Retail Clinics – A Booming Industry
Retail clinics, which operate outside the conventional bounds of primary healthcare provisions, have changed the way the healthcare industry is viewed in the US
The percentage of American families using retail clinics two years ago nearly tripled from 1.2% in 2007 to 2.9% in 2012. In 2013, retail clinics received roughly six million visits per year. The numbers are only expected to increase going forward.
Let’s take a look at what retail clinics are, as well as the key factors behind the high growth in the industry.
So, What Is A Retail Clinic?
Retail clinics – also known as convenient care clinics – are walk-in medical facilities available within large pharmacies and retail chains. These clinics provide health care services primarily on a walk-in, pay-as-you-go basis. Retail clinics are typically open seven days a week; their convenience and accessibility attest to their appeal.
The number of retail clinic locations in the US increased at a phenomenal rate between 2001 and 2007; year-over-year growth of 442% was achieved in 2005. The same year, Wal-Mart Stores, Inc. (WMT) touted plans to open retail clinics in 2,500 of its stores. However, retail clinic managers found that the business was highly seasonal and generated low profits, especially when patients began to reduce spending because of the 08-09 recession. Wal-Mart closed shop instead of bringing its retail clinic count up to the planned 2,500. According to Merchant Medicine, a research company with a focus on retail clinics, Wal-Mart’s retail clinic count fell from 142 in 2011 to 125 in December of 2012.
The total number of retail clinics opened in 2009 grew only 1% YoY. The rate of growth improved to 3% in 2010 and then to 11% in 2011, only to fall back to 5% in 2012, with most of the growth concentrated in CVS Caremark Corporation (CVS)-owned MinuteClinic and Walgreen Company (WAG)-owned Take Care Clinics.
CVS disclosed in February last year that its retail clinics business has grown at a compound annual growth rate of 39% in the last six years. The primary difference between the companies’ business models was that Wal-Mart was leasing out space to third parties for clinical service provisions. In contrast, CVS was purchasing licenses to operate clinics on its own. CVS said that the Minute Clinic division of its business first broke even in 2011, about 5 years after the company had started this business. In 2012, it said that it has plans to double its clinic count to 1000 units by 2016.
Walgreens is also another big name in the retail clinic business. The company started out with 40 retail clinic locations -- called “Take Care Clinics” – in the beginning of 2007. The retail count had grown to 355 by 2009, according to Merchant Medicine, only to experience stunted growth as a consequence of the recession. As of 2013, the company had 364 clinics.
Who Uses Retail Clinics?
Ha T. Tu, a a senior health researcher at the Center for Studying Health System Change, conducted research in which it was surmised that about 37% of families who were at least 6 times over the poverty line lived near a retail clinic in 2010. In contrast, 25% of the population, with incomes that were twice that of the poverty level, was close to a retail clinic. The relative ease with which general checkups can be had at retail clinics (along with prescription refills and vaccinations) has made it possible for retail clinics to generate traffic from high-income families.
The fact that retail clinics will now be opening up at various other locations means that there is a strong likelihood that, over time, retail clinics will be closer to low-income groups as well. Retail clinics accept private insurance, Medicare, and Medicaid, which means that their proximity to consumers will only drive traffic even higher.
Dr. Ateev Mehrotra, adjunct policy analyst at the RAND Corporation and an associate professor of medicine at the department of healthcare policy at Harvard Medical School, is of the opinion that retail clinics are particularly attractive because of pricing: “It is not the actual price, but the transparency of the cost.” Retail clinics generally quote prices for various services up front, which eliminates for consumers the shock factor associated with seeing bills that are much higher than anticipated.
The physician-to-patient ratio is expected to worsen in the face of the Affordable Care Act, which according to Deloitte’s estimates will bring in an additional 32 million US residents under the health insurance coverage. The Association of American Colleges’ Center for Workforce Studies estimates that physician shortage in the US will increase to 45,000 by 2020, as more and more doctors choose to specialize in fields that are more lucrative in the face of declining budgets allocated for hospital residencies and the aging baby boomer generation, which now needs more medical care.
Changes in healthcare laws, which now allow individuals to stay on their parents’ plan until they reach 26 years of age, are also expected to make seeing a primary care physician even harder, thereby leading to more waiting times and hassle. The void created will be partly filled by the new retail clinic additions as they step up to meet patients’ needs for diagnoses and treatment of common illnesses, vaccinations, and prescription renewals. Accenture Plc (ACN), which is a multinational management consulting agency, anticipates an addition of 2,243 clinics to the overall retail clinic count in this year. The number is expected to rise to total additions of 2,868 clinics in 2015. The same research agency also estimates retail clinics to fulfill the needs of 10.8 million patients a year.