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5 major retailers expanded into healthcare. Were they successful?


In recent years, retailers like Amazon, Walgreens, and Best Buy (among others) have made efforts to expand into the healthcare industry. But the results have been largely mixed, with many companies reducing their investments, closing clinics, and more, Caroline Hudson writes for Modern Healthcare

Healthcare has been a mixed bag for retailers

According to Hudson, retailers have experienced significant challenges as they try to make clinical care a viable part of their business. In fact, some retailers, such as Walmart, have completely exited the clinical care space, citing increased operating costs and reimbursement challenges.

"Within a few years of entering the healthcare services space, we have seen some pretty high-profile exits," said Julie Utterback, senior equity analyst at Morningstar. "They couldn't make the economics work quickly. Changing the way Americans receive healthcare services just looks like a very long slog."

However, several retailers remain in the industry. Here's where five retailers currently stand in healthcare.

Amazon is working to expand its primary care footprint with new brick-and-mortar clinics and partnerships with health systems.

In January, Amazon One Medical announced plans to open new primary care clinics in New York through a partnership with Montefiore Health System. Amazon One Medical has other similar partnerships as well.

Amazon also offers telehealth services, including messaging and video visits, for a flat fee per visit. Prime members can also pay an upfront monthly price to use consultation and pharmacy services.  

In March, Walgreens announced plans to go private in a deal with Sycamore Partners worth almost $24 billion, including debt. The deal is expected to close in the fourth quarter of this year.

At the same time, Walgreens is still searching for a buyer for its majority stake in VillageMD, a primary and multispecialty care provider. So far, the company has invested more than $6 billion in VillageMD. It has also recorded almost $8 billion in impairment charges related to the company in less than two years.

In 2024, VillageMD closed more than 150 clinics, and it is closing more primary care clinics this year. Previously, the company announced plans to open more clinics through SummitHealth-CityMD, which it purchased for $8.9 billion in 2023, but so far, it's not clear if those expansion plans are ongoing.

"Like any high-growth company, we continue to [assess] where we need to go deeper in some markets or where we need to consolidate locations based on patient demand. We have notified patients where we've closed locations, such as in Colorado recently. We do not have other plans to share at this time," a VillageMD spokesperson said.

Best Buy has partnered with Advocate Health, UC Davis Health, and several other health systems to provide technical and logistics support for at-home care through its technology platform Current Health.

However, the company recorded a $475 million impairment charge in the fourth quarter due to lower long-term financial projections for Best Buy Health.

"We still believe in the fundamental strategy of leveraging technology to enable care at home and believe it will be important to the future of healthcare, but the market is not scaling as fast as we originally forecasted," said Best Buy CEO Corie Sue Barry. So far, the company has not commented on the impairment charge or whether it plans to adjust its healthcare strategy.

CVS Health is expanding its primary care capabilities at hundreds of its in-store MinuteClinics nationwide. MinuteClinic offers in-network adult primary care to Emory Health Network, as well as select Aetna members in Texas, Georgia, Florida, and North Carolina.

CVS also operates primary care clinics through Oak Street Health, which it purchased for $10.6 billion in 2023. As of December, Oak Street had 230 clinics, up from over 170 when it was purchased. Although initial plans called for 300 Oak Street clinics by 2026, CVS has not spoken much about its progress toward that goal.

According to a CVS spokesperson, the company does not use the number of clinics to measure Oak Street's success. "We continue to believe Oak Street's care model is industry-leading and are encouraged by the improved clinical outcomes we're driving for our patients," the spokesperson said.

CVS executives have also said that they are seeing some pressure due to elevated medical costs at Oak Street, particularly for Medicare Advantage spending.

"Oak Street, it's still very immature. We're early in the year," said Prem Shah, CVS group president. "We're watching how claims will develop over the course of the next several months."

Currently, Kroger operates over 200 in-store The Little Clinic sites that treat minor illnesses. In late 2023, the company began piloting senior care at some of its clinics, with plans to expand these services to patients in Georgia, Kentucky, and Tennessee this year.

However, a Kroger spokesperson said those expansion plans have been paused. Instead, the company plans to prioritize raising awareness of its services, especially in underserved communities. It also expanded its telehealth program, the OptUp Your Nutrition Program, to allow Kroger Plus customers to access virtual visits with dietitians.

Why retailers have struggled in healthcare

According to Advisory Board's Vidal Seegobin, speed to scale is a common thread across various retailers' experiences in healthcare.

"On scale, healthcare struggles to expand quickly," Seegobin said. "And these stories highlight that technology, physical footprint, access to capital, while all powerful scaling tools, are insufficient for gaining ground quickly enough for these new healthcare actors."

When it comes to speed, Seegobin noted that publicly traded companies are at a disadvantage. In particular, "the need to report earnings and success on a quarterly basis runs counter to the multiple year time horizon that traditionally governs healthcare success," he said.

The retailers that are in healthcare for the long haul and demonstrate an appetite to win over years (rather than quarters) can succeed, according to Seegobin. But whether companies can manage to do that profitably and quickly "is the question we're all asking," Seegobin added. 

(Hudson, Modern Healthcare, 5/14)


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