Walmart Closes US Health Clinics Due to Profitability Issues

Walmart NYSE:WMT

Walmart (NYSE:WMT) disclosed on Tuesday its decision to close all 51 of its health centers and discontinue its virtual healthcare operations, citing an unsustainable business model.

According to Walmart spokeswoman Marilee McInnis, the company faced challenges due to the high costs associated with healthcare operations, including labor and operating expenses, alongside reimbursement issues from both public and private sources.

The retail giant acknowledged the lack of profitability in its healthcare ventures, leading to the decision to shutter the business entirely. The closure will affect health centers located adjacent to Walmart Supercenters in five states, including Texas and Florida.

Established in Georgia in 2019, Walmart’s health centers provide a range of services such as primary care, dental care, behavioral health, labs, X-rays, audiology, and telehealth.

Although Walmart declined to disclose specific financial details, including sales figures or potential losses from the closure, analysts like Michael Baker from D.A. Davidson consider the impact on Walmart’s overall financial outlook to be insignificant.

Instead, Walmart plans to concentrate on its extensive pharmacy network of nearly 4,600 locations and over 3,000 Vision Centers within its stores. These outlets offer many of the same services provided by the now-closed health centers, including clinical services like respiratory illness testing and treatment.

The move by Walmart marks a notable departure from its previous plans to expand its health center locations in the United States. Similarly, Walgreens has faced challenges in its healthcare ventures, with recent closures and sales of VillageMD primary care locations due to slower-than-expected growth.

Other industry players, including Amazon and CVS, have encountered difficulties in their healthcare expansions, with Amazon announcing job cuts across its healthcare units, including clinic operator One Medical.

These struggles underscore the complexities of the U.S. healthcare system, characterized by a mix of employer-funded care, private insurance, and government programs. The sector faces ongoing challenges such as physician shortages and escalating drug costs.

Following the announcement, Walmart shares experienced a 1% decline in morning trading on Tuesday.

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