You may have missed it with cyber attacks dominating healthcare news feeds at the time, but earlier this year Walmart Health announced plans to fully exit the retail health space by closing all 51 of its physician-staffed health clinics. While those clinics were based in only five states (Florida, Texas, Arkansas, Illinois, and Georgia), the closure still surprised many people, given that Walmart had announced partnerships with Florida’s Orlando Health and Centene not all that long ago.

In announcing the closures, Walmart said: “Through our experience managing Walmart Health centers and Walmart Health Virtual Care, we determined there is not a sustainable business model for us to continue.” What they could have said is a lesson that companies like Amazon, Berkshire Hathaway, JP Morgan Chase, and Walgreens have all learned in their turn: Healthcare is tough.

These high-profile flameouts beg the question: why are so many private companies—most with no shortage of resources to throw at any project—struggling in health care? Well, I have some idea of what may have gone wrong—not just for Walmart, but for the others in corporate America, too.

American healthcare isn’t any other business.

First, let me say that I applaud these big businesses for recognizing that our healthcare system is broken and attempting to use their knowledge from the consumer and retail space to try and change the status quo. It is no secret that access to quality health care is a major problem for our country and it’s going to take big bucks and influence to turn the aircraft carrier of healthcare even an inch in either direction. However, the American healthcare system comes with a set of challenges that newcomers can’t fully grasp until they’re fully immersed in the industry.

I have written my fair share of pieces outlining and describing the harsh and complex regulatory environment facing rehab therapy, but these headwinds affect the entire healthcare ecosystem. Reimbursements are down across the board in almost every sector of healthcare, and as we’re seeing with so many PT practices, healthcare providers are having to survive on even tighter financial margins. So while there might be a lot of money spent in healthcare—$4.5 trillion as of 2022—the bloat of costs and frankly, profit driven companies with misguided incentives, leave very little left for the people actually providing those services.

There’s also the lack of uniformity of regulations and systems, which varies from state to state and sometimes region to region. Interestingly enough, nearly half of the Walmart Health clinics were based in Florida—a state that has seen a surge in population—much of which is Medicare dependent. With a high cost of premiums ($7,356 annually in 2024 vs the national average of $7,008 annually) and a relatively competition-free environment, the business landscape in Florida would seem ripe for a new healthcare venture. But,  perhaps no state has seen stronger headwinds in healthcare delivery and reimbursement than Florida.

The real problem (shocker) comes in the form of payment or insurance reimbursement. With the surge to move to Medicare Advantage plans, most states see a lack of real competition among health insurance providers, with markets dominated by private insurers like UnitedHealth Group, Blue Cross Blue Shield, Anthem/Elevance/whomever they are rebranding to in the future, Aetna, and more. Most consumers are forced to choose from a series of poor options that push the financial burden to the consumer with high deductibles while severely limiting the amount of care they can receive—and from whom they can receive it. In short, insurance companies are now dictating how healthcare is delivered, not providers.

Private companies seem to have missed the mark.

As I mentioned before, Walmart, Berkshire Hathaway, Amazon, JP Morgan Chase, Walgreens, and other large corporations aren’t short on the resources required to transform healthcare to even a small degree. What they are short on is insight into the unique patient-provider relationship, the administrative burden needed to get paid for services, and the patience required to change consumer attitudes and habits that have become ingrained over decades.

The idea that Americans would seek patient services at a local Walmart or Amazon-owned healthcare facility since they are familiar with the brand and are frequenting their locations regularly seemed like a logical pairing. However, a gross miscalculation occurred, especially in consideration of Walmart’s more typical shoppers. Cash based services and the use of a series of automated, self-service controls instead of a real person was something prospective patients were just not ready for—or at least not yet. Although improved efficiency and potentially lower cost of care are known benefits, the human connection and the rapport of working with a real person when it comes to healthcare is not something that this demographic was willing to sacrifice.

There remains a lot to be learned from this retreat and I don’t think we’re at the end of the retail healthcare experiment. The culture of healthcare delivery, insurance coverage, and expectation of coverage through the employer will make this transition to retail and cash-based services for the majority of the US population slower than may have been anticipated, but it will happen. From an outsider’s perspective, I think there are three big reasons for the early struggles.

There’s too much automation all at once.

Each announcement of a new healthcare venture from one of the aforementioned companies has been paired with a promise to innovate and automate. And while there’s no doubt that healthcare could do with some streamlining innovation, there’s a danger of going too fast too quickly or leaning too hard into automation in one of the remaining industries where human interaction is still perceived as vital to optimal outcomes.

Perhaps this has been one of the more misguided initiatives by these companies by forcing fast automation. Until technology systems can generate empathy and true interpersonal connection, which have been shown to be the keys to great patient outcomes, healthcare services with human interaction will not be completely replaced. I do believe there is room for automation, but the value, efficiency, trust, and comfort level has not convinced the masses to go all in on the kiosk or healthcare visit without the human touch. Case and point with Walmart’s attempt to move to a dehumanized healthcare model.

There are other options beyond the traditional doctor’s office.

Sure, the idea of retail healthcare is relatively new—but the idea of alternatives outside of your typical doctor’s office or hospital certainly isn’t. No matter where you live, you’ve probably seen a surprising increase in the number of urgent care centers over the past few years—although if you start to dig a little, that growth might not be so surprising after all. Bridging the gap between expensive hospital emergency room visits and the shortage of available primary care physicians, urgent care centers—often staffed by physician assistants and nurse practitioners—have exploded post COVID. However, growth in this sector had already started with the passing of the Affordable Care Act in 2010 as more Americans were given the ability to seek health care with their newfound insurance coverage. And although these urgent cares have reduced the cost of paying for an ER visit, the convenience of finding a clinic on every corner has actually increased the number of people seeking care—thus on the net, urgent cares have actually increased our overall healthcare spend.

Unfortunately, urgent care is also taking the place of primary care in too many instances so there is no relationship with a physician who knows that entire patient history which often leads to overutilization due to a lack in the continuity of care. This is especially dangerous when it comes to pediatrics where kids being treated in urgent care can lead to disparity in care and overall fragmentation.

All that is to say that Walmart and company aren’t just competing with the general practitioners and specialists in those states and cities—they’re also dealing with the physician assistants, nurse practitioners, and other providers that staff the urgent care centers.

Changing health habits is tricky.

Walmart and others have correctly identified that healthcare is due for a shakeup, but have seemingly underestimated that unique provider-patient dynamic and how resistant Americans were to going all in on digital healthcare. Healthcare is still very personal and so there’s also the fact that Americans don’t like or trust large corporations—although the premise of convenience seems right, offering up medical services at Walmart didn’t hit the mark.

Fortunately for those looking to foray into retail health, there’s reason to believe that it’s not impossible to attract new patients. A 2022 study commissioned by Tegria found that 69% of patients would consider switching their healthcare provider if another one offered more appealing services, including same-day appointments, convenient locations, and self-scheduling, as well as implementing technology to make it easier to pay bills and view test results. The key here is services are provided in an environment specific to healthcare.

And when most patients’ funds are already tight, finding an option that offers more value or efficiency for their dollar is worth consideration. According to a Gallup study published in January 2023, 52% of Americans rate the quality of healthcare in the U.S. as fair or poor, with only 56% satisfied with the cost of their care and only 24% satisfied with the cost of care in the country. With these numbers, someone is bound to find a way to truly disrupt the stalemate in health care. But, until we can break the shackles of profit-driven insurance carriers, the disruption will remain elusive. With 92% of Americans now covered by insurance and 70% of those by private commercial carriers (2022 Census numbers, probably higher in 2024), there are major barriers for disruption, but as an optimist, I will always bet on entrepreneurship!

We need to make the case for healthcare’s value.

Maybe one thing retail healthcare gets right—that insurance companies have yet to truly incentivize—is that healthcare should be run like any other business in terms of competition and outcomes based rewards. In order to “fix” health care, we must also change Americans’ health habits, and more specifically their expectations of quality care and emphasis on prevention.

It’s a tricky and complicated topic as we have seen with the social determinants of health and culture. These are system problems that need to change and it takes time and of course commitment by all stakeholders including government, providers and us as potential patients.

As it stands right now, the average American is more likely to spend money on something else than spend it on their own health. With a nod to AI, I asked ChatGPT to give me some examples  of what Americans are more likely to value over their own health and it came up with 11 different categories due to their “tangible and immediate benefits or because of societal and lifestyle influences that prioritize material and recreational satisfaction.” Included in these categories were the likes of:

• electronics and gadgets;
• entertainment;
• automobiles;
• fashion and beauty;
• travel and leisure; and
• subscriptions and memberships.

Changing health habits is no easier than fixing health care. The science of behavioral economics gives a bit more insight into what this is going to take. The benefits of healthcare must  be translated into more tangible incentives that the average patient is willing to pay out of pocket for and instead of the low hanging fruit of a fancy pink drink from the local coffee shop or the shiny new smartphone to hit the shelves.

Fixing American health care will take some major structural changes.

The jury is still out on whether or not retail health will truly disrupt healthcare. One thing for sure is that there are a lot of major retailers who have jumped into the market to place billions of dollars on this bet. So an important question is “Why would they do that?” Well, these prominent retailers believe we are moving to a value-based care model and are investing heavily in the healthcare industry to claim a share of the $4.2 trillion market, focusing on total-cost value-based care. When recently asked about the recent string of corporate failures, Walgreens Boots Alliance EVP and U.S. Healthcare President Mary Langowski remains positive, stating, “I happen to be very bullish on the role of retail in healthcare, and frankly, having a very central role in healthcare. Consumers want the ease and convenience of it. We’re seeing a lot of evolution around not whether it will exist, but around what the right model is going to be.”

With over 50% of the Medicare population now on a Medicare Advantage (MA)  plan, retailers are banking on maximizing the abundance of profit opportunities in the MA model—for those of you who have been around long enough in healthcare, we are going back to the capitation model of optimizing for lives covered and treatment costs while minimizing utilization of care. Technology has and will continue to be an important component in this big bet as we mentioned earlier—think automation, RTM, and telehealth.

Although there are benefits of increased access to care in rural and underserved areas, the Center for Medicare/Medicaid Services (CMS) has not recognized or kept up with regulations to keep the loopholes that retailers have found to make this big bet be lucrative. In fact, many believe that value based care and MA plans will actually cost more than our fee for service models due to this rush by retailers. Primary care seems to be the target for these retailers at the moment and time will tell if physical therapy will become a target in the future.

One thing is for sure, major reform in how healthcare services are paid for is needed. We, as physical therapists, know this better than anyone.  Larry Benz does a great job explaining the impacts of the latest round of cutting proposed in the 2025 fee schedule.  We must stay vigilant in our advocacy, but also stay educated on the pros/cons and how we fit into this changing landscape of healthcare in America.