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Nov 06, 2024

Why Retail isn’t the Future of Healthcare - MedCity News

Retail healthcare in the U.S. took off quickly, grabbing headlines as major companies like Walmart, Walgreens, CVS, and Amazon entered the healthcare scene with promises to transform primary care

Retail healthcare in the U.S. took off quickly, grabbing headlines as major companies like Walmart, Walgreens, CVS, and Amazon entered the healthcare scene with promises to transform primary care delivery. However, recent trends show that this model is struggling to establish itself sustainably. Although these big-box names initially attracted consumer and industry interest, navigating the intricate healthcare landscape has presented unexpected challenges. The evidence now increasingly points to a healthcare future shaped by hospital-affiliated and health system settings, where patient care quality, continuity, and trust are more readily provided.

Retail failures in healthcare – what went wrong?

Retail clinics seemed well-positioned to deliver accessible, affordable primary care. Yet, in the past year, their viability has been questioned. For instance, Walmart recently closed all 51 of its health centers, stepping back significantly from healthcare. Walgreens, facing poor financial performance, announced plans to close 1,200 locations by 2027. CVS has also adjusted its primary care expansion plans, scaling back on its initial ambitions.

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The retail clinic model has struggled for several reasons. One of the fundamental flaws was that primary care was never a core business for these retail players. For Walmart and Kroger, healthcare was always a side project, a loss leader meant to support other parts of the business rather than a fully integrated component. This marginal status limited their investment in innovation and clinical capabilities, making it difficult to compete with traditional healthcare providers.

Additionally, retail clinics were predominantly located in urban centers, which limited their reach and exacerbated accessibility issues for patients in rural and suburban areas — places where primary care shortages are most acute. The limited geographical scope and lack of virtual care integration created barriers for patients looking for convenience. Without a more diversified strategy that included expanding into rural markets or partnering with existing health networks, retail clinics have remained isolated and less impactful.

Amazon’s approach: A different strategy, similar challenges

Amazon, another major player in the retail healthcare space, took a different route by focusing on primary care, chronic disease management, prescription fulfillment, and virtual care delivery. This approach seemed promising, leveraging Amazon’s technology capabilities and logistical reach. Amazon launched initiatives specifically targeting chronic conditions, viewing virtual care as a way to provide more scalable services.

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Despite its strategic differences however, Amazon’s healthcare ambitions have faced challenges similar to those of its brick-and-mortar retail counterparts. The company’s chronic care initiatives have been praised for their potential but have struggled to establish deep, ongoing patient relationships — something that health systems excel at due to their established infrastructures and comprehensive care models. The focus on episodic and transactional care, rather than on managing a patient’s full continuum of needs, limits the potential for Amazon to make a meaningful impact in healthcare outcomes.

Why hospital and health system-affiliated care stands out

Hospitals and health systems offer unique benefits that retail clinics have struggled to match: continuous care, strong patient-provider relationships, and a comprehensive approach to health management. Traditional health systems foster long-term relationships between patients and their providers, integrate various specialties, and maintain an in-depth understanding of individual health histories — key factors essential for delivering both primary and complex care.

Health systems also excel in providing coordinated care. Unlike the segmented retail approach, hospital-affiliated care ensures patients access the right specialists at the right time, following a unified plan that addresses their full health needs. As demand grows for integrated, comprehensive care, these capabilities highlight the challenges retail providers face in meeting patient expectations.

The failure of Walmart, Walgreens, and others to truly embed themselves in the primary care space highlights why health systems remain at the core of future care delivery. While retail clinics have attempted to cater to convenience, health systems provide the depth of services and continuity that patients truly need.

Lessons for the future of healthcare

Retail’s entry into healthcare was not without merit. It offered lessons on the importance of convenience, consumer-focused experiences, and digital innovation — all of which health systems can and should continue to adopt. However, the failures of retail healthcare attempts also provide insight into what doesn’t work: healthcare must be more than a transactional experience. The focus must be on relationships, continuity, and coordination.

To be successful, retail players would need to make healthcare a core part of their business, expand geographically to underserved areas, and partner with established health providers to enhance capabilities. Without such shifts, retail healthcare will likely remain limited in scope, unable to make the kind of meaningful, systemic change that health systems are equipped to deliver.

The key takeaway for the future of US healthcare is that health systems, not retail giants, are positioned to provide the necessary depth of care, relationship-building, and long-term health outcomes that patients deserve. Retail has brought innovation and attention to healthcare delivery, but the future lies with entities that treat healthcare as a core, mission-driven commitment.

Photo: Michail_Petrov-96, Getty Images

Ryan Bengtson is an accomplished healthcare executive with over 25 years of consulting, strategy, and business development experience. Prior to joining Panda Health, Ryan was Founder & Principal at Luminis, a digital health advisory firm. He was previously Senior Vice President, Corporate Alliances at Waystar, a Managing Director at Huron Consulting Group, and began his career at Accenture.

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