Why are Retail Giants like Walmart Leaving Primary care?

Some giant healthcare companies are scaling back services because of low profits, raising concerns about access to care, especially in rural areas. 

Key Points

• US healthcare is an expensive, complicated system of doctors, insurers, drug companies and other players that costs the nation more than $4 trillion a year.  
• Walmart and Walgreens are closing health-care clinics across the country due to low profits.
• Optum and Walmart are closing their telehealth businesses. 
• Amazon is cutting jobs in One Medical and CVS pharmacies are closing dozens of pharmacies in Target stores. 

Walmart Gets Out of Primary Care 

Walmart has decided to exit the primary care business and will close all 51 of its doctor-staffed health-care clinics across the country.  

This is a sudden change from its decision just a few months ago to expand the program. 

It will also phase out its virtual care option because it was “not a sustainable business model.” 

The company said in a recent release that it could not afford to keep underperforming locations open due to low profit margins, rising operating costs and difficulty managing reimbursements for services provided. 

For rural and lower-income Americans, staying healthy will become more time-consuming, experts say, with longer drives and wait times for doctors following Walmart’s decision.  

The company’s 4,600 pharmacies and more than 3,000 vision centers will remain open. 

Focus on Profits 

Walmart is not alone; other major companies are cutting back as well.  

Walgreens plans to shut more than 160 VillageMD clinics – closing almost 100 more than predicted in late 2023 because of a $6B loss reported in March.  

The clinics were supposed to be a driving force for Walgreens’ expansion beyond the pharmacy business.  However, financial losses and lower profits led to the recent decision to cut back.

According to John Driscoll, the company’s executive vice president and president of its U.S. healthcare segment, “We will continue to grow in 2024, but with a renewed focus on more profitable growth,” citing the need for “increased density in our highest-opportunity markets.”

Optum, another healthcare giant, is closing its telehealth virtual care business and has recently laid off hundreds of people across the country.  

This year, Amazon announced job cuts within One Medical and Amazon Pharmacy and CVS Health plans to close dozens of pharmacies in Target stores.

Retail Retreat from Healthcare

These recent moves are signs of how difficult it is to disrupt and improve American health care. 

Some of the issues companies face include:

• Running clinics is costly and only getting more expensive with increased labor costs and inflation.
• Payment from insurers has been largely flat or moving toward value-based payment systems designed to reduce health care spending.
• Health care keeps proving to be a tough industry that can’t be solved through typical business efficiency.  

In short, retail success doesn’t always translate to healthcare.  “Primary care margins are small, similar to grocery margins,” said Hal Andrews, chief executive of healthcare consulting firm Trilliant Health.  

For example, when Walmart entered primary care in 2019, it said it could bring close and easy access to primary care, since 90% of Americans lived within 10 miles of a Walmart store.

However, like other companies, Walmart found that affordable care was not affordable for providers, even for the retail giant famous for squeezing out profits.    

For patients in rural areas or areas with limited resources, the closings will mean difficulty finding health care and traveling longer distances once they do.     

“People will have to go back to driving to a big city,” Andrew explains. “Going to the doctor will take an entire day. We’re going backward.”

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