(Reuters) -Walmart said on Tuesday it will close all 51 of its health centers and shut its virtual health care operations, saying it could not see it as a sustainable business model to continue.
“Healthcare is expensive to run. We were finding that the increased labor and operating costs environment, like with reimbursement, both public and private, made it difficult (to run the business) and obvious we had to close,” Walmart spokeswoman Marilee McInnis told Reuters.
The company said in a statement those challenges created an environment where it saw a “lack of profitability” that made the care business “unsustainable for us at this time.”
The world’s largest retailer expects to close the 51 health centers, which are typically located next to a Walmart Supercenter and house doctors and dentists, within 30 to 90 days, McInnis said. The clinics were spread across five states including Texas and Florida.
The Bentonville-based company launched the health center business in Georgia in 2019, offering primary care, dental care, behavioral health, labs and X-ray, audiology and telehealth services.
Walmart declined to disclose the sales it made from each health center or the losses Walmart might incur from closing the business.
“While this decision is disappointing to management, we believe it is immaterial to their financial outlook,” D.A. Davidson analyst Michael Baker said.
The company said it would instead focus on its nearly 4,600 pharmacies and more than 3,000 Vision Centers located within its stores that offer many of the services that its health care centers offered.
Walmart’s pharmacies, for instance, offer clinical services like testing and treatment for respiratory illnesses like flu and strep, which were also offered at health centers.
Companies such as Walmart, Walgreens, Amazon and CVS have expanded into providing healthcare services during the past five years, seeing opportunities in the highly fragmented U.S. system. But it has not been clear that consumers want such services from retailers or that they are profitable.
Walmart’s move on Tuesday is a surprising reversal of plans it laid out last year to nearly double the number of U.S. health center locations it operated in 2024
And Walgreens has shuttered or sold about 160 VillageMD primary care locations in the last few months, Jefferies analysts noted, after the company expanded too fast and witnessed slower-than-expected growth of patients per doctor. In March, it recorded a $5.8 billion impairment charge on its investment in VillageMD.
Amazon in February said it would cut a few hundred jobs across its healthcare units, including clinic operator One Medical which it acquired for $3.5 billion last year.
The struggles show how difficult it is to crack the U.S. health care system, which is a conglomeration of employer-funded care, private health insurance and government programs that cost the United States $4.5 trillion in 2022. More recently, the sector has been facing other issues including a shortage of physicians and rising costs of drugs.
Walmart shares were down 1% in morning trading on Tuesday.
(Reporting by Siddharth Cavale in New York, Granth Vanaik and Leroy Leo in Bengaluru; Editing by Shounak Dasgupta and Shailesh Kuber and Chizu Nomiyama)
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