundamental reevaluation of existing healthcare business models. It prompts a critical examination of the industry’s approach to delivering coordinated care and improving access. As the healthcare ecosystem continues to evolve, suppliers and providers must navigate the complex demands imposed by the healthcare system’s intricate landscape.
Looking to the future, industry experts anticipate that large retailers will refocus their efforts on employer-facing solutions for primary care, chronic condition management, and benefits navigation. This shift reflects the acknowledgment that addressing rising healthcare costs requires a new approach that prioritizes employer-focused solutions.
Amidst the challenges confronting the retail healthcare sector, there is optimism for a new era that emphasizes personalized and interconnected healthcare experiences. The closure of Walmart Health may signify the dawn of a new chapter in modern healthcare, characterized by a departure from transactional models towards holistic, tailored care.
Market Capital Research 