[NPInfo] Editorial on Retail Clinics

[David Mittman]

Sep. 2007

Retail Decisions
Some once-skeptical health systems have found value in the quick-access
clinic business model. Here are some factors to consider before your
organization jumps in.
One new retail care clinic opens in the United States every day. Whether
it¹s an independent arrangement or through a partnership with a national
company, an increasing number of health systems are entering the
quick-access space. With competitors opening clinics in everything from
drugstores to supermarkets, hospital executives are being forced to decide:
Should we do nothing or dive in?


³Healthcare systems need to think seriously about [opening retail clinics],
and if they pass, it has to be a very conscious decision. This is a trend
that¹s not going to go away,² says AtlantiCare Health Systems President Don
Parker.

AtlantiCare¹s two New Jersey-based clinics were among the first
hospital-affiliated retail clinics to open in the United States. They won¹t
be the last. Tine Hansen-Turton, executive director of the Convenient Care
Association, a trade association for the retail clinic industry, estimates
that the 400 or so clinics in the United States today will grow to more than
3,000 within the next three years. Fifteen percent of the clinics are
hospital-affiliated, but that number is expected to grow, says Mary Kate
Scott, a California-based healthcare consultant and president of Scott &
Company.

³Two years ago, a lot of healthcare systems really weren¹t sure that this
was something that they should be participating in. As healthcare systems¹
curiosity about participating in this type of business has increased, we¹re
finding that the depth of interest is greater than it was in the past,² says
Web Golinkin, chief executive officer of RediClinic, a national independent
retail clinic provider.

Health systems¹ recent enthusiasm for the retail clinic model is due in part
to customer demand for convenience and cost transparency. Retail clinics
offer low-cost (fees average around $60) and easy access (based in
supermarkets, drug stores and mass merchandisers) to a number of low-risk
diagnostic and screening services. For hospitals, retail clinics can be a
way to keep their best patients in their system and to attract customers
they wouldn¹t normally reach.

Most healthcare systems aren¹t opening retail clinics for the money‹or at
least not directly. No hospital-affiliated retail clinic model has yet
proven profitable, contends Dean Lin, CEO of CareWorks Convenient
Healthcare, part of Geisinger Health System¹s entrepreneurial arm, Geisinger
Ventures. Instead, Geisinger looks for a more indirect ROI from its retail
clinic business; nearly 40 percent of the CareWorks clinics¹ patients are
new to Geisinger, which allows the system access to an entirely new
population of potential customers. With more national companies entering the
retail clinic space, many healthcare systems consider opening their own
clinics a defensive move against competition and a way to build their brand,
referral network and customer loyalty. ³I see these hospitals spend all this
money on billboards. I basically have a billboard in a store that¹s
attracting thousands of people every week,² Lin says.

So what considerations are most crucial for health systems thinking of
getting into the retail clinic business?

Scope of services: By limiting the services provided at the clinics,
organizations can ensure convenience, low-cost labor and low-cost space.
Limited services also ensure limited liability, says Pennsylvania-based
lawyer Patricia C. Shea, who specializes in healthcare services.

Target market: Healthcare systems need to determine the audience for their
clinics. Is the target market underinsured patients who overuse the
emergency department and need a low-cost alternative for quick care, or is
it
primary-care patients who want quicker access to some types of care? The
target market will ultimately decide retail partner and location.

Retail partner: No particular type of retail partner‹supermarket, drug store
or mass merchandiser‹has proven to be more successful than the others. The
best relationship, according to Hansen-Turton, is one that goes beyond a
tenant-landlord relationship and offers joint marketing and branding
opportunities. Whatever the partnership model, retail clinics force health
systems to think like retailers‹something hospitals may not be used to
doing. ³A lot of providers have worked behind doors. This is a new thing for
them, being out in the stores, talking to people, having a marketing
mindset,² Lin says.

Physician oversight: Physician oversight can drastically increase a clinic¹s
operating expenses. Different states have different requirements, which may
affect a clinic¹s oversight model. ³People may perceive that having a
physician on-site provides you with a greater quality of care and therefore
lowers your risk or liability. I don¹t think that¹s particularly true if you
have good, standard protocols and you limit the types of services that you
are going to be providing,² says Shea.

Payer relationships: The ability‹or inability‹to accept insurance has a
significant impact on a clinic¹s success, Scott says. Healthcare systems
need to consider their payer relationships and the requirements of each
during every step of the process.

Physician opposition: Geisinger¹s clinics drew mixed reactions from the
physician community worried about the harm to patient care and the threat of
competition. Geisinger took the gamble that their physicians would
eventually come around. ³We¹ve designed the clinics with certain principles
to not compete, but to complement. We¹re not going to put them out of
business,² Lin says.

Staffing: Clinicians who are comfortable in the hospital setting may not be
the best fit for a retail clinic, so health systems may need to adapt their
recruitment and training methods.

Cost: Hospitals spend about $100,000 to open a clinic, and depending on the
oversight model (nurse practitioner or physician), $350,000 to $500,000 to
operate one each year, experts say. Partnering with independent providers or
other health systems like Geisinger can minimize a health system¹s financial
risks and reduce the investment in start-up research. ³Will people like
this? That question still keeps me up at night, but I¹m optimistic that this
will continue to grow,² Lin says.

Molly Rowe is leadership editor of HealthLeaders magazine. She can be
reached at mrowe at healthleadersmedia.com.




Retail Landscape

    €    Average clinic size: 220 square feet
    €    Typical length of visit: 15 minutes
    €    Typical fee for visit: $40 to $70 per service
    €    Number of customers a clinic must see per day to break even:
Approximately 17 to 23
    €    Number of months to break even: 18 to 24, with some as fast as 12
months and some as slow as three years
    €    Average pay of clinic nurse practitioner: $65,000 to $80,000
    €    Number of clinics that opened between 2000 and 2006: 60
    €    Number of clinics that opened between January 2006 and April 2007:
350
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