Retail clinics operate thousands of high-traffic, brick‑and‑mortar sites designed to improve access to care and support the development of value‑based care models. With chronic disease accounting for nearly 90% of U.S. healthcare spending, retail health’s scale and accessibility are well suited to the frequent, low‑acuity interactions required for effective chronic care management. However, these services remain under-reimbursed in today’s fee-for-service environment, creating a structural barrier to the sustainability of retail health models.
Why Publicly-Traded Companies Struggle With Retail Health
CVS’s acquisition of Oak Street Health was designed to strengthen its value-based care platform by integrating primary care with its insurance arm (Aetna) and expanding into chronic care and behavioral health. However, recent changes to Centers for Medicare and Medicaid Services (CMS) risk adjustment and rising fixed costs have materially weakened the economics of Medicare-focused primary care. Oak Street’s patient base — primarily Medicare Advantage members — has experienced higher-than-expected utilization and acuity, increasing medical costs and compressing margins. The result has been a growing disconnect between reimbursement rates and actual expenses — highlighting the structural challenges publicly traded companies face in scaling health models.
That tension has led to visible retrenchment across the retail health landscape. Walmart shuttered all 51 health centers and exited virtual care, citing reimbursement challenges and unsustainable operating costs. Walgreens recorded multibillion‑dollar write‑downs and scaled back or exited dozens of VillageMD markets, while Amazon folded Amazon Clinic into One Medical and reorganized its health units following uneven performance. Together, these moves underscore a difficult reality: Without aligned incentives, low-margin retail care struggles to support the overhead required for chronic care at scale. Greater value lies in owning — or closely collaborating across — the full continuum of care, rather than operating in isolated segments. Healthcare systems, in particular, benefit from controlling the referral chain.
The Market for Chronic Disease Management Continues to Grow — But Financial Incentives Remain the Same
The global market for chronic disease management is growing rapidly, driven by the rising prevalence of diabetes, cardiovascular disease, chronic obstructive pulmonary disease (COPD), and other long-term conditions. Some sources estimate a compound annual growth rate (CAGR) of 11.7%,[2] with others as high as 16.3%.[3] Advancements in telemedicine, digital health tools, and mobile applications have improved monitoring and enabled more personalized care, but they have not materially reduced the underlying fixed costs of delivery. Clinical staffing, information technology (IT) infrastructure, and regulatory compliance remain significant cost drivers — particularly for retail entrants that lack meaningful downstream revenue to offset them.
Ultimately, providers are still better able to cover these fixed costs through in-person, on-site care. Financial incentives have yet to align with the technological capabilities now available, leaving retail health providers with limited visibility into how long losses may persist. As a result, despite strong consumer demand, chronic care remains financially tenuous when delivered as a standalone retail offering.
For health systems, the implication is clear: Chronic care programs must capture today’s “appropriate site of care” economics while simultaneously building the data, workflows, and clinical integration required for future value-based models. Capital planning should therefore prioritize hybrid designs — virtual and on-site care — that leverage existing inpatient and outpatient infrastructure and clinical staffing.
Site-Neutral Payments May Soon Reshape Financial Incentives
Although site-neutral payment reform has long been discussed, recent legislative momentum suggests meaningful change may finally be approaching. Congress is considering a range of proposals — from MedPAC’s broader alignment across care settings to frameworks like the Lowering Health Costs for Seniors initiative and the Site-based Invoicing and Transparency Enhancement (SITE) Act — which would extend site-neutral payment cuts beyond evaluation and management (E&M) services and potentially include on-campus departments.
Health systems should prepare for continued rate compression and extended policy timelines by proactively planning for multiple scenarios. Site neutrality limits the financial arbitrage of shifting services into hospital outpatient departments without clinical justification, and Medicare Advantage and commercial payers are likely to follow Medicare’s lead over time. The result will be increased pressure on outpatient margins and an accelerating need for lower-cost care footprints, digital throughput, and care pathways that compete on convenience, quality, and cost — not simply on rate differentials.
What Do We Recommend for Our Clients?
While the long‑term goal remains aligning financial sustainability with a consumer‑friendly model of chronic care — combining convenient access, home‑based telemedicine, and remote monitoring — our near‑term focus is helping clients capitalize on their existing strengths. For most health systems, that advantage lies in ownership of hospitals and hospital outpatient departments within today’s reimbursement landscape.
In the current environment, we see several practical ways health systems can “make hay while the sun shines”:
a. Plant primary care flags in selected markets as a loss leader to capture commercially insured patient volumes.
Selectively deploy primary care in markets where downstream specialty and ambulatory volumes can offset front-door losses. Consumer demand for access remains strong; pairing digital scheduling, same-/next-day access and embedded diagnostics can increase capture of commercially insured patients.
- Pros: Strengthens referral streams; improves brand presence; supports risk-contract readiness over time.
- Cons: Elevated operating losses if site-neutral expands faster than expected; requires tight clinical operations and access management.
b. Partner with a third-party primary care provider to provide low-margin primary care services and capture the referral stream for higher acuity services.
Where feasible, partner with third-party urgent/primary care operators to deliver low-acuity access while retaining referrals to hospital-based diagnostics, procedural services, and inpatient care. Examples include Novant Health and GoHealth Urgent Care in North Carolina and new Rush Health and MinuteClinic collaborations to expand convenient access and coordinated referrals.
- Pros: Reduces fixed-cost exposure; leverages partner retail capabilities; preserves downstream revenue.
- Cons: Less control over patient experience and data unless electronic health records (EHRs) and workflows are deeply integrated.
c. Prioritize hospital outpatient department (HOPD) diagnostic and treatment utilization while focusing on opportunities to optimize patient convenience.
Continue to deliver appropriate low-acuity diagnostics and treatments on the acute care campus and fully utilize existing assets while reengineering throughput for consumer expectations (wayfinding, digital queues, extended hours). This captures current Outpatient Prospective Payment System (OPPS) economics, especially for services not yet subject to site-neutral cuts, while improving experience. Model exposure to CMS’s proposed changes and build contingency pathways to freestanding / ambulatory surgery center (ASC) sites as policy expands.
- Pros: Maximizes today’s reimbursement; keeps complex care and ancillary services close to specialists.
- Cons: Future site-neutral expansion could erode margins; requires rapid redesign of access/flow to stay competitive.
d. In all environments, once existing capacity is maximized, look for opportunities in lower-cost-per-square-foot environments.
When pushing primary and ambulatory volumes off campus, prioritize flexible real estate that lowers fixed costs and supports modular scaling. Mobile units and modular clinics can bridge demand spikes, fill access deserts, and minimize stranded capital if policy shifts.
- Pros: Lower build/operating costs; agile capacity; better match to site‑neutral economics.
- Cons: Credentialing, community awareness, and care-team logistics must be planned meticulously.
Retail health’s recent retrenchment has not diminished consumer demand for convenience. Instead, it creates an opportunity for health systems that can pair access with clinical depth. By making disciplined near-term capital decisions — prioritizing OPPS-supported services, flexible sites, and targeted partnerships — while preparing for site-neutral realities, systems can deliver the experience patients want without compromising financial sustainability.
Execution Checklist for 2026 Capital and Operating Plans
Health systems should take the following actions as they finalize 2026 capital and operating plans:
- Model revenue exposure to CMS’s 2026 OPPS drug‑administration rule across off‑campus HOPDs; build phased migration plan and patient communications.
- Run three to five policy scenarios (narrow vs. broad site‑neutral) with Medicare Advantage spillovers; include contracting strategies for commercial payers likely to mirror Medicare.
- Strengthen joint venture (JV) governance with urgent and primary care partners (data interoperability, referral Service Level Agreements (SLAs), care pathways, quality guardrails). Think creatively on win-win making it work for both parties in partnership models.
- Invest in digital front doors (access, scheduling, triage, virtual urgent care), linking chronic care to diagnostics and treatment slots that preserve margin today.
- Prepare for Medicare Advantage risk adjustment volatility (Hierarchical Condition Category (HCC) phase‑in, Risk Adjustment Data Validation (RADV) audits) with documentation rigor and clinical workflows that avoid over-/under-coding while protecting care quality.
References
2. Chronic Disease Management Market Size, Statistics Report 2034
3. Chronic Disease Management Market Size, Trends, Growth Report 2032
© Copyright 2026. The views expressed herein are those of the author(s) and not necessarily the views of Ankura Consulting Group, LLC., its management, its subsidiaries, its affiliates, or its other professionals. Ankura is not a law firm and cannot provide legal advice.
