When you think “healthcare,” the first place your mind probably goes is Best Buy, right?
No? Well, perhaps that’s a good thing, seeing as it recently divested from its hospital-at-home offering and restructured its health business.
In 2021, the tech retailer acquired the Current Health virtual care platform for roughly $400 million, and in 2023, it shared plans to further develop its healthcare services. But the company’s health arm struggled, recording a Q4 $475 million goodwill impairment charge, which contributed to a nearly 16% stock drop on March 4 and led to a healthcare restructuring that included an announcement to lay off 161 employees, effective this September.
Current Health announced the split from Best Buy at the end of June. It will be reacquired by co-founder Christopher McGhee, who started the company in 2014, for an unspecified amount. According to a LinkedIn post, Current Health treated 70,000+ patients during its time under the Best Buy umbrella and had partnerships with major health systems like New York-based Mount Sinai Health System and NYU Langone Health.
“Investors are becoming increasingly cautious about big-name retail companies expanding into healthcare,” David Hamlette, health and wellness analyst at market researcher Mintel, told us via email. “Investors are wary because the long-term profitability and sustainability of these healthcare ventures remain unclear, especially as retailers continue to experiment with digital strategies and partnerships.”
Best Buy and Current Health did not respond to requests for comment.
How hard could it be? In general, this seems to follow a trend: Companies saw that healthcare and virtual care were experiencing a boom during and after the height of the Covid-19 pandemic and wanted to find a way in, Lucienne Ide, founder and CEO of digital health company Rimidi, told Healthcare Brew.
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“A bunch of people thought, ‘Oh, how hard is this? We do virtual business in all other sectors, we can jump in and do this in healthcare,’” she said. “And it’s just not the same.”
According to data from researcher eMarketer, retail health clinics saw the most growth in use (over 51%) compared to other nontraditional care venues between 2020 and 2021. And that was largely because these retailers could offer more convenience, better price transparency, and a customer service element, Ide said.
“These big guys didn’t fail because they had nothing to offer,” she added. “They had a whole lot to offer. They just didn’t have all of this equity that we have in healthcare.”
This…feels familiar. Now, we’re seeing these retailers divest from parts of their healthcare offerings or ending them altogether after the pandemic bubble burst.
If you’re feeling a sense of déjà vu, that’s because last April, Walmart made a similar move by ending its Walmart Health initiative. Or perhaps you’re thinking of Walgreens, which has struggled to maintain strong foot traffic in its stores and has been looking to sell off its VillageMD primary care offering (which is still of interest for its soon-to-be new owners, private equity firm Sycamore Partners).
“Divesting from underperforming healthcare assets is increasingly seen as a necessary move to address stakeholder concerns and adapt to market realities,” Hamlette said.
Beyond stakeholder wariness and rocky earnings related to these healthcare investments, retailer options also contribute to rising healthcare costs when patients receive “disjointed care” that results in “duplicate care, duplicate testing—a lot of inefficiency in the system,” Ide said.
“I don’t think anyone has cracked the nut on it,” she said.