May 1, 2024 - Health

Retailers retreat from health care delivery

Illustration of a plastic bag with "NO THANK YOU" printed multiple times on it alongside a health plus.

Illustration: Aïda Amer/Axios

Walmart's decision to shutter its health clinics and virtual care services marks the most significant retrenchment yet from major retailers who sought to transform how health care is delivered.

Why it matters: With its economies of scale, Walmart might have seemed positioned to capitalize on patients' desire for affordable and on-demand care. But the major retailers are still struggling to make the health care delivery business work.

Driving the news: Walmart had 51 in-store clinics with plans to open 28 more this year, a well as a nationwide telehealth offering under the Walmart Health brand.

  • On Tuesday, the company announced it would close them down within three months after determining "there is not a sustainable business model."

The announcement followed other retailers' recent retreats.

What they're saying: "Just because you can sell toilet paper and groceries and other things very, very well does not mean you can easily translate that into health care," said Ateev Mehrotra, who studies retail health care at Harvard Medical School.

  • "I think we should be very skeptical when we hear about a large retailer making a new play into health care," he said.

State of play: Running clinics is costly and only getting more expensive
with increased labor costs and inflation.

  • At the same time, payment from insurers has been largely flat or moving toward value-based payment arrangements that seek to tamp down health care spending.
  • And health care keeps proving to be a really tough industry that can't be solved through typical business efficiency, said Farzad Mostashari, CEO of Aledade, a company helping primary care practices shift to value-based care.
  • "We've seen multiple strikes against this model," he said.

Zoom out: This isn't just about retail clinics. Telehealth is going through a contraction as well.

My thought bubble: The recent pullbacks bring to mind another high-profile effort from corporate titans to disrupt health care that ultimately imploded: Haven, the partnership of JP Morgan, Amazon and Berkshire Hathaway.

  • "There's a little bit of hubris here, right?" Mehrotra said. "Which is that, 'I'm a really good retailer, therefore, I can run anything.'
  • "And health care is different. It's hard. And even with all the resources that Walmart has, they weren't able to make it work."
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