Walmart on Tuesday said it will close all of its health care clinics nationwide, a surprising reversal of its plans to bring its reputation for low prices to the dentist and doctor's office along with the grocery aisle.
The big box retailer said it would also close its telehealth provider, which it acquired for an undisclosed amount in 2021.
Walmart will close 51 clinics in Arkansas, Florida, Georgia, Illinois and Texas, plans that will not affect the company's 4,600 pharmacies and more than 3,000 vision centers, the company said in a statement. The clinics will close for the next 45 to 90 days, two people familiar with the matter who asked not to be identified told CNBC.
Walmart attributed its plans to close clinics to a failed business model. In the statement, he described the move as “a difficult decision” but said he was unable to operate a profitable business due to “the challenging reimbursement environment and rising operating costs.”
The shortage of healthcare workers in the United States has also increased the company's labor costs, according to sources familiar with the matter.
The announcement comes just a month after Walmart said it planned to double the size of its clinical presence by opening 22 new locations this year and more in 2025.
Walmart's announcement is also another sign of how difficult it is to radically alter and improve American health care – an expensive, complicated and entrenched system of doctors, insurers, drug makers and other players that costs the nation more than $4 trillion. dollars a year.
Walmart opened its first Walmart Health clinic in Georgia in 2019 and then gradually opened more clinics next to its department stores. Customers, who typically shopped Walmart's aisles for groceries or household items, could also stop by for a doctor or dentist appointment or a therapy session. The clinics also offered other services, such as flu tests, x-rays and stitches.
Those health care services were priced low, such as $30 for an annual checkup for adults, $45 for a 45-minute counseling session, or as little as $25 for a teeth cleaning for adults.
At a conference in the fall of 2019, then-Walmart CFO Brett Biggs touted the company's ambitions to investors. He referred to how Walmart had used its large size to reduce the price of many common generic drugs to as low as $4 in its pharmacies and planned to do the same for other parts of health care.
“It's more than just testing and learning because we know this is a place where we can make a huge difference in the way people live,” he told investors at the time. “When we think about 'Save money, live better,' we can do both with what we can do in health care. And so, we plan to be a major player in the future in what happens in health care.”
However, in the years that followed, Walmart opened new clinics at a slow pace and faced new challenges and competitive dynamics, including keeping its store shelves stocked and staffed during the Covid-19 pandemic. Walmart struggled with high executive turnover and cycled through numerous Walmart Health leaders. And CVS Health, Walgreens Boots Alliance and Amazon announced their own ambitions to open or acquire medical practices. Last year, Amazon closed a $3.9 billion deal to buy primary care provider One Medical.
Meanwhile, on earnings calls and investor meetings, Walmart CEO Doug McMillon and other company leaders instead highlighted other emerging and higher-margin businesses, such as its growing advertising business and its third-party marketplace.
In the future, Walmart will return to the health services it offered before the Walmart Health push: it will continue to operate its thousands of pharmacies and vision centers.
Walmart said its clinics will continue to see patients with scheduled appointments until they close their doors, people familiar with the matter told CNBC. The company will also help patients find high-quality providers in their insurance networks to ensure they continue to receive care, the people said.
Walmart Health marks the latest failed attempt by a high-profile company in the healthcare sector, following the dissolution of a joint venture between JPMorgan Chase, Berkshire Hathaway and Amazon in 2021.
Before announcing the closures, Walmart was among a list of retail giants vying to strengthen their presence in primary care as demand for convenient and affordable healthcare grows. Walmart grew its clinical business at a slower pace than its competitors, but some companies have struggled to balance their expansion plans with their growing patient networks.
Walgreens said in March that it had closed 140 of its VillageMD primary care clinics and plans to close 20 more to boost the profitability of its broader healthcare division. Walgreens also recorded a charge of nearly $6 billion in the first quarter related to the decline in the value of VillageMD, which has generated disappointing returns since the company became a majority owner of the business in 2021.
Meanwhile, AmazonHealth clinic operator One Medical now has more than 125 locations nationwide.
Walmart has made several other plays in the healthcare space, including partnering with an insurer and health system for care coordination in Florida. But Walmart will no longer see patients under that partnership in the future, according to two sources familiar with the matter.
Walmart purchased a chronic disease management platform called CareZone in 2020 for an undisclosed amount.
