Stanley Feld M.D.,FACP,MACE
In 2006 I stated "the creations of free standing retail clinics (convenient care clinics) are complicated mistakes.” I thought they would distort the healthcare system even further. I believed it would also be difficult to establish positive cash flow quickly or ever. When investors realize these clinics will have a difficult time making a profit they would be closed.
I said “I think Wal-Mart and CVS are indeed putting their reputation and good will on the line and are going to get a nose bleed.”
“The boom in walk-in health clinics located inside pharmacies, supermarkets and big-box retailers is showing signs of slowing.”
Hailed as an inexpensive option for treating minor health ailments like sore throats and rashes, the retail clinics have grown in number to 963 as of May 1 from just 125 three years ago. The clinics typically feature nurse practitioners who can prescribe basic drugs. The price for a visit ranges from $50 to $75.
“ But in recent months, retail health- clinic operators based in New York, Nevada, Indiana and Alabama have closed their doors, shuttering 69 clinics in 15 states, including ones operating inside outlets of Shopko Stores, Meijer Inc., in New York, Nevada, Bi-Lo LLC, Wal-Mart Stores Inc, and the Medicne Shoppe unit of Cardinal Health Inc."
“Now, the biggest retail-clinic operator, CVS Caremark Corp., says it is scaling back expansion plans for its MinuteClinic brand.”
The math is easy. It is very difficult to generate a profit with uncomplicated cognitive services. The In Store Clinics investors did not realize the resistance from primary care physicians and the communities they service. If these clinics have any chance for success they would have to be a direct extension of the community physicians’ care.
“Tom Charland, the owner of industry consultant Merchant Medicine LLC says the venture capitalists and private-equity firms that backed many of the retail clinic operators failed to appreciate how complicated and expensive the clinics are to operate. Research shows that patients are enthusiastic about the clinics' convenience and quality of care, but acceptance has been slow.”
I do not think the consultants understand the problem. There is a difference between medical care and healthcare. When someone is sick he wants to see a doctor and not a healthcare provider. Another problem is these clinics can not be profitable if they do not provide ancillary services. Ancillary services are not within the scope of practice for nurse practitioners in most states. A third problem is that if these clinics were seeing enough patients to create positive cash flow they would have the same long waiting times and become as inconvenient as community emergency rooms.
“Some operators are finding that the clinics are complex to manage. Earlier this year, CheckUps, a clinic operator based in New York, abruptly closed 23 clinics that it operated inside Wal-Marts in Florida, Mississippi, Alabama and Louisiana. It was stretched thin by operations in multiple states, says company spokesman William Armstrong.”
"You have to have a critical mass of stores seeing a high number of patients to get somewhere," he says. He adds that new clinics need to spend a lot of money on marketing to build public awareness and that the clinics become expensive quickly. "We ran out of operating funds," he says.
The big box stores and pharmacies opening In Store clinics are on the verge of another complicated mistake. Rather than affiliate with the convenient care companies, who have not done well, they are reaching out to hospital systems well known in the community.
"Tina Galasso, an analyst who follows the retail clinic industry for Verispan LLC, says the cost of setting up an in-store clinic runs about $500,000. That is one reason why much of the future growth in walk-in health centers is expected to come from big companies with deep pockets and from hospital systems that are already well-known within a community and don't have to spend so much on marketing."
Hospital systems tried to establish “DOC In the Boxes” in the mid eighties as a strategy to capture patients in the surrounding area. They failed in the mid eighties because they were competing with local physicians who were hospital system staff members. The establishment of these clinics was a strategic move to “increase the hospitals’ product line.” The practice of medicine is more than a product line and a commodity. No one seems to understand this.
In a strategy that combines both elements, Wal-Mart plans to partner with hospital systems to open as many as 400 co-branded store clinics by the end of 2010, up from about 50 sites in operation now. That approach is a departure from an earlier strategy under which Wal-Mart leased space to operators like CheckUps that weren't associated with hospital systems.
It amazes me to see local hospital systems competing for the Wal-Mart contract. Where is their corporate memory? Where is the building of trust between physicians and hospital administrators to create stronger institutions? If physicians do not know how to provide convenient care, the hospital system teach them how to provide it. Hospitals are always saying they want to create partnerships and trusted relationships with physicians in order to provide better care for the patients in the community. Do it and don’t create more dysfunction in the healthcare system.
The opinions expressed in the blog “Repairing The Healthcare System” are, mine and mine alone.