AAMC Reporter: September 2008

Open for Business: Health Systems Explore Retail Clinics

The retail clinic's coronation as the next big thing in American health care delivery may have been a bit premature. After a slight slowdown in the growth of retail clinics, companies, investors, and practitioners are examining what might come next. And, as it turns out, academic medical centers may be poised to play a big role.

"At one time, people were forecasting that up to 5,000 retail clinics or more would open in the next few years," said Tom Charland, CEO of Merchant Medicine, a retail clinic research firm. "I think it's difficult to still predict that."

Retail clinics were enjoying meteoric growth until recently, when firms including CornerCare, Checkups USA, and Medical Marts went out of business. At the same time, MinuteClinic, the juggernaut of the retail clinic world with 512 outlets (its prime competitor, Take Care Health Systems, operates 183 clinics), announced it was scaling back operations.

Also known as convenient care clinics, retail clinics are usually located inside a larger "host" retailer such as a supermarket or drugstore, are usually staffed by nurse practitioners and physician assistants, and offer a limited menu of inexpensive services for which patients normally pay out of pocket.

"In a normal day, we see sinus pain, bronchitis, poison ivy, swimmer's ear—a lot of minor to moderate family issues," said Anne Pohnert, N.P., a nurse practitioner who runs several MinuteClinic retail clinic locations in northern Virginia. "People view it as a nice, familiar place to come to. It's right in the community, and it's another avenue for people to use to access health care." Charland said the market dip happened in part because many of the defunct companies were founded by venture capitalists with little to no health care experience.

"The pattern is that all of those were backed by private sources whose primary interest was making money," Charland said. "Health care is a very personal thing. It takes word of mouth to get going. [Retail clinics] are also generally not a very profitable business. To turn a profit, you would need to be treating 30 to 35 patients a day, and that is very difficult."

Despite the recent slowdown, however, retail clinics have still enjoyed a remarkable rise in recent years. As of mid-August, there were 1,005 retail clinics around the United States, compared with 521 a year before, according to Merchant Medicine. A study from the University of Michigan Health System found that 30 percent of parents reported having a retail clinic nearby, and one out of every four parents who took children to a retail clinic would have visited the emergency room otherwise. Retail clinics also scored a major victory this summer when, in a potentially precedent-setting move, several Massachusetts insurance companies announced they would cover retail clinic visits.

Of course, no one expected 400 percent growth forever, and the Convenient Care Association industry group still estimates that there could be 1,500 retail clinics by year's end. Nevertheless, retail clinic operators face choices on how to get their clinics into the black. Charland predicted that the future retail clinic model may involve a more integrated approach, and identified two major players in the industry moving forward: retail pharmacy chains (CVS owns MinuteClinic, Walgreen's owns Take Care) and hospital systems.

"The clinics need big backing, both philosophically and financially, to help weather the ups and downs as this phenomenon gets out of the gate," said Scott Shipman, M.D., M.B.A., a member of the Dartmouth Institute for Health Policy and Clinical Practice and a professor at Dartmouth Medical School. "There is value both ways. The clinics benefit from having a degree of confidence that comes from a recognizable brand. And clinics provide induced demand to some degree. Many people who come into a store see the clinic and go in, when they probably would not have sought care otherwise."

According to Shipman, who has an uncompensated research relationship with Take Care, health systems can use retail clinics as an entry point to their networks. Perhaps that is one reason why retail clinics backed by hospital systems are the fastest-growing segment of the retail clinic market, according to Merchant Medicine.

"A typical diabetic visits the endocrinologist twice a year, but visits a [drugstore] 20 times a year," said David Nash, M.D., M.B.A., a professor of medicine and chairman of the health policy department at Jefferson Medical College of Thomas Jefferson University. "It's not hard to see the opportunity there."

Academic health centers play an increasingly prominent role in this trend. Wisconsin-based Aurora Health Care, an integrated academic health system, operates 19 clinics, the most of the 22 health systems operating retail clinics, according to Merchant Medicine. In 2007, Baylor Health Care System in Dallas, Texas announced a formal collaboration agreement with retail clinic company MedBasics. Geisinger Health Care has entered the fray as well, with five retail clinics in Pennsylvania. Geisinger and Lehigh Valley Hospital and Health Network have just agreed to jointly operate two clinics in Allentown and Shanksville, Pa.

"It has created a strong face for our consumer health areas, it's a tremendous brand-building opportunity, and it's good for increasing your market share," said Dean Q. Lin, CEO of Geisinger-operated CareWorks Convenient Healthcare. "There are clearly gaps in our health care system. There isn't enough infrastructure to meet basic health care needs. We're open all the time, and people don't have to wait. For minor things, people don't want to bother their primary care physician or go to the ER. But that doesn't mean it's not still a health need. Retail clinics can help close this gap."

Lin said Geisinger is looking to tie CareWorks to the larger health care network by conducting more screenings and other preventive services, with the goal of using the screening results as a basis for referring patients into the Geisinger system. If done right, Lin said retail clinics can be profitable.

"In our research, we've found that clinics need to complement, not compete with, your network," he said. "The retail clinics are a potentially strong revenue stream when you consider both direct and indirect revenues. The system value in the near term is attracting new patients and offering an innovative health care service. I do believe, in the longer term, that these clinics will have a bigger impact as the service menu expands."

Uncertainty persists, however, over the retail clinic's place in the health care system. Many physician groups worry that retail clinics siphon off less-complicated patient complaints, leaving primary care physicians with a more complex case mix. Furthermore, some say the retail clinic may clash with the patient-centered medical home, another relatively new care model in which a single physician coordinates a patient's treatment.

"You go to a retail clinic, you get some treatment, and then you leave," said Jim King, M.D., president of the American Academy of Family Physicians. "You could be missing preventive care, health monitoring, and the management of chronic diseases. Retail health clinics need to be working collaboratively with a physician." It is uncertain whether or how clinics, physicians, and health systems will ultimately come together, but according to some analysts, clinics could potentially relieve some of the burden on doctors and hospitals. "Academic medical centers could work out deals with clinics, with no profit motive, to help redirect certain patients away from clogged emergency departments," said Nash, whose department has received research grants from Take Care.

Retail clinics could also help take some pressure off primary care physicians, who are at the center of a predicted national physician shortage.

"Given the primary care shortage, I think [retail clinics] are a welcome contribution, with a caveat that it is important to link these clinics to an ongoing system of health care delivery," said Edward S. Salsberg, M.P.A., director of the AAMC Center for Workforce Studies. "It certainly has a lot of potential."

Pohnert said that retail clinic practitioners are taking their own steps to ward off professional shortages. "If an N.P. is only trained in pediatrics, we try to help them get adult nursing training, and vice versa," she said. "We're also trying to partner with nursing schools to arrange internships, so students can come and work in a clinic and get that exposure."

—By Scott Harris