Is the Commercialization of Healthcare Over?

Let me say right up front—I fully recognize my use of the phrase “commercialization of healthcare” is a misnomer given the subject matter of this Editor’s Letter. However, quite frankly, it was the best description I could think of to describe what I’m focused on here. With that said, let’s continue.

Recently, I saw news from Walmart saying the organization would close its Walmart Health centers—all 51 locations across five states. In a statement, the firm said, “This is a difficult decision, and like others, the challenging reimbursement environment and escalating operating costs create a lack of profitability that make the care business unsustainable for us at this time.”

The company will still maintain its pharmacies and vision centers (clearly having a much better handle on these care delivery models). Over the five years since its introduction in 2019, it’s apparent Walmart was unable to master the intricacies of an urgent care model within its retail locations.

Regarding the announcement, Emarketer senior analyst Rajiv Leventhal stated, “Walmart Health’s decision to shut down its health centers and telehealth services is a sudden pivot from its recent plans to expand but not surprising given retailers’ overall struggles in the care delivery space.”

Leventhal also predicted this would be the organization’s final attempt to serve this space, considering how poorly this attempt went. “The latest effort was littered with red flags throughout, from struggling with basic billing and payment functions to leadership changes and other operational obstacles.” He added, “The news is a significant setback for retail health players, some of whom are now realizing that delivering retail-driven primary care may not be economically viable and certainly isn’t causing the disruption in local healthcare markets that many predicted.”

Those predictions sound similar to the ones made of big tech’s takeover of medtech. That is, “outsiders” coming into a specialized industry with seemingly no concern for the steep learning curve (in that case, the regulatory environment) and falling well short of prognostications.

In another retail-driven healthcare model, Walgreens owns 53% of VillageMD (according to a CNBC article). Unlike Walmart Health, however, VillageMD has also acquired “full-service” healthcare vendors such as Summit Health (in 2022 for $8.9 billion). Fast-forward two years and this sort of differentiation doesn’t seem to be helping Walgreens with its healthcare delivery efforts; VillageMD announced it would be closing 160 locations. It’s also been reported Walgreens faced a $6 billion loss in Q2 due primarily to VillageMD’s decrease in value. Whether a divorce is imminent between the two is unknown at this time, but right now, the investment is not going well for Walgreens.

Coming in third among retail healthcare horror stories, CVS is said to be closing a number of MinuteClinic locations. In addition, the organization said it would be shuttering an undisclosed number of pharmacies within Target store locations.

In the aforementioned CNBC article, Timothy Hoff, professor of management health-care systems at Northeastern University, explained the problems with the retail clinic model. “If you can’t pump through a lot of patients, it doesn’t work,” he said. “They ended up being more expensive to run than they thought, combined with a workforce shortage, they just didn’t work.”

So what does that mean for medtech manufacturers? While the commercialization of healthcare (again, misnomer) may be faltering, the consumerization and digitalization of medtech are not. The movement of healthcare from the hospital and doctor’s office is not moving to the MinuteClinics, but rather, they are moving into the home. With technologies being created for consumers to use directly and leveraging familiar tools such as smartphones, patients can take more control of their healthcare. This empowerment will hopefully provide more incentives to those consumers to make better choices. If the healthcare technologies they use emphasize the value of prevention or better illustrate how one choice affects their health versus another, a pattern may begin.

So while companies continue to develop sophisticated medical devices for clinicians, nurses, and surgeons within hospitals, ASCs, and primary care offices, they also must consider the benefits and interest in serving consumers directly. This can occur through digital health solutions primarily, such as apps and software as a medical device, but there are other options. The point is, designing for consumers must be on the radar for medical device manufacturers.

Regardless of what happens to the retail-connected urgent care facilities, this is a trend unlikely to fade as quickly. Figure out how your products can best function in the hands of the public. 

Sean Fenske, Editor-in-Chief
[email protected]