Wal-Mart General Hospital

Wal-Mart Stores, Inc. (WMT-NYSE), has announced that it intends to contract with local hospitals to open as many as 400 in-store health clinics over the next two to three years.  For future growth it says it could open up to 2,000 clinics in Wal-Mart stores over the next five to seven years.

The long and short of it is that this is really just the first larger expansion of a test bed the company has been running.  The health clinics will lease space in Wal-Mart stores and will be managed by local or regional hospitals and/or other organizations that are independent of Wal-Mart. The pilot project started in September 2005, when Wal-Mart started leasing space to medical clinics inside Wal-Mart stores that is currently 76 clinics operating inside Wal-Marts in 12 states. 

Wal-Mart President and CEO Lee Scott is giving a speech at the World Health Care Congress today in Washington, D.C.  This is after Wal-Mart’s $4 generic drug prescription program.  Most of you who know our writing have seen us say very little positive about Wal-Mart and Lee Scott, but this may actually make sense longer-term for the company.  If nothing else, it will at least benefit Joe Q. Public.  The company does say this is also about economics, but if anyone has ever been to a doctor or hospital they have to know that none of it is free.

It does raise some questions, but if this will keep people from going to the emergency room every time they or their kids get a cold then this is a net good.  There are risks, after all this means they have more sick people wandering around spreading cooties. 

You also have to look at the pace of the expansion before you can make any assumptions on the financial impacts to Wal-Mart.  The truth is that this will add very little to the bottom line and there is no way to know what the splits and the cost structure will be.  This is also a slower and much more manageable expansion plan, so it seems like the company isn’t digging a hole it can’t get out of. That translates into a lack of sizable contribution to the bottom line any time in the near future. 

Despite most criticism, this at least sounds like a decent continuation of an initiative that rewards the public and the company longer-term.

Jon C. Ogg
April 24, 2007

Jon Ogg can be reached at [email protected]; he does not own securities in the companies he covers.