By JEFF GOLDSMITH

There has been a lot of commentary on the largest “disrupter” candidate in healthcare, retail giant Walmart, throwing in the towel on their primary care clinic and virtual health businesses. As someone who has watched “retail health” for close to forty years, Walmart’s decision did not surprise me. This is disciplined company that has chosen its niches in healthcare carefully. And the fact that they could not make primary care work with their customer base makes all the sense in the world.

I am a Walmart shopper.  I visit my local Walmart at least once a week, and buy all my commodity items there, where they are cheaper than anywhere else in town. I also buy my drugs at Walmart, and got all my immunizations (including four COVID shots) from their pharmacy. I love my local Walmart- linoleum, fluorescent lighting and all.

The shoppers in Walmart that I see every week are not “poor”. They are a cross section of the community I live in. If I am accused of a crime, they are the “jury of my peers” that I will see in court. What I see in Walmart:  signs of serious family financial stress, a product of a near twenty percent increase in the cost of everything since the pandemic began.  They are in Walmart for the same reason I am: they hate wasting money and their shopping dollar goes further in Walmart than anywhere else in the community. I will wager that every single uninsured person in the US, perhaps more than 32 million after the post-COVID Medicaid purge, is a Walmart shopper!

Walmart never articulated exactly the strategy behind its clinics. Primary care was never going to be profitable as a stand alone product, but rather was going to be a loss leader to something else:  more prescriptions for its pharmacy, (like CVS?),  more pull-through from products required by diagnoses, longer store visits. Or, as some suggested, Walmart’s clinics could have been a potential entry point into a yet-to-be-acquired Medicare Advantage plan (Humana or CIGNA were both in play), or a collaboration with MA giant, United Healthcare. Whatever the benefits expected, early losses far exceeded forecasts.

Walmart clearly underestimated the revenue cycle overhead associated with accepting Medicaid or Medicare, despite retaining OptumInsight to help with their revenue cycle issues. Walmart also likely overestimated both volumes and the cash yield on what they intended to be  $40 primary care visits. Many health plans unthinkingly apply a copayment to primary care visits, an increasingly potent demand destroyer in this inflationary age. That copay or the full $40 for the abovementioned uninsured folks was going to have to compete for increasingly scarce paycheck dollars with everything in that cart. In that competition, medical care is probably going to end up being deferred, until it becomes unavoidable.  And when it is unavoidable, they will go to the “unavoidable” healthcare place, their local hospital ED. 

Walmart also had no special answer for the labor market conundrum affecting everyone in healthcare:  where to find the nurses and supporting cast in a really tight labor market. The cost of clinical person power has spiked sharply since the pandemic-induced wave of retirements of boomer care givers. Walmart cannot import those folks at scale from China like a lot of the dry goods in those carts.    

 So lower volumes than forecast and higher people costs likely doomed the effort. There was no way to use Walmart’s legendary reach and logistical savvy to bring down the cost of the visit. The aforementioned reach and logistical savvy is the not-secret reason why the two healthcare businesses Walmart remains in-pharmacy and optics-are profitable.  Walmart has 4600 pharmacies and over 3000 optical shops, and employs almost 65 thousand people in them. They can mark up the drugs and eyeglasses bought by the boxcar load  to cover their people and collection costs (and the corporate overhead of a $650 billion business).

Looking at corporate primary care more generally, so-called “concierge medicine” is struggling, and has yet to be shown to be a viable business. OneMedical started as a concierge provider of “direct primary care”, and on discovering how limited the market was, morphed into billing and collecting from insurance for each visit, then into shaking down local hospitals for the referrals. After more than decade, with all those income streams, it still lost $419 million on operations in 2022, immediately before being  acquired by Amazon in 2022 for nearly $4 billion. Many are watching how long Amazon tolerates those losses.

Sad to say, the only folks making money in primary care are the private equity firms that rolled up these “businesses” – OneMedical, Oak Street, Village MD, etc. and flipped them to the “disrupters”. Walmart executives deserve a medal, not only for “failing fast” in primary care,  but also for resisting the siren song of the bankers and not buying ChenMed, another fine but cash flow negative senior care enterprise.  

Primary care is in the early stages of an entirely predictable crisis of access that will explode onto the political landscape in the second half of this decade. According to AAMC, over one-fourth of practicing primary care physicians are over the age of 65 and will be retiring en masse in the next five to seven years. 

By the time they do, politicians will be scrambling to explain what they were not doing  while it was so obviously happening. Then there will be a policy panic to fix a situation that could take the better part of a decade to resolve.  Politicians (and Arnold Ventures),  will, of course, continue blaming hospitals and specialty physicians for the consequences of a failure to provide a viable front line primary care alternative for those who wish to be healthy. 

If we want to have a primary care system in the US, our mainstream health insurers, especially public plans like Medicare and Medicaid, are going to have to stop chiseling and pay primary care providers a LOT more, as well as dramatically simplify the task of their getting paid.  They need to stop paying per visit or per test, and begin paying for relationships with patients, including virtual and email/text based interactions, and not burden that transaction with 200 core measures clinicians must submit to justify their existence.  They also need to waive copayment for primary care, since those copayments serve as an potent  and senseless damper on demand for primary care. 

The Walmart withdrawal from primary care is proof positive that the cost of “disrupting” our health system is steeper than publicly traded companies are willing to pay. Two weeks later, Walmart announced improved earnings and its stock rose sharply.

Jeff Goldsmith is a veteran health care futurist, President of Health Futures Inc and regular THCB Contributor. This comes from his personal substack