Walmart to Close Healthcare Business: Impact on 51 Locations and Industry Challenges Ahead
Walmart Shuts Down Healthcare Business, Impacting 51 Locations in Five States
In a surprising move, retail giant Walmart (WMT) announced on Tuesday that it will be closing down its healthcare business, affecting 51 locations in five states. This decision will also impact relationships with health systems, including the one recently formed with Florida’s Orlando Health in November.
The company cited a “challenging reimbursement environment and escalating operating costs” as reasons for the closure, stating that the healthcare business was no longer profitable and unsustainable at this time. Walmart declined to comment on the profitability of the segment when asked by Yahoo Finance.
“We continually assess our business, once we made the decision, we moved quickly and with appropriate speed, which we believe was in the best interest of our associates, patients, and communities,” Walmart said in a statement.
The spokesperson mentioned that the affected locations are expected to close within a 45- to 90-day timeframe.
Walmart’s decision to close its healthcare business comes amidst a trend of retail healthcare pullbacks. Walgreens (WBA) recently announced the closure of 160 VillageMD clinics, and UnitedHealth Group’s (UNH) Optum division confirmed the end of its telehealth services.
Health economist Craig Garthwaite from Northwestern University’s Kellogg School of Management commented on Walmart’s strategy, stating that the company relied too heavily on its retail approach in the complex healthcare system. Despite Walmart’s efforts to expand its health offerings, including as an insurer, it was unable to achieve profitability.
Sachin Jain, president and CEO of SCAN Health Group, highlighted the challenges faced by for-profit publicly traded companies in the healthcare sector, where declining reimbursement rates have led to thin margins for hospitals and physician practices.
The closure of Walmart’s healthcare business may serve as a cautionary tale for other retail efforts in the health space, such as Amazon’s (AMZN) One Medical. Stephen Klasko, a former hospital CEO, believes that if Walmart with its scale and resources could not succeed in the healthcare sector, it is unlikely that retail health will ever take off.
Walmart’s stock was trading down 2% on Tuesday, reflecting investor reaction to the news. Stay tuned for more updates on this developing story.