Walmart, the U.S. retail giant, announced on Tuesday that it will close all 51 of its health centers and wind down its virtual care service after struggling to find success with the offerings. The decision comes as a surprise, given the company's previous plans to expand its health care venture by adding more than two dozen health centers to its stores this year.
In a statement, Walmart cited the "challenging reimbursement environment and escalating operating costs" as the primary reasons for the closure of its health centers, which were located in five states: Arkansas, Florida, Georgia, Illinois, and Texas. The company had launched these clinics in 2019 with the goal of helping people save money on their health care needs.
"This is a difficult decision, and like others, the challenging reimbursement environment and escalating operating costs create a lack of profitability that make the care business unsustainable for us at this time," the company said. A spokeswoman added that reimbursement proved challenging "from all types of insurance."
The announcement marks a swift reversal for Walmart, which had announced plans in March 2023 to add 28 health centers to its stores, mostly in Dallas and Houston, and expand into the Phoenix and Kansas City, Missouri, areas. The company's decision to shutter its health care venture highlights the difficulties faced by nontraditional providers in offering health care services.
Walmart is not alone in this struggle. Walgreens, another retail giant, recently closed 140 of its VillageMD primary care clinics and plans to shutter 20 more to boost profitability. The company had spent more than $5 billion to acquire a majority stake in VillageMD and planned to add hundreds of clinics to its stores. However, it recorded a $5.8 billion, after-tax impairment charge for VillageMD in its most recent quarter as it adjusted the asset's value.
Health care researchers and analysts note that building a network of primary care clinics can be challenging, even for established companies. Many people who already have a doctor may be reluctant to leave, and some may not want to get care in a store or retail setting. Additionally, clinics may have to spend a significant amount of money to treat and improve the health of new patients who haven't been seeing a doctor regularly.
Walmart has not yet provided specific dates for the closure of its health centers but has stated that it will share that information when it becomes available. The company has assured that employees who worked at its health centers are eligible to transfer to any other Walmart or Sam's Club location.
Despite the closure of its health centers and virtual care service, Walmart will continue to operate almost 4,600 pharmacies and more than 3,000 vision centers in the U.S. The company has also stated that patients with scheduled appointments will continue to be seen, and efforts will be made to direct them to high-quality providers within their insurance networks to ensure continuity of care.
The failure of Walmart's health care venture, along with the struggles faced by other nontraditional providers like Walgreens and the now-defunct joint health venture among Amazon, Berkshire Hathaway, and JPMorgan Chase, underscores the challenges of entering the complex and highly regulated health care industry. While these companies aimed to disrupt the traditional health care system and offer more accessible and affordable services, the reality of rising costs and competition has proven to be a significant hurdle.
