Jun 11, 2024 - Health

What retailers might do next on health care

Illustration of a business person walking away from a red cross

Illustration: Gabriella Turrisi/Axios

Major retailers are abandoning or scaling back their ambitions to become health care providers — but don't look for them to pull out of the market entirely.

Why it matters: Retailers hoping to grab a bigger piece of the $4.5 trillion health care market are likely to lean into their core strengths: consumer products, alongside some health services that don't require major investments, experts said.

The big picture: Even for giants like Walmart and Walgreens, the economic realities of primary care proved challenging, with its low reimbursement, growing labor and supply costs, and other workforce challenges.

  • Retailers have struggled to convince enough patients to give up traditional providers for their more comprehensive health care needs in the same place where they buy toilet paper.
  • That's led to some big losses. Walgreens earlier this year took a nearly $6 billion writedown as it closed dozens of primary care clinics. Walmart lost nearly a quarter-billion dollars before pulling the plug on its 51 in-store clinics, Endpoints reported last week.
  • Dollar General late last month shuttered a pilot with DocGo to bring mobile clinics to rural areas, showing that even smaller-scale efforts have also been challenging.

State of play: Look for retailers to instead pursue health care services that people are accustomed to paying for out of pocket. For instance, Walmart is still keeping open its more than 3,000 vision clinics.

  • Other examples could include heavily cash-pay services like certain dental services that aren't typically covered by insurance, aesthetics, weight-loss drug management and veterinary care, said Kate Festle, a managing director at West Monroe.
  • She said the approach seems to be: "Let's really target the things that are at the peak of the hype cycle in terms of retail health so that we can at least enjoy and capitalize on those gains today while we figure out our broader health care delivery strategy."

What else: Experts say they expect more partnerships instead of acquisitions as retailers test out new waters in health care. One example is Costco's team-up with online platform Sesame to offer $29 primary care visits.

  • National brands will also be more apt to partner with community organizations in a bid to build up their local patient volumes, said said Michael Abrams, managing partner of the global health care consultancy Numerof & Associates.

Zoom in: Retailers that focused on providing services to health care providers, rather than delivering care themselves, may be better positioned.

  • For instance, Best Buy has partnered with health systems to provide its Geek Squad services for home health devices.
  • Other devices — like hearing aids, glasses or continuous glucose monitors that can be sold alongside care delivery — offer an area of opportunity for retailers, experts said.

What we're watching: Several experts said they remain interested in seeing what synergies emerge between Amazon's care delivery services, One Medical and Amazon Clinic, and its online pharmacy PillPack.

  • "The [One Medical] subscription model that Amazon is using has considerable potential given they make money whether or not you engage with the service," Abrams said. "Having predictable cash flow is an important aspect of this."

The bottom line: It's not impossible for retailers to succeed in health care. But we're now in a period when many are taking a step back to rethink strategy.

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