Walmart shuttered its health clinics and sold-off its telehealth business in recent months, amid widespread industry surprise. The convention was that the retail giant had deep enough pockets to make the business strategy work. Apparently, it was unwilling to hemorrhage blood. The firm retreated to its longstanding position in the optometry and pharmaceutical businesses.
There are a number of ideas on why the approach failed. One smart angle is that Walmart’s healthcare business was purely transactional. Network-based primary care providers have the ability to make direct referrals to higher cost services and procedures. Another idea is that the enterprise discovered it could not control staffing costs in an industry with across-the-board skill shortages. Our view is simpler. American consumers are tapped out as inflation has chewed into household budgets. However irrational, sorting out primary care issues may be less important than paying a mortgage, covering a mobile phone bill, or making an auto-loan payment.
Most of the Walmart clinics were in medically-underserved communities. That is polite language for low-income zones. Those households have seen their disposable income evaporate with inflation. Many retail businesses are suffering in this context, not just walk-in medical centers. The fast-food industry is a case in point, as is so-called dollar-store businesses.
For Walmart, scalability is the issue. The enterprise can buy pharmaceuticals for pennies on the dollar because of enormous sales volume. The lines at some Walmart pharmacies meander, seemingly like lines at a theme park. That hat trick is tough to pull off in primary care. Doctors may earn, whimsically, $250,000 a year and are not interested in late nights or weekends.
Walmart—a company headquartered in low-income Arkansas—will recover from this misstep. Reports now suggest the behemoth is looking to sell its now vacant clinics. More importantly, the corporate failure points to public-policy questions about healthcare access. Neither Amazon nor artificial intelligence is likely to find an answer. ■
Learn more at The Wall Street Journal
© 2024 Cranganore Inc. All rights reserved.
Unauthorized use and/or duplication of any material on this site without written permission is prohibited.
Image Credit: Yakobchuk Olena at Adobe Stock.
