As Walmart shutters clinics, startup Fabric buys its MeMD telehealth business

As Walmart shutters its primary care clinics, the retail giant inked a deal to sell its MeMD telehealth business to healthcare technology startup Fabric.

Fabric, formerly known as Florence, officially launched out of stealth in early 2023 and has rapidly built out its tech that automates clinical and administrative work in healthcare.

The deal will significantly expand Fabric's reach in the employer market as MeMD provides virtual care services to 30,000 employers and 5 million employees, according to the companies. MeMD's customer base is comprised of large employers, brokers, third-party administrators and distributors.

Fabric provides a telemedicine platform for health systems, employers and payers and has built a suite of products, from patient intake to self-scheduling to provider documentation tools, to help streamline workflows for in-person and virtual patient visits using conversational AI. The technology improves both the provider and patient experience, according to executives, while also improving operational efficiency.

"The combination of our teams, technology, and clinicians strategically positions Fabric to quickly expand across payers, employers, and provider organizations," Aniq Rahman, founder and CEO of Fabric, said.

MeMD, founded in 2010 and acquired by Walmart in 2021, provides on-demand medical and behavioral health services to millions of members nationwide, according to the companies in a press release. The retailer rebranded the business to Walmart Health Virtual Care after the acquisition three years ago.

"We're doubling down on virtual care, which benefits all of our customers, including payers, employers, health systems and provider groups," Rahman said in an interview. "It's just adding more technology, more product pieces to our team. We've historically been serving the employer segment. Many of our health system customers are the largest employers in their town or in their state, so they've been leveraging our technology not just for their patient base, but also for their own employees."

The acquisition also will expand Fabric's provider network, add virtual behavioral health to the company's services and build on Fabric's employer and payer solutions, Rahman noted.

"In addition to having the software side of our business, we also have a medical group. We're bringing over the MeMD clinicians, so we're going to be adding additional clinical capacity and we're also adding in behavioral health as a new service line through this acquisition."

He added, "We're bringing Fabric's technology platform to 30,000 employers and 5 million members on the MeMD customer base. We think we're doing something unique and world-class in terms of tech-enabling the patient experience using asynchronous telemedicine to create more efficiency while also improving provider workflow. This made a lot of strategic sense for us. It also greatly expands the total addressable market of what Fabric has been going after historically."

Fabric will continue to provide its telehealth service to Sam's Club members.

Financial details of the acquisition were not disclosed. But, Rahman quipped the transaction was the "longest receipt" he's ever gotten from Walmart.

Under Walmart's ownership, MeMD experienced significant growth and expansion, executives said. The acquisition builds upon MeMD's previous technology partnership with Fabric to streamline patient intake and documentation.

Fabric's care enablement system uses AI-powered clinical intelligence and automation to triage and route patients to the most appropriate point of care based on time of day, availability, distance and disposition while streamlining treatment across virtual and in-person workflows.

"We are able to provide members the ability to route back to the health system in a thoughtful way. This benefits both sides of our customer base, both the demand side and supply side, being able to navigate patients to the most appropriate type of care and then direct care to systems we already have connectivity to as well. I think there's some really exciting opportunities that we can explore downstream here. It's honestly been on our road map for a long time; being able to bring MeMD into the company is greatly accelerating our ability to do that," Rahman said.

As of March, the company was working with 70 health systems and payers, and its customers include Cleveland Clinic, OSF HealthCare, Highmark, Wellnow, MUSC Health and Intermountain Health.

In February, Fabric pocketed $60 million in a series A round backed by General Catalyst. Thrive Capital, GV (Google Ventures), Salesforce Ventures, Vast Ventures, Box Group and Atento Capital also backed the round. 

Fabric is growing rapidly, reporting triple-digit annual sales growth.

The MeMD deal marks Fabric's third acquisition in the past 18 months. In May 2023, it picked up Zipnosis from Bright Health in an all-cash deal to expand its asynchronous virtual care capabilities, and, in January, the company bought conversational AI assistant Gyant in another all-cash deal to expand its "digital front door" for patients.

With those two acquisitions and through internal product development, the company has built out its products to automate workflows from patients' symptom onset to post-visit follow-up, according to Rahman.

In the past two years, Fabric's team has grown from eight to more than 200 employees.

The MeMD acquisition will enable Fabric to add new features to its virtual care platform and build on its engineering and product resources, Rahman said. "We're also leveraging the technologies that we've acquired over the years, including the virtual care technology that we've heard from Zipnosis, which we bought from a payer. We have interesting proof points in terms of how this technology has been leveraged in the payer and employer space," he said.

The company says payers that have deployed its technology recognized savings of $17 per member per month within the first 120 days after a member began using the virtual care platform, 

"We can bring that efficiency to the MeMD customer base and also improve upon it with the other technology that we've brought in," he added.

Two months ago, Walmart announced it was closing all 51 of its Walmart Health centers along with its virtual care services, citing the difficulties of creating a profitable business amid a "challenging reimbursement environment and escalating operating costs."

The move was a dramatic turnaround from the retailer’s previously announced plans to expand its health clinics. 

Around the same time, UnitedHealth, which owns Optum, also confirmed plans to shut down Optum Virtual Care. Optum launched the telehealth service just in 2021.

Major telehealth players like Teladoc and Amwell, which saw a surge in demand for virtual care during the COVID-19 pandemic, are facing pressure in the market and have yet to reach profitability. The integration of telehealth into healthcare platforms is now commonplace.

Rahman said the virtual care market is going through major shifts, and he is bullish that this evolution will be a tailwind for Fabric.

"This is a modality that is not going anywhere: It's just evolving. I do think that the commoditized video visit space, I think there's an opportunity to kind of rebirth it a little bit and create something that brings together additional service lines and components," he said. "We can layer on our navigation capabilities and layer on our asynchronous telemedicine to allow telehealth to be truly omnichannel where patients can get care whether through phone, video, voice, async or referrals for an in-person site of care, being able to bring that all together as one holistic experience. It's virtually impossible to do that by cobbling together a bunch of points solutions. It's positioning Fabric as a unique offering for both the provider side and also the employer and health plan side."

He added, "Everybody in healthcare, whether it's a payer, provider or retailer, is looking for ways to engage patients as consumers and create that longer-term relationship with them. We want to create a world-class patient experience that allows you to have that direct consumer interaction, whether it's coming through a health system, a plan or through an employer."

Fabric will continue to be "opportunistic" about digital health M&A, Rahman said. "First and foremost, we want to make sure that we're building in a thoughtful way. So far, we've been able to really bring together teams and products and integrate them into the Fabric technology stack. It will continue to be a part of our strategy," he noted.