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Sh*tting the bed: Walmart's Healthcare Strategy
Why the retail giant's launch into healthcare was a Juicero level flop
Ahmed Saeed
June 23, 2024
In partnership with
On April 30th, Walmart announced it was closing its healthcare services business, and this newsletter called it back in February. We’re talking about the clinics, not the vision and pharmacy stuff
We had a couple of guys basically give us all the answers to the test.
We’re breaking down why, and pulling some key quotes from our interview.
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Why Walmart Healthcare Failed
Understanding the Challenges Walmart Faced in Implementing Healthcare Services
Walmart had a hard time making health clinics work because of a few things:
They couldn't avoid the complex third-party insurance system.
Running a primary case business is a loss leader in healthcare
They weren’t doing procedures at the clinics, which is where all the money is made in healthcare (see #2 again)
Walmart's main strength is understanding what customers need and using their buying power to offer the lowest prices. A great example is the $4 generics program, where they bypassed middlemen and bought common generic drugs directly from suppliers at a lower cost.
Walmart probably thought they could use this superpower to democratize the doctor’s office.
However, healthcare is expensive and requires a lot of infrastructure. Primary care doesn’t make much money; most profits come from procedures and referrals.
Walmart aimed to make basic healthcare cheap and easy for customers, hoping their store network and patient base would eventually bring in more money and lower costs. But this strategy proved too costly. The expenses for doctors, nurse practitioners, imaging specialists, and physician assistants were too high, and it (probably) took too many visits to break even, and in a retail store no less, where profits are usually razor thin.
Excerpt from our Interview with AB (Healthcare Finance Director Guy):
On why Walmart is fighting a losing battle when it comes to building up healthcare centers -
…where money really gets made in the healthcare industry is the high acuity high complexity patient care. So hospitalizations. Surgeries, difficult cancer cases... In those outpatient clinics, you cannot do high acuity high complexity cases…
On how clinics could become profitable running a Value Based Care practice -
The only way to play that game is not to play.
Have a Great Week!
Ahmed and Peter
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