How the virtual care market is shaking out in 2024 as Walmart, Optum exit the telehealth business

News this week that Walmart is shuttering all 51 health centers along with its virtual care services came on the heels of recent media reports that Optum also was exiting the telehealth business.

The announcement that UnitedHealth, which owns Optum, was shutting down Optum Virtual Care came shortly after employees began sharing posts on social media about a massive workforce reduction. Optum launched the telehealth service just in 2021.

A spokesperson for UnitedHealth Group’s health services arm said Optum would continue to provide patients with a "robust network of providers for virtual urgent, primary and specialty care options.”

Just three years ago, Walmart's healthcare division, Walmart Health, bought multispecialty telehealth provider MeMD, rebranded it a year later to Walmart Health Virtual Care and integrated it into its healthcare business. 

Walmart is now shuttering that telehealth service.

Many digital health leaders say these recent moves don't signal an end to the telehealth era—while certainly the boom during the COVID-19 pandemic is over—but the virtual care market is evolving and moving away from commoditized models like virtual urgent care.

"I think the simplest way to say what we're seeing right now is we're observing the shriveling of telehealth 1.0," said Robin Glass, president of virtual care and health navigation company Included Health. "This original model that I think came out that was really premised on this highly transactional interaction between a patient and the clinician that didn't have any elements of longitudinal care or treating that individual as a holistic person, I think we're starting to see the end of the road for that model. It has not served the patient as well as it needs to. I think it also doesn't reflect the modern experience that consumers are getting used to in all facets of their life. And ultimately, it doesn't deliver on the kind of value that purchasers need out of their healthcare dollar."

To survive in the telehealth market, virtual care models need to offer coordinated care that can integrate with brick-and-mortar providers as part of a hybrid model, experts say.

"I think this represents sort of a big moment, for shifting our thinking into models that we've really believed in now for a long time, about creating a much more holistic experience for patients and setting in place the opportunity to serve a patient in a longitudinal way over time, and, most importantly, to integrate that care experience across various facets of someone's healthcare journey," Glass said. "Healthcare has been slower to deliver on that. But I think the market is telling us that we're ready."

Many analysts forecasted a significant slowdown in the use of virtual care in a post-pandemic world.

In June 2021, data showed telehealth use declining as much as 37% from peak-pandemic highs in some states, according to health tech company Trilliant Health.

Delineating between total telehealth visits and the discrete number of unique individuals who used telehealth, Trillant Health's research concluded that only about 13% of Americans used telehealth during the pandemic.

"There were trends that I don't think the industry was processing before a lot of these big investments and expansion strategies were put in place. It goes back to basic supply and demand. There was always more supply than there was demand," Sanjula Jain, Ph.D., senior vice president of market strategy and chief research officer at Trilliant Health, said in an interview. "What happens is the price goes down. So, we saw over the last year or so, a lot of the prices for telehealth services were starting to go down to the point that United had started offering for some of their population virtual care for free." 

"Telehealth effectively became a zero-cost service and that ultimately changes the business model," she said.

While Trilliant Health's data predicted the downward trajectory of telehealth volume, Jain said she was still surprised that Walmart shut down its virtual care services so quickly.

"Given their scale and given the markets in which they serve, if anybody were to crack the code or find a way to make it work in the broader continuum of their healthcare services, I would have placed that bet on Walmart. They have the scale, the markets, they have the technology and resources. That is the more surprising part," she said.

Telehealth got its start by offering consumers virtual appointments for primary care and urgent care needs. But as healthcare organizations become more consumer-centric, features like messaging, online booking and remote visits are now table stakes.

The virtual care industry is finding its footing and reaching a point of stability, noted Forrester Principal Analyst Arielle Trzcinski.

"Consumers want virtual care, but hybrid models are necessary to fully support their care needs," Trzcinski said in an emailed comment.

Many companies are bringing in new business models for virtual care to integrate more fully with existing care or to focus on unmet needs like chronic condition management.

Included Health works with employers and health plans and provides healthcare benefits and insurance navigation along with virtual primary care, behavioral health, specialty care and expert medical opinions. The company recently launched virtual-first specialty care clinics.

Companies like Wheel and SteadyMD provide the tech infrastructure to power telehealth platforms through white-labeled services, such as through Amazon Clinic.

Wheel continues to build out its health tech partnerships to integrate more virtual care capabilities into its platform. The company recently added three big healthcare players—Talkspace, Mark Cuban Cost Plus Drug Company and Health Gorilla—to its virtual care network.

"My takeaway is that this is about the players who drive that transformation, and the types of companies that can and will power the next generation of virtual care," Wheel co-founder and CEO Michelle Davey told Fierce Healthcare. "Here at Wheel, we think this shift demands a technology-first approach to meet the ever-expanding market and patient needs in a virtual-first environment. It's not just about being big—it's about the platform that drives the care delivery itself - and how it's purpose-built to scale to mass adoption and repeat utilization."

Over the last seven years, Wheel has delivered more than 4.5 million patient visits across the country, she noted.

"If anything, [the latest news] is a sign that we're for real when we talk about innovation in healthcare," Glass said. "I think it is encouraging to see that we're willing to shed a model that isn't up to the challenges of today. I actually take some comfort in the fact that we're saying telehealth 1.0 is not enough. We have got to shed this basic model that we started with here in the industry and advance to something more sophisticated and more worthy of the members' needs." 

She added, 'It just speaks to a stepwise change in both the technology and the service experience within healthcare. As hard as it is to see companies struggle, it is encouraging and brings optimism to me to see that we're advancing our standard of healthcare."

As retailers like Walmart shift to focus more on their core businesses, it will open up opportunities for telehealth companies and digital health startups to partner with them on digital health services, executives noted.

As the market continues to evolve, digital health companies need to develop a strategy based on current and future supply and demand, Jain noted.

"Whether you're doing virtual care for GLP-1s or you're doing virtual care for talk therapy,  find the right partner to really understand and measure it and track it in real-time, and then have a tough conversation internally to see, 'Is there enough demand here to support our business growth objectives?' Part of it is also managing expectations for your business and rate of growth," she said. "I would encourage every company to just take a hard look and take a step back, start with the basics and review your business plan accordingly."