Walmart has announced the closure of its healthcare clinics and virtual care services, due to a lack of profitability, a challenging reimbursement environment, and escalating operating costs. An announcement, which comes shortly after the reported shutdown of Optum Virtual Care. 

Why it’s notable:

• Walmart launched Walmart Health in 2019, aiming to provide affordable healthcare services, particularly for rural or underserved communities. In a reversal of its earlier expansion plans, Walmart has announced it will close 51 of its health clinics in five states and end its virtual care service. Walmart encountered various hurdles including staff shortages, however, it ultimately attributed the closure to difficulties in reimbursement and low profit margins. The company will continue to operate its nearly 4,600 pharmacies and more than 3,000 vision centers across the U.S. 

• Walmart's withdrawal from virtual care has coincided with Optum reportedly pulling out of its telehealth business. Optum Virtual Care launched in 2021, providing virtual access to physicians and nurse practitioners across all 50 states. There are various theories for the closure, including the financial health of Optum’s parent company. However, it seems that the decision to cease its telehealth operations is largely linked to the broader decline of the telehealth industry as a whole. 

• Whether primary care, or virtual care, these standalone companies are struggling to retain a profit margin. For large healthcare systems, primary care is often a loss leader, but plays a crucial function by funneling patients and clients towards specialty care and procedures. Without these high profit revenue streams, standalone services have to achieve significant adoption and volume for profitability.

• Providing low-acuity care services, which are the primary focus of retail care and telehealth, lowers the barrier to entry, resulting in a highly competitive market, driving down pricing. Moreover, these companies compete not only with each other but also with health systems to attract top clinical and administrative talent to efficiently manage their operations.

• Walmart's closure of its health centers highlights the difficulties retailers face in the healthcare sector, with challenges including low reimbursement rates and high operating costs. Despite setbacks, companies like Amazon, CVS, and Walgreens still remain committed to expanding their healthcare services, albeit cautiously. Retailers must navigate regulatory hurdles and financial risks, but some remain optimistic about the long-term prospects of providing healthcare solutions to consumers.