Walmart shutters health centers, telehealth service, citing cost burdens

Another virtual care business bites the dust.

Less than a week after UnitedHealth Group's Optum announced plans to shut down its virtual care business, Walmart said it is closing Walmart Health and Walmart Health Virtual Care.

In an email to mHealthIntelligence, Walmart spokesperson Annie Patterson said, "The challenging reimbursement environment and escalating operating costs make the bottom line of a care business unsustainable for us at this time."

Launched in 2019, Walmart Health grew to include 51 health centers across five states. The centers offer medical and primary care services, including chronic condition management, dental care, and behavioral healthcare. They also provided X-ray and laboratory services for diagnosis and treatment. In 2021, Walmart Health acquired MeMD, adding virtual care to complement the in-person care provided in the health centers.

However, with the decision to shut down the health centers, the virtual care business is also being sunset over the next year.

 "We believed virtual care was a key offering in the health centers, and with those closing, it no longer makes sense to operate a virtual care service," Patterson said.

In a study published by Trilliant Health last year, the company noted that Walmart had reduced its price per virtual visit from $67 in 2022 to $49 in 2023, which is equivalent to a $7 billion decrease in the total addressable market for telehealth. 

According to Sanjula Jain, PhD, senior vice president of market strategy and chief research officer at market research firm Trilliant Health, the declining total addressable market for telehealth is spelling trouble for retailers and other entrants into the virtual care market. 

"When total supply exceeds demand, by the laws of economics, you have to compete on price," she said in an email to mHealthIntelligence. "And at such low price points, it is difficult to operate a virtual care business. This reality, compounded by the fact that retailers generally deliver less than 1 percent of the primary/low-acuity care — whether it be virtual or in-person — in large metropolitan markets, highlights the lack of market penetration these new entrants have had over the years. Then you layer in the fact that the typical profile of a telehealth user looks very different than the typical Walmart customer, the numbers speak for themselves."

To achieve virtual care success in the future, Jain said that retailers will need a data-driven understanding of their markets to develop more effective business models.

Walmart plans to transfer all eligible employees impacted by these closures to other Walmart or Sam's Club locations. Affected employees will also be paid for 90 days unless they transfer to another location or leave the company.

Walmart Health's provider partners will continue to care for existing patients while clinics are open. The providers will be paid for 90 days through their respective employers, after which eligible providers will receive transition payments.

"The decision to close is never easy. The impact is greater than just closing a health clinic," Patterson said. "It affects people — people who work in, receive care in, and live in communities near our clinics — and we never take that lightly."

The company noted in a press release that it would continue healthcare-related efforts through its 4,600 pharmacies and 3,000-plus vision centers. The pharmacies will continue to offer immunizations, health screenings, testing and treatment services, and access to specialty pharmacy medications.

The news follows Optum's decision to close its virtual care business just three years after its inception. Optum Virtual Care offered UnitedHealthcare and Surest plan members virtual access to physicians and nurse practitioners for urgent, non-emergency medical needs, including cold and flu, sinus infections, allergies, skin conditions, and prescription refills.

In an emailed statement, Optum emphasized its continued focus on virtual care capabilities, though there is no indication if it plans to replace the business with another telehealth-based service.

These back-to-back closures indicate that the virtual care boom of the COVID-19 pandemic era is slowing.

Data shows an undeniable drop-off in virtual care adoption and utilization. In a December 2023 report, Epic Research revealed that telehealth use has dropped nearly 25 percentage points from peak usage in 2020. Researchers analyzed 475 million telehealth and in-person visits between the second quarter (Q2) of 2019 and the third quarter (Q3) of 2023. The data was gathered from Cosmos, a collaboration of 222 health systems using Epic EHRs.

Telehealth use, encompassing less than 1 percent of all visits in the last three quarters of 2019, jumped to 31.2 percent in Q2 2020 before dropping to 5.8 percent in Q3 2023.

Amid this drop, Americans have also signaled an ongoing preference for in-person care. A survey that polled 2,202 United States adults in July 2023 showed that only 6 percent said they preferred virtual care versus 53 percent who preferred in-person care.

"Consumers want virtual care — but hybrid models are necessary to fully support their care needs," said Arielle Trzcinski, principal analyst at Forrester, in an email to mHealthIntelligence. "As medical deserts continue to expand, other retailers operating in healthcare should take action now to reassure patients of their long-term strategy to protect customer retention." 

In apparent response to evolving patient preferences, entrants from other industries that launched virtual care services in the past few years are changing their strategy.  

For instance, Amazon closed its virtual care business in late 2022, shortly before announcing Amazon Clinic, a messaging-based platform that connects users to an online marketplace of telehealth provider groups. The shuttered virtual care business included telehealth and in-person care and was positioned as an employer-focused service. However, company leaders determined it was not sustainable in the long term.

Editor's note: The article was updated on 4/30/2024 to include comments from Trilliant Health's Dr. Sanjula Jain and Forrester analyst Arielle Trzcinski.