Walmart to shutter health centers, virtual care service in latest failed push into health care (2024)

Walmart on Tuesday said it will close all of its health-care clinics across the country, a stunning reversal of its plans to bring its low-priced reputation to the dentist and doctor's office along with the grocery aisle.

The big-box retailer said it would also shutter its telehealth provider, which it acquired for an undisclosed amount in 2021.

Walmart will close 51 clinic locations across Arkansas, Florida, Georgia, Illinois and Texas, plans that won't affect the company's 4,600 pharmacies and more than 3,000 vision centers, the company said in a release. The clinics will close over the next 45 to 90 days, two people familiar with the matter who asked not to be named told CNBC.

Walmart blamed its plans to shutter clinics on a broken business model. In the release, it described the move as "a difficult decision," but said it couldn't operate a profitable business because of "the challenging reimbursem*nt environment and escalating operating costs."

The shortage of health-care workers in the U.S. has also increased the company's labor costs, according to the sources familiar with the matter.

The announcement comes just a month after Walmart said it planned to double the size of its clinic footprint by opening up 22 new locations this year and more in 2025.

Walmart's announcement is also another sign of how challenging it is to disrupt and radically improve American health care – an expensive, complicated and entrenched system of doctors, insurers, drug manufacturers and other players that costs the nation more than $4 trillion a year.

Walmart opened its first Walmart Health clinic in Georgia in 2019, and then gradually opened more clinics next door to its big-box stores.Customers, who typically shopped Walmart's aisles for groceries or household items, could also stop by for a doctor or dentist appointment or therapy session. The clinics offered other services,too, such as flu tests, X-rays and stiches.

Those health-care services came with a low price tag, such as $30 for an annual check-up for adults, $45 for a 45-minute counseling session or as little as $25 for an adult teeth cleaning.

At a conference in fall 2019, then-Walmart CFO Brett Biggs touted the company's ambitions to investors. He referred to how Walmart had used its large size to bring down the price ofmany common generic drugs to as low as $4at its pharmacies and planned to do that for other parts of health care.

"It's more than test and learn because we know that this is a place we can have a massive difference on how 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 healthcare. And so, we plan to be a big player going forward in what happens in healthcare."

Yet in the following years, Walmart opened new clinics at a slow pace and faced new challenges and competitive dynamics — including keeping its store shelves stocked and locations staffed during the Covid-19 pandemic. Walmart struggled with high executive turnover and cycled through numerous leaders of Walmart Health. And CVS Health, Walgreens Boots Alliance and Amazon all announced their own ambitions to open or acquire doctor offices. Amazon last year closed a $3.9 billion deal to buy primary-care provider One Medical.

Meanwhile, on earnings calls and at 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.

Going forward, 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 their doors close, the 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 get care, the people said.

Walmart Health marks the latest failed push into health care by a high-profile company, following the disbandment of a joint venture between JPMorgan Chase, Berkshire Hathaway and Amazon in 2021.

Before it announced the closures, Walmart was among a slate of retail giants racing to build up their primary-care presence as demand grows for convenient and affordable medical care. Walmart grew its clinic business at a slower pace than its competitors, but some companies have struggled to balance their expansion plans with their swelling networks of patients.

Walgreens said in March it had closed 140 of its VillageMD primary-care clinics and plans to shutter 20 more to boost the profitability of its broader health-care division. Walgreens also recorded a nearly $6 billion charge in the first quarter related to the decline in value of VillageMD, which has generated disappointing returns since the company became a majority owner of the business in 2021.

Meanwhile, Amazon's health clinic operator One Medical now has more than 125 locations nationwide.

Walmart has made several other plays in the health-care space, including partnering with an insurer and health system on care coordination in Florida. But Walmart will no longer see patients under that partnership moving forward, according to the two sources familiar with the matter.

Walmart bought a chronic condition management platform called CareZone in 2020 for an undisclosed amount.