Walmart is launching its first standalone primary care clinic

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Walmart's first standalone primary care clinic, dubbed Walmart Health, will be piloted in Dallas, Georgia, and housed in a building next to Walmart's retail store. Patients will be able to receive a variety of primary care services at the clinic, including immunizations, lab tests, dental care, optometry, audiology, and behavioral health services.

Sources close to Walmart told CNBC that, should the pilot prove successful, the retail giant will likely scale up its primary care offerings across its nearly 5,000 locations. Wading deeper into primary care makes sense for Walmart: Health and wellness made up approximately 9%, or $36 billion, of its $332 billion total revenue for its last fiscal year (ended January 31, 2019).

The company could also be shoring up defenses against digital disruption in the pharmacy space by investing heavily in dedicated clinical locations for services that require face-to-face interaction, like lab procedures and dental work: Shockwaves spread throughout the industry last year after Amazon acquired digital pharmacy startup PillPack in 2016, for instance.

Here's what it means: Walmart is doubling down on its healthcare efforts, following a trend we've seen from large, brick-and-mortar pharmacies.

• Walmart Health clinics are the latest development in the company's ongoing healthcare crusade. Back in 2014, Walmart launched a number of Care Clinics - retail clinics staffed with nurse practitioners who guide customers through chronic disease management for problems like diabetes, as well as provide routine care like immunizations - throughout parts of the southern US. However, Care Clinics never expanded beyond a handful of locations. Walmart has since tightened its relationship with Humana to cobrand a Medicare drug plan in 2017, and snatchedup the insurer's former VP of Innovation Sean Slovenski in 2018 to head its healthcare business. Rumors continue to swirl that Walmart is interested in buying Humana, pursuing a route similar to the CVS-Aetna merger currently under judicial review. If Walmart does choose to pursue a Humana acquisition in the future, a beefed-up primary care division could help the company keep costs low for Humana's more than 11 million members by potentially offering discounted prescriptions and incentivizing preventative care services.
• And it's not the only major retail pharmacy pushing further into healthcare. CVS has also made moves to broaden its healthcare play in the last year. In addition to acquiring health insurer Aetna, the pharmacy giant has also invested heavily in building out its on-site healthcare services through its HealthHub expansion efforts.

The bigger picture: Its focus on mental health could help ensure Walmart Health's success, given the dire need for more behavioral health providers throughout the rural US.

Walmart is betting big on primary care services that patients prefer to have addressed in person. The majority of services offered by the soon-to-be Walmart Health clinics - like dentistry and lab work - are largely immune to a digital shift away from traditional in-person care. And though we've seen an uptick in telehealth companies using their tech to reach a broader pool of mental health patients, consumer interest in telehealth for treating mental health issues remains low at about 30%, according to an American Well survey from earlier this year.

Walmart is smart, then, to recognize that it can capitalize on its massive geographic footprint to expand into areas like behavioral health services, where there's a massive need for more in-person care. There are approximately 112 million people living in areas that have mental healthcare professional shortages, and the issue is especially prevalent in rural areas, with 65% of rural US counties lacking a psychiatrist, compared with 35% of urban counties.

Since over 90% of US consumers live within 10 miles of a Walmart location, offering behavioral health services could bring in a huge number of customers looking for care - as well as provide a much-needed mental health boost to the communities Walmart operates in.

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