Walmart Abandons Health Care Plans, As Retailers Struggle With Their Home-Based Care Strategies

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Health care is hard – an idea reinforced this week when Walmart (NYSE: WMT) announced the abandonment of its previously grand health care ambitions.

There may be a day when the country’s largest retailers, including Walmart, become major players in home-based care delivery, but today is not that day. And other recent developments suggest tomorrow won’t be either.

Over the past half decade, retailers such as Walgreens Boots Alliance (Nasdaq: WBA), CVS Health (NYSE: CVS), Amazon (Nasdaq: AMZN), Walmart and Best Buy (NYSE: BBY) have jumped head first into home-focused health care.

Each company teased an entrance into some sort of home-based health care, then moved quickly. One initiative after another was announced.

But Walmart and Amazon – two of the most capable and large companies in the U.S. – have already retreated.

Walmart first partnered with the home health provider Amedisys Inc. (Nasdaq: AMED) in 2019, the same year in which it launched its Walmart Health centers, with the plan to help customers access care in the home and play a more meaningful role in older Americans’ health care journeys.

“We want to support people being in their home and aging in place,” Walmart Health Senior Vice President Marcus Osborne said in 2021. “We also want to address social isolation and … how technology is playing a role there.”

On Tuesday, Walmart announced that it would be shutting down its 51 health care centers, along with virtual care services.

“Back in 2019, we launched Walmart Health centers,” Walmart wrote in a company statement. “During our five-year journey, we made meaningful impacts with patients while continuing to learn, pivot and evolve. While our mission to help people save money and live better remains, today we are sharing the difficult decision to close Walmart Health and Walmart Health Virtual Care.”

Amazon, meanwhile, conceded in 2022. It touted “Amazon Care” as a disruptive health care platform that would enable home and virtual care services for patients, but quickly pivoted. Shortly after, it decided to purchase the primary care platform One Medical.

In light of Walmart’s exit, it’s worth taking stock of the retailer arms race toward home-based care.

In this week’s exclusive, members-only HHCN+ Update, I dive into:

– A brief update on the history of retailers diving into health care services

– Which retailer(s) are most likely to succeed in the long term

– And what this all means for traditional home-based care providers

From disruption, to table stakes, to closures

In December 2021, I wrote that retailers were embarking on a mission to disrupt home-based care. In short order, each of the retailers’ plans became crystal clear. By the following September, I wrote that home-based care had become table stakes for those retailers.

At that point, home-based care leaders began to consider what business would be like after these retailers’ entry.

Broadly, I would put their thought processes into three separate camps: the first was genuine concern over these companies disrupting the traditional home health and home care models; the second was a lack of concern, more intrigue, and some consideration over partnership opportunities; the third was more of a dismissal of this trend, and an assurance that health care was local and intimate, and would remain that way.

It’s still early on in the game, but right now, I’d say the latter camps are closer to correct.

Best Buy has gone slower and steadier with its entry, aiming to augment home-based care – and mostly hospital-at-home care – through its capabilities. It has landed some impressive partnerships with health systems such as Mass General Brigham, Geisinger, Atrium Health and others.

Through the home-based care technology company Current Health – which Best Buy acquired in 2021 – and its existing capabilities (such as the Geek Squad), Best Buy has made an effort to usher more care into the home. But it hasn’t necessarily aimed to be a disruptor of the space moving forward.

CVS Health and Walgreens, on the other hand, have really shifted their company-wide strategies to lean into health care provider capabilities. CVS Health has CVS Healthspire and Walgreens has its U.S. Healthcare segment, both of which include primary care and home-based care capabilities.

Through CVS Health’s acquisitions of Oak Street Health and Signify Health, and Walgreens’ backing of VillageMD and acquisition of CareCentrix, both companies completed the three-piece puzzle that companies across the country are trying to achieve.

That puzzle: pharmacy, primary care and home-based care.

Humana Inc. (NYSE: HUM) and UnitedHealth Group’s (NYSE: UNH) Optum have taken similar paths.

CVS Health and Walgreens came off the high of being able to administer hundreds of millions of Americans vaccines in 2021 and 2022. When vaccinations waned, a revenue void was left to fill. At the same time, a simultaneous epiphany surfaced.

Both companies realized Americans trusted them with their health care, and that as retail stores became less profitable, health care services would be a logical road to travel down.

While Best Buy took a slow ramp – and Amazon and Walmart backed in, and then out – CVS Health and Walgreens have most of their proverbial eggs in one basket.

The CVS Healthspire and U.S. Healthcare segments have gotten off to slow starts, but after spending $18 billion-plus and close to $7 billion, respectively, on these initiatives, CVS Health and Walgreens have no choice but to stay the course.

The dirty work

Home-based care, especially, is a hard game to play. Yes, there is an overwhelming demand for that type of care, a demand which will only grow in the future.

But there’s an equal demand for staff, a bevy of logistics to work through, and adoption and trust to gain.

Neither CVS Health nor Walgreens has acquired a straight home care or home health asset just yet, but many thought that would be a logical next step. For now, building out a successful health care provider operation has been a tall enough task for each, however.

Since Walgreens committed to its transformation, it has already hit significant snags. Walgreens’ former CEO, Roz Brewer, was replaced with Tim Wentworth, a more seasoned health care vet.

In March, the company announced it was conducting a strategic review of its assets. John Driscoll – the former CEO of the health-at-home technology platform CareCentrix – was replaced as head of the U.S. Healthcare segment.

“We are now meaningfully looking at the entire portfolio of assets that we have to ensure that everything we have is going to drive the growth that we aspire to deliver,” Wentworth said in March. “This doesn’t just happen overnight. By and large, the broader set of questions that we’ve got to answer will probably take a couple of years to really begin to show fruit.”

CVS Health is in the same boat now, slashing its profit outlook amid its own shift this week. CVS Healthspire generated revenue of approximately $40 billion in the first quarter, a decrease of nearly 10% year over year.

As Wentworth said, these things don’t happen overnight. And, like Walgreens, CVS Health is not backing away. At this point, it can’t.

“Between Signify and some of the capabilities we have at Oak Street, there’s a lot of boots on the ground in market capabilities that we have to really change the health trajectory of patients, whether that be readmissions to the hospital or managing your most complex chronic patients,” CVS Health CFO Tom Cowhey said Wednesday on the company’s first-quarter earnings call. “We have the resources, we have the program, we have the know-how, … and so I think both Signify and Oak Street will bring a lot to the table over the coming years on how we can really bend that cost around.”

Year over year, Walgreens stock is down close to 50%. CVS Health’s stock is down about 25% after a sharp fall post-earnings.

What’s next

In its statement this week, Walmart was candid about its decision to close all 51 health centers across five states.

“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,” the company noted.

If Walmart and Amazon are losers by forfeit, it’s still tough to name a winner.

As mentioned above, even if CVS Health and Walgreens regret the shift to health care services, it’s too late now to turn back.

It’s possible a hail-mary acquisition could be in the future, but for now, it’s likely these companies are just trying to get to the other side of turbulence.

One key difference between Walgreens, Walmart, Amazon and CVS Health remains, however. The latter owns Aetna, one of the largest health care payers in the country. Effectively, one side of the house controls the lifeblood of any health care business: payment/reimbursement.

In the interim, CVS Health can tout all the benefit Signify Health’s in-home visits are doing for Aetna members, and all the primary care referrals it has handed off to Oak Street Health.

CVS Health’s ultimate goal is to reach peak synergy between its pharmacy, Signify Health, Oak Street Health and Aetna. That will take time, too, but positive signs are likely to show up sooner.

There could be a place for home care providers to step in, too. The legacy, local providers have capabilities that CVS Health and Walgreens do not yet have.

“We don’t [yet work with those providers],” Signify Health President Paymon Farazi told HHCN last month. “But that’s something that is possible through the care coordination pathways product. There’s nothing limiting us from doing that, other than conversations with our health plan partners and those entities to make sure that that’s turned on. I have had partnership conversations with different home health providers. And we’re starting to explore more of that in the rest of 2024.”

Instead of CVS Health and Walgreens disrupting home care, it could be possible that they’re the biggest, newest partners in a growing industry.

All things considered, that’s the best-case scenario for legacy home-based care providers.