Corporate walk-in clinic closures 'not at all surprising,' highlight unsustainable system

Key takeaways:

• Large corporations have opened and closed many walk-in clinics in the last few years, attempting to increase access to primary care.
• The factors that led to closures highlight the difficulties regular PCPs face.

The closure of walk-in clinics from massive corporations like Walmart and Walgreens is reflective of a primary care system in crisis, according to experts.

“Retail giants getting into health care delivery definitely had promise,” Jesse M. Ehrenfeld, MD, MPH, immediate past president of the AMA, told Healio.

“I think there was a lot of excitement for what this could do to change the access equation, particularly in rural and underserved communities, where they do have a large footprint,” he added. “But unfortunately, that has not played out.”

Walmart Health launched in 2019, and the company said it made “meaningful impacts with patients” over its 5-year journey, but it shuttered all 51 of its health care centers along with its telehealth operations earlier this year. Similarly, Walgreens invested billions of dollars into its VillageMD clinics, but after taking a $6 billion loss, the company is scaling back.

Ehrenfeld said this is “illustrative of the system-wide economic strain” that primary care providers face today.

“The closures that we're seeing ... [are] just more evidence that we've got to make fundamental changes to how the health care delivery systems values care and reimburses for the services that are delivered,” he said.

What went wrong?

In a press release, Walmart executives said that rising operating costs and “the challenging reimbursement environment” create a lack of profitability “that make the care business unsustainable for us at this time.”

Conrad L. Flick, MD, a partner of Family Medical Associates of Raleigh, the comedical director of the Community Care Physician’s Network, and copresident of the Community Care Physician’s Network Board of Managers, said he believes the corporations faced multi-faceted challenges.

“The first was a really poor understanding of what primary care is and how it is actually delivered and the actual finances around it,” Flick told Healio. “Most for-profit companies and shareholders want a good return on their investments.”

Flick has been a physician for 30 years, and most practices he knows have a profit margin between 3% and 5%. These practices are struggling financially because primary care has been devalued for decades, he said.

“The assumption of what profit could be and actually is were far off from the beginning,” he said. “I believe they also did not think through issues like increasing overhead with inflation and cost of living.”

The corporate clinics faced the same issues as regular PCPs — namely, “a flawed payment system that’s unsustainable,” according to Ehrenfeld. For example, when adjusted for inflation in practice costs, Medicare physician payment has dropped 29% from 2001 to 2024, Ehrenfeld said.

“That has not gotten better this year, last year, the year before,” he said. “Reimbursement cuts in ‘23, cuts in ‘24, proposed cuts for ‘25 while we’ve got practice inflation that continues to run rampant.”

The CMS Medicare Economic Index indicates a 4.6% increase in inflation-adjusted practice costs this year, which Ehrenfeld said is the highest this century.

“If your reimbursement goes down and your costs go up, there's a point where you can no longer keep the doors open,” he said. “It's not at all surprising to me that the big retailers — Walmart, CVS, Walgreens — are having mixed success as they're trying to keep these primary care services afloat.”

The U.S. health care payment system needs to be restructured so that more people choose primary care, Russell Kohl, MD, FAAFP, speaker of the American Academy of Family Physicians Congress of Delegates, said.

“Physician compensation must recognize the important work family physicians do every day, and address the value of prevention, health maintenance, early diagnosis and early treatment,” he told Healio. “Volume-based, fee-for-service care doesn’t adequately support the comprehensive, continuous nature of primary care, and it doesn’t keep costs in check. “

Access

When corporations first pushed into primary care, many expressed excitement about the idea of increased access.

“In general, there are 83 million Americans [who] don’t have access to primary care,” Ehrenfeld said. “We need innovative delivery models. We need to expand the workforce.”

Kohl also stressed the importance of addressing the primary care workforce shortage, which he said directly impacts communities, patients and physicians.

“Everyone has felt the consequences of a shrinking workforce,” he said. “Patients have longer wait times to see a doctor or difficulty finding a physician. Physicians are facing higher rates of burnout and staffing shortages than ever before.”

There is still some hope for expanded accessibility with corporate clinics. For example, although Walmart Health has closed, Humana announced that its CenterWell unit will open 23 senior-focused primary care centers to occupy Walmart Health’s former clinical office space. CenterWell president Sanjay Shetty, MD, said in a press release that the company is excited by the unique opportunity to offer seniors “greater access to our integrated approach to care.”

Ehrenfeld emphasized that patients need more options to improve accessibility but questioned how this is possible under the current circumstances.

“If a huge retail giant ... cannot make a primary care offering work with all of their capital, their expertise, all their infrastructure and all their scale, how on earth can a small, independent private practice be expected to survive?” he said. “That's a key message that policymakers need to really take to heart as they're thinking about priority for some of these important fundamental payment reforms that we need to see take hold across the country.”

Turning things around

There is legislation seeking to improve the current primary care model.

“Here’s the bottom line: We must make sure physicians are practicing in areas where patients need them the most,” Kohl said. “Policymakers can move the needle by enacting Medicare payment reform, accelerating the transition to value-based payment models and expanding programs that have been proven to help address physician shortages in medically underserved and rural areas.”

Investment in primary care can take many forms, Flick said, including equal pay with other specialties, loan forgiveness for medical students and more.

Ehrenfeld said that last year, Congress “made a small step forward” by introducing HR2474, a bill to tie physician payment to the Medicare Economic Index with a yearly payment update to account for cost of practice inflation.

“It happens for every other entity that gets paid under Medicare; it doesn't happen for physicians,” he said. "We've got to have that annual automatic inflation-based update.”

Although it has not yet passed, he said it is a “really important bill” and “we’re optimistic that that might get through in the next session.”

Kohl said the American Academy of Family Physicians has additionally been advocating for Congress’s implementation of “sweeping Medicare physician payment reform.”

“Medicare’s current physician payment system is undermining physicians’ ability to provide high-quality, comprehensive care — particularly in primary care,” Kohl said.

Ehrenfeld also said budget neutrality reform is critical. This is the target of HR6371, a bill that he said has bipartisan support.

With this bill, CMS would be required to review actual claims data “and correct some of the flawed utilization projections that are leading to these inappropriate conversion factor cuts or increases,” he said. It would also increase the spending threshold, triggering a budget neutrality adjustment from $20 million to $53 million.

“We're hopeful that that can also be introduced to the next Congress and move forward,” he added.

Kohl agreed that the lack of inflation-adjusted payment updates and statutory budget-neutrality requirements “will, without intervention from Congress, continue to hurt physician practices and undermine patient care.”

“The 2.8% reduction in the Medicare conversion factor in the Medicare physician fee schedule proposed rule once again highlights the urgent need for congressional action to ensure that physician payments keep up with the costs of running a practice,” Kohl said. “These cuts are deeply concerning because, in the long run, Medicare payment distortions between primary and specialty care will continue to drive more physicians to go into higher paid specialties, worsening the maldistribution of the physician workforce.”

The final area of reform Ehrenfeld mentioned was the Medicare Incentive Payment System (MIPS). It currently levies penalties that are steep, unevenly distributed and impact small, independent and rural practices disproportionately, he said.

“We've got to reform that program as well, so that when you do have clinics, whether they’re operating in small areas, underserved areas, rural areas, they're not disproportionately disadvantaged because of how the quality incentive rules are set up,” he said.

The AMA has developed a statutory proposal called the Data-Driven Performance Payment System to replace the MIPS model.

“At the end of the day, we believe in quality, we believe in federal quality incentive programs, but the programs have to be designed and executed in a way that they're relevant clinically ... and less burdensome,” Ehrenfeld said.

References:

• CenterWell announces plans to open 23 senior primary care centers at Walmart locations in Florida, Georgia, Missouri and Texas. Available at: https://press.humana.com/news/news-details/2024/CenterWell-Announces-Plans-to-Open-23-Senior-Primary-Care-Centers-at-Walmart-Locations-in-Florida-Georgia-Missouri-and-Texas/#gsc.tab=0. Published July 24, 2024. Accessed Aug. 20, 2024.
• Medicare physician payment is NOT keeping up with practice cost inflation. Available at: https://www.ama-assn.org/system/files/2024-medicare-updates-inflation-chart.pdf. Published March 2024. Accessed Aug. 20, 2024.
• Walgreens suffers $6 billion loss as VillageMD clinic investment sours. Available at: https://www.forbes.com/sites/brucejapsen/2024/03/28/walgreens-suffers-6-billion-loss-as-villagemd-clinic-investment-sours/?sh=2f096a251eb6. Published March 28, 2024. Accessed Aug. 20, 2024.
• Walmart health is closing. https://corporate.walmart.com/news/2024/04/30/walmart-health-is-closing. Published April 30, 2024. Accessed Aug. 20, 2024.