Walmart’s ‘stunning’ decision to close health centers a blow to rural America

After announcing big plans to deliver primary care, Walmart has decided to pull the plug on its health centers.

Walmart is closing all of its health centers. Some hoped the retailer would be able to expand healthcare options in rural communities.

The retailer announced Tuesday that it is closing all of its 51 health centers operating in five states, and its telehealth service as well. “We determined there is not a sustainable business model for us to continue,” the company said in a news release.

“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,” Walmart said.

Walmart made the announcement just a year after unveiling plans to expand the number of health clinics. Walmart said it planned to operate more than 75 health clinics by the end of 2024. The company initially planned to expand its presence in Texas and open clinics in two new states: Arizona and Missouri.

Hal Andrews, CEO of Trilliant Health, tells Chief Healthcare Executive® that he didn’t expect Walmart to drop its plans to operate health clinics.

“I think it's stunning,” Andrews says. “I think that it is disappointing.”

Like other healthcare leaders, Andrews expressed hope that Walmart could expand healthcare options in rural communities, where many Americans don’t have easy access to primary care.

“At the end of the day, it's certainly bad for rural America,” Andrews says.

Walmart says it’s planning to continue to operate its pharmacies, and also said it plans to expand its pharmacy services. In its release, Walmart noted that it has 4,000 stores “in medical provider shortage areas.”

In light of that fact, the decision to close the clinics and abandon plans to run more clinics in rural areas is sobering, Andrews says.

“That's the issue for America,” Andrews says. “Walmart is where primary care is most needed.”

• Read more: Rural hospitals in the red: Half are losing money, many are cutting services

‘They’ve chosen not to’

Walmart cites financial considerations in its decision to close Walmart Health. But Andrews says the company has other priorities for its resources,

“The idea that Walmart can't operate primary care profitably is a sort of a crazy idea,” he says.

“It's not that Walmart couldn't do it,” Andrews says. “It's that they've chosen not to. And, again, I think that is an ominous sign for the U.S. healthcare system that the number one company on the Fortune 500 has just decided they're not going to do it.”

Walmart said in its news release that pharmacies are increasingly important to consumers, and the company is expanding its services. The retailer pointed to its offerings of specialty pharmacy products and referred to its pharmacies in underserved communities as “the front door of healthcare.”

Andrews suspects Walmart’s going to place an even greater focus in the specialty pharmacy space.

“Specialty pharmacy is where there's massive financial gain,” he says.

“Walmart's the logical distribution spot for specialty pharmacy, and specialty pharmacy is much more lucrative than primary care,” Andrews says. “I think when you step this back again, the notion that Walmart can't find a team of people who've been in the primary care business to run it profitably … that's a silly notion.”

Clearly, Walmart sees potential for larger profits with specialty pharmacy services than primary care.

“It’s a lot easier to make a lot of money in specialty pharmacy, as the distribution point where millions of Americans go through Walmarts every week, than it is to actually be there in the grind of primary care, and trying to see four patients an hour,” Andrews says. “So I think this is purely financially driven.”

Patients gave the health centers high marks, Pritesh Gandhi, Walmart’s chief community health officer, told Chief Healthcare Executive® in a September 2023 interview. Surveys showed that 96% of patients said they felt cared for and that the centers met their needs, he said.

“The customer is always first in our health center sites,” Gandhi said last fall. “The customer is always first on our telehealth visits. The customer is always first when we're thinking about our health programs.”

At the time, Gandhi envisioned Walmart’s clinics as going beyond meeting the immediate needs of patients and putting in place capabilities to go beyond the clinic. While Gandhi said Walmart would act deliberately, he said he expected the retailer to place more health centers in additional markets.

• Read more: Rural hospitals struggle with staffing shortage, and not just doctors

Struggles in primary care

Other retailers have found struggles entering the primary care arena.

In March, Walgreens Boots Alliance announced plans to close 140 VillageMD clinics, and plans to shut down 20 others, the Associated Press reported. The company spent more than $5 billion to obtain majority ownership of VillageMD, but is closing clinics to stem financial losses.

Andrews, who has run primary care practices, says it’s not a business with high operating margins.

With Walmart backing out of primary care, hospitals and health systems have one less rival for their business.

“I think that in the short term, it is beneficial to health systems and hospitals, because there's now one less competitor, there's one less competitive threat,” Andrews says.

“That doesn't change the fact that any hospital that could benefit from Walmart shutting a clinic is, by definition, in a medical provider shortage area. And you're still back to the supply side of the equation. You’ve got less competitors in the market, but you haven't solved the supply piece of the equation.”

Andrews laments the lost opportunity for Walmart to offer healthcare, and affordable care, to many rural communities.

“There is nobody who can solve the problem other than Walmart, at the way that Walmart could have solved it,” Andrews says. “It is terrible for everybody. It's especially terrible for the rural Americans, especially for the rural and poor Americans. Because Walmart, as the price setter in a market, was setting prices that poor rural Americans could afford.”

• Read more: Dartmouth Health CEO Joanne Conroy outlines rural hospital crisis