Exclusive: Walmart shut down its healthcare clinics after losses reached nearly a quarter of a billion dollars

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Walmart’s efforts to build a new kind of primary care service in rural communities — and to create a fresh line of revenue for itself — led to losses last year of $230 million, Endpoints News has learned.

The company announced the surprise shutdown of the business in April, five years after launching it with great ambitions shared by many other retailers who have likewise attempted to enter the healthcare services industry. In its public announcement about the closure, Walmart blamed poor healthcare payments and rising operating costs for a lack of profits.

But several senior and director-level current and former Walmart employees, speaking on condition of anonymity, said it had attracted only a small fraction of the number of patients that would have been needed to support the venture. And instead of operating 1,000 clinics by this year, as originally planned, it had opened only 51, mostly in Florida and Georgia. Sources also described shifting strategies and leadership for the venture, over-investment in under-used resources, and a lack of backing for the effort from the company on the ground.

Endpoints sent a detailed list of questions to Walmart, which didn’t dispute the characterization of the healthcare business’s operations and closure. “We’ve determined this is not a sustainable business model for us at this time,” the company said in a statement.

In 2019 when it was launched, Walmart Health began with a focus on caring for cash-paying customers who it believed would come to the company’s clinics for services like checkups, lab tests and dental exams. But by late 2022, under new leadership, it had changed strategies. Instead of relying on cash-pay patients, it refocused on striking deals with health insurers who could provide a better margin and more predictable revenue stream.

A cornerstone of that effort was a partnership with insurance giant UnitedHealthcare, in which Walmart would deliver care to seniors in the insurance giant’s private Medicare plans.

But that push was slow to take off. According to an internal presentation from April viewed by Endpoints, Walmart had set a goal of having 9,613 “attributed” Medicare Advantage patients by the end of January 2025. Yet as of March 2024, it had only 932 who had picked Walmart Health to be their primary care provider — less than 10% of the company’s goal.

Walmart has said it will shut down its clinics in the next few months, and two employees told Endpoints that the retailer is planning to end the operations on June 28.

It’s hardly alone in its failure, coming amid repeated attempts by retailers to grab a slice of the healthcare services market and leverage their on-the-ground footprint or customer relationships.

Amazon had struggled with its healthcare bets for years before acquiring One Medical, and there are reports that the primary care chain has sustained heavy losses. Most recently, Walgreens shuttered 160 VillageMD primary care clinics after losing billions on its investment. CVS Health reportedly is looking for a private equity partner to help fund its Oak Street Health clinics, a potential sign that the chain’s losses are too much to stomach amid other business pressures. Even Dollar General called off its brief foray into delivering care at mobile clinics.

The clinic business wasn’t Walmart’s first try. For more than a decade, the Bentonville, Arkansas-based retailer, which operates more than 4,600 of its huge stores across the US, has dabbled with the idea of expanding its healthcare offerings beyond its thousands of pharmacies and vision centers.

But the most recent push was to provide a one-stop shop for a variety of healthcare services, including primary care, behavioral health, dentistry, x-rays and more. Walmart planned to offer them at published, low cash-based prices — a radical approach in an industry dominated by insurance reimbursement and opaque billing practices.

Walmart’s board approved a plan to scale this model to 1,000 clinics by 2024 and 4,000 clinics across the country by 2029, according to a 2021 Business Insider report.

Sean Slovenski

Leaders thought Walmart Health could make a small margin across a large volume of customers, similar to its superstore concept, Sean Slovenski, the former head and architect of Walmart Health from 2018 until 2020, told Endpoints. And Walmart’s core retail business would benefit as the clinics drove more customers to its stores.

In September 2019, it opened its first clinic in Georgia, where patients could see a doctor without insurance for $40. That was just a start — the goal was “to innovate to figure out how to offer that same doctor visit for $20 or even less over a period of a few years,” Slovenski said.

Instead, the business bounced between at least three leaders in the five years after its inception, according to current and former employees and Walmart’s own announcements. Instead of lowering its cash prices, Walmart raised them, three sources said. And the vision for the clinics shifted toward more traditional healthcare strategies, such as contracting with employers and insurers.

“What we learned through Walmart Health centers will help us continue to innovate and support the healthcare needs of our communities through our legacy pharmacy and vision centers. We are proud of the health care services Walmart Health brought to communities,” Walmart said in its statement to Endpoints.

Too few patients

Though some of the 51 clinics did well, Walmart Health generally struggled to attract enough patients, sources said.

One reason was that Walmart Health didn’t get enough marketing resources, according to one current and two former employees. Two said communities were often unaware there was a Walmart Health Center in town, despite hiring teams of workers to promote the clinics within their cities.

One former senior employee said executive leadership was ill-equipped to fix the problem, and described how one top Walmart Health executive suggested sending doctors into the superstores’ aisles to hand out business cards.

By 2022, Walmart Health had turned its focus to what it called “value-based care” — a potentially lucrative arrangement in which medical practices receive a set monthly payment for each patient, rather than billing only when that patient comes in for a visit. It’s a model that creates recurring revenue for providers and is supposed to encourage them to keep patients healthier.

In September of that year, Walmart Health announced a 10-year partnership with UnitedHealthcare in which it would care for the insurer’s Medicare Advantage plan members, starting in January 2023 at 15 clinics in Florida and Georgia. The program was to later expand to “serving hundreds of thousands of seniors,” according to the press announcement, and they planned to launch a co-branded Medicare Advantage health plan in 2023.

One person familiar with the deal said UnitedHealthcare chose to work with Walmart because it has a huge footprint with proximity to most people in the country, and it has built up credibility with consumers.

But that failed to translate to new business. As of March 2024, of the roughly 930 attributed Medicare Advantage patients, just 546 had had an “encounter” with Walmart Health in the past 12 months, according to the company presentation reviewed by Endpoints.

Walmart’s plan to grow its attributed Medicare Advantage business was meant to  be “fueled by three channels,” according to the presentation: 70% by brokers, 25% by growth and sales team members and 5% by a “payor.” Much of the growth was supposed to come from Texas, where Walmart had unveiled plans in April to open 18 new centers this year before the shutdown was announced.

Too many resources, not enough time

Walmart Health had other problems, leaving several current and former employees, who said the business overstaffed its compliance department, hiring dozens of employees for the team despite the lack of customers, skeptical that it could ever turn a profit.

According to two employees, one current and one former, expensive equipment such as x-ray machines was barely used, and Walmart wasn’t set up to accept referrals for x-rays from outside doctors, which could have boosted revenue, they said.

Primary care doesn’t make much money to begin with, and it likely didn’t help Walmart that its clinics launched just before the Covid-19 crisis hit and drove patients away from doctor’s offices. Mike Pykosz, the former CEO of primary care company Oak Street Health and now an executive at CVS, has said that it takes his company about $3 million in losses before a clinic breaks even.

Walmart Health was a totally different type of clinic from Oak Street, which serves only Medicare patients, and it’s not clear how long Walmart’s health centers should have taken to break even.

“It’s not cheap to stand these things up,” said Jefferies analyst Brian Tanquilut. With a doctor or nurse practitioner staffing each location, “you need a lot of volume to justify the profitability of the clinic.”