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Growth of Retail Health Clinics May 2014

Growth of Retail Health Clinics Retail clinics are a new healthcare delivery trend, quickly gaining momentum across the US, offering consumers lower-cost, non-urgent healthcare services in convenient settings. They are essentially walkin health clinics commonly located inside pharmacies, supermarkets or “big-box” retailers. These clinics offer extended hours of service on evenings and weekends, employing non-physician clinicians and charging relatively low. More than 90% of retail clinic visits are for simple acute conditions and preventive care such as upper respiratory infection, sinusitis (sinus inflammation), bronchitis, sore throat, immunizations, inner ear infections, swimmer's ear, conjunctivitis, urinary tract infections (UTIs), and screen blood tests.

Overview of Retail Clinics1 In 2012, the US had around 1,400 retail clinics (see the adjacent chart), an increase of over 50% since 2007. According to Convenient Care Association, the number of US retail clinics is projected to double in the next three to four years due to the increasing demand of newly-insured patients under healthcare reform. Retail health clinics are expected to increase at a CAGR of 16.1% from 2010 through 2016. MinuteClinic and Take Care are the two major players in the US retail clinics space with a combined market share of more than 75% between them, followed by Wal-Mart and The Little Clinic. CVS’s MinuteClinic added 350 clinics since 2011 to reach 800, which it is planning to take to 1,500 by 2017, with more than 6 million annual visits. Walgreens introduced Healthcare Clinic at select stores as the new branding strategy for nearly 400 in-store retail clinics, replacing the former Take Care Clinic name that has stood since the brand’s inception in 2004.

What Is Driving This Strong Growth in Retail Clinics? More than ever before, patients have started choosing retail clinics for care instead of traditional hospital and physician practice services based on cost and convenience. Several industry trends driving the increase in retail clinics include the following:


Convenient Care Association

Growth of Retail Health Clinics

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Shortage of Primary Care Physicians (PCP) The doctor shortage, which according to industry experts will create a deficit of 45,000 primary care providers by 2020, seems to be a strong driver of retail clinics. In geographies where there are critical shortages of primary care physicians, some insurance companies are paying retail clinics to act as a medical home. In the absence of a primary care physician, the insurers are banking on nurse practitioners in these clinics who they feel are fully able to act as patients’ primary care providers.

Affordable Care Act (ACA) Retail clinics are expected to be a key treatment location for millions of uninsured Americans once they obtain health coverage from January 1, 2014, either through a private health plan operating on an exchange or through the expanded Medicaid health insurance programs for the poor. As the healthcare system prepares to enroll 30 million Americans who will have health coverage as a result of the ACA, a surging market of retail clinics is poised to take on a wider role to relieve the bottleneck. High-deductible health plans, which are expected to become more common due to ACA, will also mean growth for retail clinics.

The Cost Advantage2 Research shows that the average cost of treatments is 30% to 40% less at a retail clinic than at a physician’s office. Retail clinics can provide services at a lower cost per encounter than traditional medical practices. In addition to lower cost, convenience has also been a key factor, since patients are not required to make appointments and the clinics are often co-located with pharmacies.

Price Transparency Clinics are ahead of the curve on price transparency. Unlike a primary-care doctor, if consumers want to comparison shop at retail clinics, the price is just out there on a giant board. Transparency of pricing is important to people because they are paying directly out of their own pockets, and do not want to end up in a situation where they do not know what they paid, until 60 days later when the explanation of benefits comes in the mail.

Some of the Challenges Faced by Retail Clinics While the number of retail clinics has increased in recent years, the overall use of retail clinics remains quite low. Today, retail clinics nationwide receive roughly 6 million visits per year accounting for less than 5% of the 100 million outpatient visits to physicians’ offices and emergency departments. The disappointing performance of retail clinics can be attributed to some regulations and reimbursement in the current healthcare system.


Health Affairs

Growth of Retail Health Clinics

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Retail clinics are often staffed by nurse practitioners, but regulatory limitations on nursing scope of practice, which vary significantly from state to state, and regulation that fixes reimbursement to nurse practitioners at 85% of physician reimbursement for providing the same care, have impeded rapid expansion of these clinics. Even some Medicaid plans that serve the poor have been reluctant to cover care in retail clinics and therefore shun the very market segment that may benefit the most from the convenience of retail clinics. Ultimately, as long as the US healthcare system is driven by an administered payment schedule that bears little relation to the actual cost of care and allows some services to offset the costs of others, it will always be prone to market irrationalities.

Outlook for Retail Clinics Looking forward, it is possible that the role of retail clinics may expand substantially as a result of the Patient Protection and Affordable Care Act (ACA) of 2010. As the ACA’s insurance expansions likely to put further stress on existing primary care capacity constraints in many communities, more and more consumers may turn to alternative sources of care – especially for simple, routine preventive and primary care needs. In addition, as noted previously, consumers soon may gain access to a broader set of services beyond simple, routine preventive and primary care at retail clinics. In summary, retail clinics exemplify both the potential of and challenges for disruptive innovators to improve value in healthcare.

Growth of Retail Health Clinics

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Growth of retail health clinics  
Growth of retail health clinics