Walmart’s decision to shutter its Walmart Health initiative at the end of April left some healthcare industry experts wondering: If Walmart—the largest company in the world by revenue—can’t profitably operate primary care clinics, who can?
Well, according to Hal Andrews, president and CEO of healthcare analytics firm Trilliant Health, the retail giant likely made the decision not because it couldn’t figure out how to sustainably run the clinics, but because executives realized that other facets of the healthcare industry—including services like immunizations and specialty pharmacy—are much more profitable.
In a press release announcing the health initiative’s closure, Walmart executives said a “challenging reimbursement environment and escalating operating costs create a lack of profitability that make the care business unsustainable for us at this time.”
But given Walmart’s scale, it’s “unbelievable” that the company couldn’t make money operating its 51 primary care clinics, which were predominantly located in rural areas, Andrews told Healthcare Brew.
“I’ve actually run physician clinics before and have run them in rural areas. I understand the math of primary care, and I understand Walmart’s scale,” Andrews said.
Andrews ran several primary care clinics in rural areas including Heflin, Alabama, and Cedar Park, Texas, between 1996 and 2000. All the clinics either shut down or were bought by hospital systems, Andrews said.
“Primary care is hard—primary care margins are very similar to grocery store margins. But Walmart sells a bunch of groceries, and they make a bunch of money selling groceries. So, the thought that you can’t make money in primary care—that’s just not true,” he added.
Walmart brought in $611.3 billion in 2023.
Walmart executives gave the company’s specialty pharmacy business a shout-out in the press release announcing Walmart Health’s closure, and Andrews believes that could be an indicator as to where the company will place its future healthcare ambitions.
Specialty pharmacy is “where the money is” in healthcare, according to Andrews. US specialty prescriptions brought in an estimated $243 billion in 2023, roughly 40% of the pharmacy industry’s prescription revenues, according to pharmaceutical research firm Drug Channels Institute.
“I think [Walmart] made an economic decision and said, ‘We can generate massive margins and massive revenue in specialty pharmacy that we can’t in primary care. The juice isn’t worth the squeeze,’” he said.
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Walgreens made a similar move recently, announcing plans to shut 160 primary care clinics while doubling down on specialty pharmacy services, which company executives say is estimated to bring in $24 billion per year, as Healthcare Brew previously reported.
The consequences: Walmart’s decision to exit the primary care business has negative implications for people living in rural areas, according to Andrews.
It’s already hard to access primary care outside of metropolitan areas; there’s a primary care professional shortage in more than 4,000 rural localities in the US, according to data from the nonprofit health policy research firm the Commonwealth Fund. And according to a September 2023 Stat report, despite 46 million people (15%) in the US living in rural areas, just 10% of doctors provide care in these places.
Walmart’s health clinics could have brought healthcare access to some of those underserved areas and helped combat rural health disparities, according to Andrews.
But now, “there are a lot of people who are just not going to have access to care,” he said.
If not Walmart, who else? Of all the retailers in the US, Walmart had the “best chance” of successfully operating primary care clinics, Andrews said.
“Unless Dollar General decides to step in and do what Walmart could have done, there’s nobody in the US health economy that can actually go deliver a consistent quality primary care experience at scale to rural America,” Andrews said.
Dollar General has dipped its toes in rural primary care, piloting mobile health clinics in Tennessee last year. But the retailer hasn’t expanded its efforts since.
Even e-commerce giant Amazon hasn’t ventured into rural healthcare, with its One Medical clinics overwhelmingly located in urban areas, Andrews noted.
“The message it sends to rural healthcare is an ominous one,” he said. “It’s disappointing because [Walmart’s health clinics] held a lot of promise to do a lot of good for people who policymakers don’t really think about very often.”