Retailers retreating from primary care
May 14, 2024
Walmart announced last week that it will shut down its 51 primary care clinics across five states and shut down its virtual care unit. Walgreens has taken a $5.8 billion write down on its investment in the primary care company Village MD and has announced closures of its 160 clinics. Virtual only companies have also been scaling back and laying off staff. Optum shut down its three-year-old virtual care unit, and Teladoc and American Well have both had layoffs.
This is happening while many continue to have trouble finding a primary care physician, and wait times for new appointments with physicians are getting longer. Walmart and Walgreens have both complained of low reimbursement rates, although this year employers saw the highest premium increases in two decades.
Primary care represents under 5% of total medical costs. Those who need to be seen in emergency departments or by specialists for lack of primary care likely incur higher bills. However, better access to primary care has not been shown to lower total medical costs.
The economics of primary care practices are very difficult. Many primary care and independent groups ran out of money during the pandemic; some have been acquired by hospitals or health plans. The most successful primary care practices often participate in Medicare Advantage contracts where the practice gains a financial benefit for keeping patients out of the hospital. There are few commercial risk contracts with substantial provider upside or downside, and fewer hospitalizations to potentially prevent in those on commercial insurance.
Existing practices also have a hard time hiring primary care physicians, as few new medical school graduates choose a primary care residency training program. Many primary care residency training slots went unfilled this year. Nurse practitioners and physician assistants are filling some of this gap. The physician shortage is worse in rural and underserved areas, which makes the Walmart withdrawal from primary care especially painful in many communities.
Implications for employers:
Primary care shortages could mean less preventive care and more delayed diagnosis and treatment of chronic disease. This can lead to worse outcomes and more time away from work.
Some employers are using onsite or near-site clinics to provide convenient access to their members at large sites or in locations with poor primary care access. Many employers that offer onsite or near-site care will offer “wrap-around” virtual care for members who do not live close to an available on- or near-site health center.
Good access to virtual care can help - and free up primary care providers in the community to deal with issues that require an in-person visit.
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