Can You Really Compete With Retail Clinics -- and Succeed?

Leigh Page

Disclosures

March 18, 2015

In This Article

Are Patients Enthusiastic About Retail Clinics?

So far, patient use of retail clinics is hardly predominant. A study[10] by Dr Mehrotra found that retail clinics logged almost 6 million visits in 2013, which was only about 1% of physicians' total office visits for that year. Even within the limited number of low-acuity conditions retail clinics treat, they accounted for less than 7% of patient volume in 2011, according to another study.[11]

The clinics are popular with parents of young children and busy professionals who don't have the time to wait for a doctor's appointment. This may seem like a niche audience, but larger demographic forces are on the horizon, and they help explain why so many investors are throwing their money at retail clinics.

A new generation of Americans in their 20s seems to be moving from doctors' offices to retail clinics. "Younger adults are the dominant users of retail clinics," Dr Mehrotra said. According to a 2013 survey,[12] one third of people in their 20s don't have a doctor, and this age group is twice as likely as people older than 50 years to use retail clinics or urgent care centers.

Younger patients are also less satisfied with traditional practices. A 2012 Harris poll[13] found that whereas 52% of patients aged 48-66 years were "very satisfied" with their most recent visit to a healthcare provider, only 35% of patients aged 18-35 years felt that way.

Retail clinics were supposed to be a stopgap measure for when physician's offices were closed, but now they seem to be creating a steady clientele. A study[14] by Walgreens found that 50% of clinic patients made a return visit, up from 15% in 2007. "After their first visit to a retail clinic, many patients go back," Dr Mehrotra said.

Just like McDonald's or Starbucks, the clinics' brand names that command loyalty and services are predictable, owing to tight adherence to clinical protocols. CVS has its MinuteClinic; Walgreens its TakeCare clinic, now redubbed Healthcare Clinic; and the Kroger grocery chain has its Little Clinic. Dr Mehrotra wrote in one of his studies, "Just as a person walks into a Starbucks in Seattle or Boston and expects similar—if not identical—lattes, a patient can walk into TakeCare Clinics in Seattle and Boston and expect similar if not identical care."

Should Doctors Differentiate Themselves From Retail Clinics?

Proponents of retail clinics argue that primary care physicians (PCPs) should differentiate themselves from retail clinics. They say doctors could easily afford to cede low-acuity patients to the clinics, because physicians are much too busy treating other patients. Academics writing[15] in Social Science & Medicine made this case, predicting that by 2025, virtually all low-acuity cases would shift from PCPs to retail clinics.

Dr Mehrotra thinks this argument has some merit. "I don't know of PCPs twiddling their thumbs in the office, waiting for visits," he said, adding that the cases that go to retail clinics are "a narrow subset of what physicians do."

However, PCPs might not want to work only on complex cases all day long. They might prefer to keep a mix of patients. Also, low-acuity cases can prompt more significant care, Dr Lee said. "Sore throat and bladder infections are not interesting in themselves," he said. "But a bladder infection may mean a young woman is sexually active, and that may be brought up."

Also, Dr Lee and many other physicians are concerned that not being able to see patients for simple conditions could lead to fragmented care, at a time when they're expected to closely follow patients in such arrangements as accountable care organizations (ACOs) and patient-centered medical homes.

Another reason to hold on to low-acuity cases is that they make money. Although they pay less per case, physicians can see more of them than higher-paying cases. Sreedhar Samudrala, MD, is a family physician in the Nashville area, which has one of the highest concentrations of retail clinics in the country. "The reason all these clinics are sprouting up," he said, "is that coughs and colds are the most profitable part of family medicine."

Dr Samudrala said physicians need to take a page from the clinics' playbook and make it easy for patients to see them. He has branded his practice "America's Family Doctors" and accepts walk-ins 7 days a week at three sites. "There are only so many patients to go around," he said. "That's why we do the quick appointments."

Although practices have yet to lose their low-acuity cases, their ongoing loss of influenza vaccinations to retail operations might provide a glimpse into the future. As recently as 2009, Walgreens stores provided virtually no flu shots, and patients had to go to physicians' offices to get them. But by 2012, Walgreens pharmacists were providing 5.5 million flu shots a year.

Will Retail Clinics Stay Around?

If physicians make major changes to deal with retail clinics, such as ceding low-acuity patients, can they be sure the clinics will still be there? In many cases, retail clinics don't make a profit on healthcare operations, which puts into question whether they can survive in the long haul. However, the fact that they bring in patients to buy other items and fill prescriptions works in their favor.

New retail clinics were constantly opening 2005 and 2006, buoyed by enthusiastic investors. But in 2009, owing to the recession, only a handful of new clinics opened and 5% of them closed. Even though volume remained strong, questions about the business model arose. It was noted that many store-based clinics actually lose money on operations, only making for up for those losses when patients' in-store purchases are included.

Even the president of the largest and fastest-growing chain—Andrew Sussman, MD, of CVS Health's MinuteClinic division—hasn't been totally clear about profitability. In a 2011 interview[16] Dr Sussman reported that the clinics were in the black, with some stipulations. They had "reached break-even on an all-in basis, with all costs and benefits to the company accounted for," he said. And in 2013, he told Forbes[5] that MinuteClinic was still "in investment mode."

As the recession subsided, however, CVS resumed its breakneck-speed growth, and doubts about the viability of retail clinics have receded. The company announced it would open 150 clinics during 2014. By November, it had 950 clinics, and Dr Sussman declared a goal of 1500 clinics by 2017.

Walgreens' operation also has been growing, with a total of more than 400 clinics in its stores in 2014, and Kroger runs 146 clinics. Wal-Mart is refiguring its business model. A few years ago, the retail giant was leasing space to 260 retail clinics operated by outsiders. But it has closed most of them and has started opening clinics that it runs directly, in the manner of CVS and Walgreens.

The next wave of retail clinic proprietors is hospital systems, and they're also losing money. A 2013 study[17] found that 83 hospital systems owned a total of 262 retail clinics, or 19% of all clinics. But in looking at 19 of those systems, the study found that only four were breaking even on their retail clinics.

Hospital systems don't seem bothered by the red ink. They hope to make up for it by attracting patients without doctors into the system. Parkview Health, an eight-hospital system in Fort Wayne, Indiana, operates nine retail clinics. "They are not seen as a money-maker," said Jim Hauguel, senior vice president and service line leader at Parkview. "We are looking at this as a way to improve access, not to find a new revenue source."

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