Walmart shuttering health units, including telehealth and 51 clinics

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Walmart (WMT) announced it is closing down its health clinics Tuesday. The move will impact 51 locations in five states, as well as relationships with health systems, like the one penned with Florida's Orlando Health in November.

In its announcement, Walmart cited a "challenging reimbursement environment and escalating operating costs" as contributing to a "lack of profitability that make the care business unsustainable for us at this time."

The company declined to comment to Yahoo Finance on the business segment's profitability, or lack thereof. And did not have an answer as to what will happen with the newly-built clinic offices.

"We continually assess our business, once we made the decision, we moved quickly and with appropriate speed, which we believe was in the best interest of our associates, patients and communities," Walmart said in an emailed response.

A spokesperson said the locations would likely close within a 45- to 90-day time frame.

Pittsburgh, USA.   March 6, 2021
Walmart store in suburb north of Pittsburgh.
Walmart store in suburb north of Pittsburgh. · bgwalker via Getty Images

Walmart is just the latest in a string of retail healthcare pullbacks.

Walgreens (WBA) announced that it will close 160 of its VillageMD clinics and only maintain the busiest sites, just a few years after investing $5.2 billion to acquire a majority stake in the business.

And recently, UnitedHealth Group's (UNH) Optum division confirmed it was ending its telehealth services — which it started offering during the pandemic at no out-of-pocket cost to members.

Industry challenges

Craig Garthwaite, health economist and professor at Northwestern University's Kellogg School of Management, said that Walmart relied too heavily on its retail strategy in the more complex healthcare system.

The idea that "we use our scale to cut costs, deliver lower prices to gain share — that's just not going to work given the cost structure of what they were involved with here," Garthwaite said.

Even with the volume of customers Walmart has walking through its doors daily, and the various attempts to expand its health offerings over the years — including as an insurer — it couldn't crack the code.

Farzad Mostashari, CEO of value-based health company Aledade, told Yahoo Finance Walmart missed an opportunity to pivot to catering to the growing elderly population in the country. In the same way that insurers were running towards Medicare Advantage strategies in anticipation of the aging Baby Boomer population, Walmart could have deployed a strategy to provide cost-effective care.

But even if it had succeeded there, the problem with profitability in healthcare would still exist.