March 29: Prices for primary care services are posted at Walmart Health Center in Sugar Land. [+] Texas (Kirk Side/Houston Chronicle via Getty Images)
Houston Chronicle (via Getty Images)
For a long time, we have been looking for a new healthcare delivery business model, and Walmart Health has been a long-awaited alternative. But after five years in business, Walmart Health has decided to close its doors for good.
Below, I will explain the perspective of post-mortem analysis. Why did Walmart enter the healthcare field? What did he do well? What caused the company to shut down this business? And what does that mean for the industry as a whole?
Walmart, like other companies, knew the health care system was broken. As I outlined in my book, Bringing Value to Healthcare, the industry has historically encouraged unnecessary care, failed to tie payments to important outcomes, and lacked cost and quality transparency. It operates on a limited business model. Care was provider- and facility-centered and often involved long wait times and long trips around town. And even now, we often don't know how much it will cost until the bill arrives in the mail weeks later. Physicians typically prescribe treatments regardless of cost, and often they themselves do not know what they will be charged. As a result, the cost of needed care has increased and insurance premiums have also increased.
To address these deficiencies in its core customer base, Walmart Health opened its first store in Dallas, Georgia in 2019. The goal was to establish a supercenter of basic medical care, including primary care, optometry, dentistry, laboratory testing, counseling, and treatment. Services such as X-ray inspection. Recognizing the access problems of traditional health care delivery, Wal-Mart competed against corporate giants by leveraging its location with clinics attached to retail stores frequented by its customers. We also introduced transparent pricing. Prices for each service are posted on the Walmart website, allowing customers to compare options and take a more active role in choosing where and how they get the services they need. Ta.
Competing against an established industry is not easy, but Walmart understood the risks. Initially, the company's healthcare model was a low-cost subscription service that did not rely on insurance. However, as they have expanded into the healthcare market, they have incorporated more traditional insurance-based models to provide affordable care within established insurance frameworks.
In 2022, Walmart Health announced a 10-year partnership with Optum to provide much-needed data analytics expertise. This partnership brings Walmart into value-based care, providing decision support tools that help clinicians treat patients holistically and link payments to outcomes, rather than focusing solely on service volume. Now it looks like this. We also opened new locations in Georgia, Florida, Texas, Arkansas and Illinois. A year later, Walmart announced expansion plans to double the number of dispensaries and expand into Missouri and Arizona. Since its inception, Walmart has demonstrated a commitment to total health and wellness. The company has designed health centers with smart strategies to promote healthy behaviors. For example, when a customer walks from a doctor's office to a retail store, they typically arrive at the produce aisle and ideally discuss nutrition and healthy choices with a health care professional during their visit.
Walmart had five years of growth, collaborations with industry giants, and a business model that addressed many of the biggest problems in traditional healthcare delivery. what happened?
The company cited a lack of a sustainable business model and a “challenging reimbursement environment and increasing operating costs,” according to an official press release. Several obstacles prevented Walmart Health from achieving profitability. One notable hurdle was the difference in culture and operating model between Walmart Health and its parent company.
By design, Walmart Health had an operating model that was the exact opposite of what had made the retail business so successful. Walmart has become a global powerhouse that buys, sells, and stocks countless products, from tennis shoes to grills to electronics and groceries. We leveraged our supply chain expertise and data infrastructure to manage the entire process. Walmart's model was built around countless product transactions with consumers. Moving from that model to a healthcare model that requires long-term relationships and health tracking was fraught with obstacles. Selling a large quantity of goods is not quite the same as providing medical services and making a decent profit on your feet. Walmart expected retail customers to naturally want its health care products, but that was never a given. The company's customers were loyal to Walmart, but loyalty to its products did not translate into loyalty to its medical services.
Walmart executives knew creating a different culture and operating model would be a challenge. What they could not have predicted was the COVID-19 pandemic and its associated economic fallout and its impact on staffing issues and rising labor costs across the industry. In the aftermath of the COVID-19 pandemic, an estimated 20% of healthcare workers left the field. As we discussed in a previous article, staffing shortages create a vicious cycle. Overworked healthcare workers question their ability to continue. At the same time, primary care reimbursement cuts continued, eroding already thin profit margins.
Some analysts speculate that Walmart's medical expansion is not a full-fledged effort, but merely a “see what sticks” moonshot. There must be no difference from the truth. Walmart invested millions of dollars and a decade in planning and implementing the program. At the time of its opening, Walmart executives said the new center was a serious strategy and “not a trivial matter.” But market realities put a halt to the company's efforts to transform healthcare by offering unique, direct primary care services. Healthcare services for employees, if not customers, given that Walmart pioneered innovative agreements with centers of excellence for specialty care for employees, including spine and orthopedic care. It is highly likely that the level of provision will continue to increase.
Not surprisingly, medical professionals are gloating over Walmart's demise. One person scoffed: It's easy. There is much to improve, they said. we could do it better. ” But such a response will not solve our nation's health crisis. We desperately need hospitals and specialty health services to succeed, but we need to reimagine them with new models. Walmart's vision and commitment to new models is aimed at serving underserved markets. That market is still underserved. Even if you can't solve a complex problem, it doesn't mean the problem doesn't exist for you to seek a solution to. Launching a new business with a new business model is never easy. This is especially true in a complex industry like healthcare.
If Walmart, one of the richest and most powerful companies on the planet, couldn't disrupt health care in this way, what lessons can we learn from it? Will this withdrawal deter others from trying? “Outsiders” like Amazon, CVS, and Walgreens are still following the path of alternative design and delivery. Each pursues a different approach. Some traditional delivery organizations have invested and will continue to invest in alternative models.
As I wrote in a previous column, reform is still a long way off. There will be setbacks along the way. The closure of Walmart Health tells us what we already knew all too well. That is, entrenched profits make it very difficult to achieve innovation in healthcare. The industry's obstacles are as formidable as they appear. American health care urgently needs pioneers who are willing to challenge the current system, both from outside and within traditional health care delivery.
