When the Disruptors are Disrupted: Why Retailers are Tapping Out

Primary care hasn't been so friendly to some of the biggest companies entering healthcare.

The road to healthcare disruption is being paved with more and more retailers who are struggling to crack the space.

While there's a consumer demand for a retail experience that can make a trip to the doctor's office even more convenient, big-name companies that have tried their hand at the concept are finding primary care is trickier and less profitable than they imagined.

Whether it's Walmart, Walgreens, CVS Health, or Amazon, the challenges with opening and operating a retail primary care model are causing giants to either reconfigure their approach or drop out of the race entirely.

"Everybody who's trying to enter this industry and trying to slice off pieces of the business, every other week we're finding somebody else that says, 'no más. No more,'" newly retired Banner Health CEO Peter Fine told HealthLeaders. "It's not easy to get into this business. It's not easy to manage to get to scale. It's not easy to manage the cost."

The decision to pivot by these companies is coming in bunches.

Walmart just announced the sale of its MeMD virtual care business to telehealth startup Fabric, which comes on the heels of the move to close all 51 of its health centers and virtual care offerings five years after launching.

Walgreens recently announced plans to cut its stake in primary care clinic chain VillageMD to the point its no longer majority owner, CEO Tim Wentworth told investors in an earnings call. This spring, the pharmacy chain operator said it planned to close 160 VillageMD clinics and reported nearly $6 billion in net loss for the second quarter, reflecting the value of its investment in the primary care business.

Meanwhile, CVS Health is reportedly seeking a private equity partner to help fund Oak Street Health, the primary care provider it purchased a year ago for $10.6 billion. The company also continues to operate more than 1,100 MinuteClinics, which have seen the type of services offered evolve over time.

In the case of Amazon, the behemoth has folded its Amazon Clinic telehealth service into its One Medical primary care business and rebranded to Amazon One Medical pay-per-visit telehealth. To expand its presence, Amazon One Medical has been inking partnerships with employers and health systems.

According to Fine, the shortcomings in primary care by these retailers should come as no surprise.

"For primary care practices, when you buy them and then you think you can run them profitably by just being behind the scenes, having a standardized billing system, it's ludicrous," he said. "We're going to see a lot more crashing and burning because they think this is just an easy business to get into and they're not always totally sure of how to handle insurance and not totally sure about really understanding the behaviors of the consumer."

Traditional providers may continue to hold the advantage in those regards, but it's clear some of these retailers want to be involved in the primary care space in one capacity or another.

As long as there is a need by the consumer to get quicker, more affordable access to services—which traditional providers haven't figured out how to offer themselves—disruptors' interest will be piqued.

However, until retailers figure out how to leverage primary care so they can send patients to more profitable services that they make revenue from, investment in that business is not going to benefit the bottom line.

"This is just basic primary and urgent care. You can't make money because that's not where the money is. Money isn't in primary care," Fine said.

"There'll be more that will say they want to move in a different direction."