The Disruptive Impact Of Retail Clinics

• Retail clinics feature a strong value proposition based on on-demand convenience and low-cost services, sustained by powerful social, technological and commercial forces.
• Although the sector is still a work in progress, a period of intense partnering and business model change is producing a workable model.
• Forward-looking retail clinics are partnering with regional hospital systems with a common goal of achieving population health management, and as a new access point in the continuum of care, retail clinics could change the scope of the practice of primary care.
• Although pharma is not actively seeking collaborations, it might start to take notice if retail clinics show they can increase prescription drug volume – or redistribute scrips away from impersonal mail-order to in-store retail.

Since the first QuickMedx clinic opened in the year 2000, the US retail clinic sector has launched about 2,000 clinics in national retail establishments. (See Exhibit 1.) The value proposition for consumers is compelling: convenient hours, short wait times, inexpensive care for low-acuity conditions and transparent prices.

Moreover, the social, technological, and commercial forces that promise to sustain retail clinics are robust. These include an ongoing shortage of primary care physicians (PCPs), clinics’ accelerating uptake of electronic medical records and other digital tools, favorable demographic trends led by millennials and the need for large retailers with in-store pharmacies to expand into fast-growing adjacent opportunities.

Although market participants are still figuring out what the strengths are of retail clinics and what value they can capture, some large societal benefits are coming into view: such clinics can play an important role in filling gaps in the continuum of care; they can help achieve the goal of population health management; and they can introduce more efficiency into the traditional consumer relationship with a PCP.

Industry Participants

Retailers and provider organizations are the primary participants in the retail clinic sector. Retailers include chain drug stores, supermarkets and big box retailers with in-store pharmacies. Provider organizations include regional hospital systems, medical practices, integrated delivery networks and accountable care organizations. Retailers provide heavily trafficked sites that are typically in close proximity to consumers. Providers bring a halo of trust, capable staff and a connection to a sophisticated health network for referrals or consultations. Clinics are typically staffed by nurse practitioners, often with access to a physician. They offer a range of preventive, diagnostic and therapeutic services for minor illnesses and injuries. Some of the major players are:

• CVS Health Corp.: In September 2014 CVS Caremark changed its corporate name to CVS Health. In June 2015, CVS made good on its new name, acquiring Target Corp.’s 1,669 in-store pharmacies and 80 retail clinics for $1.9 billion. [See Deal]It rebranded Target’s clinics as CVS MinuteClinics. The transaction reinforced CVS’ dominance over the retail clinic sector, giving it around 1,110 clinics across 33 states offering diagnosis and treatment of minor illnesses, injuries and skin conditions; vaccinations and health screenings; and monitoring for chronic conditions.
• The Kroger Co.: Through its 2010 acquisition of The Little Clinic, Kroger is the most aggressive of the national supermarket chains, operating over 200 retail clinics in 10 states. It offers a mix of diagnostic and therapeutic services for minor illnesses and skin conditions, preventive care, some chronic care education and health screenings. Kroger has partnered with 10 local hospital systems.
• Walmart: Walmart launched its Care Clinics in 2014. Currently, there are about 18 Care Clinics, all Walmart-operated, in three southern states. Together with urgent care sites (The Clinic at Walmart), Walmart in-store clinics peaked at about 150 in fourth-quarter 2011, but have since dropped to about 80 clinics. Care Clinics offer diagnosis and treatment of basic medical conditions, management of certain chronic conditions and preventive care.
• Advocate Health Care: Advocate is the largest hospital system in Illinois. It has partnered with several retailers to manage their in-store clinics, most recently with Walgreens. Last May, Advocate began operating 56 Walgreens clinics, rebranding them as Advocate Clinic at Walgreens. Services include physical exams, minor illnesses and injuries, diagnosis, and vaccinations. Organizations like Advocate provide nurses to staff clinics and, importantly, a referral channel for patients with more serious conditions. Advocate is also very involved with ACO activity in Chicago.

Other participants include technology specialists such as American Well or TeleDoc Inc. American Well is a telehealth provider that partners with hospital systems, health insurers, employers and retail clinics (e.g., CVS, Walgreens Co., Kmart) to increase access to physician care. TeleDoc is a low-cost, on-demand telehealth provider that contracts with physicians who conduct remote “visits” with patients.

Exhibit 1

Number Of Clinics By Retail Establishment, 2011–2020E

Merchant Medicine LLC

Health insurers have been covering visits to retail clinics for the past 10 years. CVS said in May 2015 that 84% of MinuteClinic visits were covered by insurance; Walgreens said 80% of clinic visits were covered. A major attraction for health plans and hospital systems is the potential of retail clinics to divert in-network patients away from high-cost emergency room visits. Some health plans have integrated retail clinics into networks to reduce costs, typically by creating ACO-like entities with local providers. But these efforts do not appear to be widespread.

Big pharma showed an early interest in retail clinics as a means to engage health care consumers at the community level. Pfizer Inc., for instance, partnered with an early version of CVS in-store clinics in the late 1990s with a stated interest in collecting disease management data. But there is currently little evidence that pharma is actively seeking to collaborate with retail clinics, although drug adherence is an opportunity that would fit nicely in the retail portfolio of health care services. Also, if retail clinics, particularly those sited in national drugstore chains, show that they can increase prescription drug volume – or redistribute scrips away from impersonal mail-order to in-store retail – pharma might take notice.

In A Period Of Intense Experimentation, A Workable Model Emerges

Howard Lapsley, a partner in the health and life science practice of consulting firm Oliver Wyman, says that no one player in the on-demand retail health ecosystem can do it alone. Providers who can figure out their strengths and limitations, and the economics of working with retailers or telehealth specialists – and moreover do so in a novel way – will emerge as leaders. Dan Shellenbarger, also a partner at Oliver Wyman, says that retail clinics that don’t take a partner are at risk for running into trouble with the plans or provider systems around them. “It's important for them to partner so they can structure a way to incent both the payer and the provider to incorporate them.”

The art in retail/provider partnering is to determine the right mix of health services that will best serve the consumer while not antagonizing established primary care. With the arrival of retail clinics, urgent care clinics and telehealth visits in addition to primary care, specialist care and emergency rooms, the number of health care access points is expanding. (See Exhibit 2.) Each should provide a menu of services geared to the specific needs of the consumer.

According to Oliver Wyman’s 2015 Consumer Survey, customers are matching their medical needs to the appropriate access point. They are comfortable receiving some health care in alternative, on-demand retail settings, but not all of it. (See Exhibit 3.)

Currently, the most prevalent kind of partnering in the retail clinic world is with local hospital-based systems. On its website, CVS advertises clinical affiliations with 54 hospital systems, over half of which are with the largest in the country. Walgreens discloses clinical affiliations with 20 provider organizations, including ACOs. Kroger’s The Little Clinic is affiliated with 10 regional health systems in the Midwest and across the southern tier.

The most forward-looking retailers are partnering with large provider organizations, increasingly with the common goal of population health management. Dean Lin, regional president of Hackensack Meridian Health, a large integrated health network in New Jersey, says that retail clinics need to be connected to a larger system of care. Moreover, he recognizes that the goals of large health systems will evolve as they move toward a population health strategy, and that retail clinics are key to achieving that goal.

Exhibit 2

Recent Representative Alliances And M&A In The Retail Clinic Sector

Retail Entity	Partner/Target	Deal Type	Date	Region	Comments
CVS Health/MinuteClinic	Target Corp.	Acquisition and rebranding of Target pharmacies and in-store clinics	June 2015	National	CVS will operate Target’s 1,600 pharmacies and 80 retail clinic locations. Plans to open 20 new clinic locations in next 3 years.
Walgreens/Healthcare Clinic	Providence Health & Services	PHS will own, operate and rebrand 25 additional in-store clinics at Walgreens locations	Aug. 2015	OR, WA	These are the first clinics to open under Walgreens’ collaborative services model. It plans to open more clinics in the Portland and Seattle area.
CVS Health	Cleveland Clinic, American Well	Three-way partnership in which CC doctors do remote on-demand consults with MinuteClinic customers using AW telehealth technology	April 2016	OH, WV	Retail/telehealth partnerships are critical to expanding the reach of providers and retail clinics.
Meijer	Froedert & The Medical College of Wisconsin	FMCW will provide physicians or physician assistants at Meijer clinic locations	April 2016	WI	Meijer is a 225-store grocery chain with in-store pharmacies that operates in 6 Midwest states. It has 7 in-store clinics in MI, WI and IL.
Rite Aid/RediClinic	Hackensack Meridian Health	A joint venture in which both parties put up risk capital and share profits	Aug. 2016	NJ	HMH is the second largest integrated health network in NJ. The first of 10 clinics are planned to open in Rite Aid locations at the end of 2016.
Big Y Foods	Johnson Memorial Hospital	Big Y (a Northeast supermarket chain) and JMH partner to open a FastCare retail clinic next door to a Big Y location	Oct. 2016	CT	The FastCare clinic model was developed by Bellin Health, an integrated health care delivery system serving WI and MI. Bellin partners with local hospital systems and retailers in 7 states.

Note: All retail clinics offer a mix of diagnostic services, treatment of minor illnesses and injuries, and vaccinations; some offer chronic disease monitoring, education and disease management.

Company reports; Word Control

In parallel with hectic partnering, retail clinics are figuring out the right business model in terms of the optimal portfolio of services and operating model. Tom Charland, CEO of Merchant Medicine, a retail and urgent care clinic consultancy, points out that players are developing a business model against a backdrop where payment schemes are moving away from volume-based, transaction-based payments to incentive payments based on health outcomes. A lot of those incentive payments in pay-for-performance schemes are centered on hospital systems. Charland points to Walgreens as an example of a retail clinic that is focusing its operations on hospital systems and the trend toward incentive payments. “I think what Walgreens would like to do is get out of worrying about clinic operating profit based on volume-based care and work more closely with hospital systems whose motivations are more around population health management,” he says.

Walgreens’ core business is selling drugs at the lowest cost. So, the company basically said, “Let’s let the hospitals operate our clinics and drive toward healthier populations, and we’ll help with that and share in the incentive schemes.” Indeed, there has been a recent drop in the number Walgreens retail clinic sites as the company moves into lease arrangements with narrow-network hospital systems and Walgreens moves out of the business of operating clinics. Deals in the past year with Providence Health & Services in the Northwest, with Advocate Health Care in Chicago and with SSM Health in the St. Louis area attest to this new collaborative-services business model. Pat Carroll, MD, Walgreens group VP and CMO, healthcare clinics, says he envisions a retail clinic portfolio consisting of clinics operating under a collaborative services model (owned/managed by a health system partner) and clinics owned and managed by Walgreens.

Some retail clinics specialize in low-acuity conditions, whereas others have expanded into aspects of chronic care. A number of observers have pointed to tension with established primary care, particularly as clinics expand their services. Dean Lin says the key is complementarity of services. “More and more there is a growing expectation for us to do a better job managing chronic conditions. There are certain aspects of chronic care support that could be helpful.” Hackensack Meridian recently established a joint venture with Rite Aid Corp.’s RediClinic in New Jersey. Lin points out that RediClinic has a Weight Forward program for weight loss management. “If you’re a primary care physician and have to deal with issues like weight loss or smoking cessation, those are time-consuming tasks that might be better handled by a nurse practitioner at a retail clinic.” Moreover, it would allow the PCP to focus on chronic care needs more appropriate to her scope of practice.

Ideally, says Lapsley, for each therapeutic or preventive intervention, players should think about what constitutes the right economics and what is the right access point for the condition at hand. Increasingly, stakeholders are coming to recognize that certain kinds of care, particularly low-acuity conditions and preventive care, can most efficiently be handled at a retail clinic.

Exhibit 3

Consumers Show Willingness To Receive Health Services In A Variety Of Locations

N = 2,000 individuals from all demographic and health segments.

Oliver Wyman 2015 Survey

The Importance Of A Technology Strategy

Telehealth refers to an audiovisual “visit” with a physician for the purpose of a consult, diagnosis or treatment decision. Most stakeholders in the health care ecosystem, be they providers, health plans, employers or on-demand retail clinics, are adopting telehealth technology to reduce costs, improve access in rural or underserved communities and generate referrals to health system PCPs or specialists.

Both Medicaid and commercial insurers offer telehealth coverage in retail clinics. Medicare does not, but efforts are underway to extend Medicare payment for telehealth consults in underserved areas, including in retail settings.

Major retail clinic chains, such as CVS Health’s MinuteClinic and Walgreens Healthcare Clinics are aggressively building out electronic health record (EHR) platforms. If retail clinics affiliated with health systems are to occupy a place in the continuum of care, they must be connected with other access points to share information about patients with physicians both within the network of their provider partner and out-of-network. Information sharing is important in any coordinated care model, but especially where care is provided outside of a patient’s medical home.

Pat Carroll says that the EHR platform is currently being implemented in Walgreens’ Healthcare Clinics, which account for 75% of the retailer’s clinics. Not only does it ensure coordination of care, but he says it will also “close gaps in patient care and support our efforts to complement the practices of patients’ primary care physicians or medical homes.”

Merchant Medicine's Charland says that right now there isn’t a lot of technology integration between the retail clinic and the primary care medical home, though he believes it’s coming. He speculates that, in the context of retail clinics expanding into chronic care, this lack of continuity and integration could cause problems. Unless the provision of chronic care is done in close partnership with a patient’s PCP, “all that those retail clinics are doing is just letting the patient know the results of a screening, then it’s up to the patient to manage the disease.” In this scenario, the patient goes to his PCP, says he just went to MinuteClinic and was told his A1C was high; the PCP says, "Let’s take that A1C test again." Charland is concerned that, without technology integration, the PCP won’t trust the MinuteClinic test.

And then there are patients who don’t have a medical home. Charland estimates that about 30% of patients who go to an urgent care or retail clinic don’t have a primary care physician. To some extent, he believes it’s by choice. “Millennials are really not interested in having a medical home; the concept of having a relationship with a doctor is beyond them.” Retail clinics will try to recruit these patients into their health-system partner’s network.

Retail Clinics Harness Powerful Social And Health Economic Trends

A trifecta of forces is converging to give rise to on-demand, alternative care. Retail and urgent care clinics are benefiting from favorable demographics, an ongoing doctor’s shortage and the rising cost of health insurance.

Millennials, the generation between 18 and 34, are particularly susceptible to the attractions of retail care…more than half use retail clinics, urgent care clinics and emergency rooms.

Millennials and family caregivers are the primary users of retail clinics. Millennials, the generation between 18 and 34, are particularly susceptible to the attractions of retail care. A survey by the non-profit FAIR Health Inc. found that more than half of millennials use retail clinics, urgent care clinics and emergency rooms.

At the start of their career curves, many don’t have the time to make appointments with primary care physicians. They are also especially vulnerable to rising health care costs in the form of premiums and deductibles. Lack of job security compared with previous generations, along with youthful good health, also play a part in eroding their reliance on established primary care.

This breakdown in millennials’ relationship with established medicine has been confirmed by ZocDoc Inc., a provider of online physician appointment services. In a survey fielded in June 2015 (2,183 Americans age 18 and over), ZocDoc found that half of millennials said they visited a doctor less than once a year, with 93% saying they did not schedule preventive care visits. A shocking number of millennials self-diagnose and self-treat using Google and a few trusted websites.

According to the Family Caregiver Alliance, nearly two-thirds of family caregivers are employed full- or part-time; the majority comes from lower-income households. Boomers taking care of aging parents are a particularly large cohort. But it’s the 2.4 million grandparents (according to 2006 US Census data) who are the primary caregivers to grandchildren living in their households that are an especially ripe demographic for retail clinics).

“That ongoing, longitudinal care that traditional primary care docs talk about – it’s starting to break up,” says Charland.

Favorable demographics are working in tandem with doctor shortages to lure customers to retail clinics. The Association of American Medical Colleges projects a shortfall of 46,100 to 90,400 physicians by 2025, a shortfall of 12,500 to 31,100 primary care physicians. Against this, the Affordable Care Act has exacerbated the need for more physicians. Some observers say that the system isn’t undermanned, it’s inefficient. We rely too much on physicians, too little on nurse practitioners. As retail clinics continue to capture more primary care tasks it will relieve some of the burden on PCPs. So will better use of mid-level practitioners (already prevalent in retail clinics), and greater uptake of telehealth technology.

Primary care could be the first established physician practice to be disrupted by retail clinics. It’s not just millennials eroding the traditional relationship with primary care. Other factors, such as retail clinics’ evolving portfolio of services and the unsustainable workload of physicians, are exerting pressure, too. Oliver Wyman's Shellenbarger sees preventive care, minor illnesses and wellness exams – the routine stuff – accounting for much of what primary care does, but also causing a lot of the pain and access issues. Retail clinics are a potential solution. “That’s the leverage point – a primary care physician in today’s world trying to see 25 to 30 patients per day; if they can move a lot of those visits, in a way that doesn’t destroy their economic model, down to other members of their care team or to other parts of the continuum, it frees them up to spend more time with diabetics or patients with multiple chronic conditions. That’s where they need to be spending their time.”

The American Medical Association, the Association of American Physicians and other physician associations have come out strongly against retail clinics. But they can see the handwriting on the wall: how the steady move to value-based transactions will further the growth of retail care.

Conclusion

Most participants would agree that retail clinics are not looked to as revenue generators. Chain pharmacies’ core business is selling drugs; chain supermarkets’ core business is selling groceries. Both are low-margin businesses. Rather, most retailers are discovering that the benefits of an in-store clinic, although indirect and often not monetary, can be significant. A retail clinic affiliated with a local health system is seen by customers as a healthy destination. That benefits a pharmacy as well as a health-conscious supermarket. It brings in more customers, and more revenue per customer. And an in-store clinic, once it maximizes its patient flow, almost certainly increases scrip sales at the pharmacy.

Most significantly, as retail clinics get up to speed in terms of clinical data collection and connectivity, they will be valued as a critical access point in the population health supply chain. This is particularly true as their health care provider-partners are pushed by payers to transition to a performance- and value-based model. Health systems will have to manage patients across the care continuum, focusing on their overall health rather than reacting to illness. Forward-looking clinics like Walgreens have seen this trend and are moving this way.

Big box retailers have neither drugs nor healthful foods. Charland says the Walmart Care Clinic is stalled, and the Clinic at Walmart (urgent care clinic) “is slowly letting its leases expire while the number of clinics under that model is dropping.” And as noted, Target sold its pharmacy and retail clinic operation to CVS in 2015.

There are a few caveats on the growth prospects of retail clinics. An article in the March 2016 issue of the journal Health Affairs reported that based on insurance claims data for a two-year period 58% of retail clinic visits actually represented new utilization rather than substitution for high-cost primary care or emergency room visits. The cost of this additional utilization came to $14 per person per year.

The study has proven to be controversial. Among the criticisms, a team from the Mayo Clinic – a provider-operator of nine on-demand clinics in Minnesota and Wisconsin – argued in the letter section of Health Affairs (October 2016) that the article implied that the increased visits might not have been needed. The Mayo team agreed that while many visits for minor acute illnesses are oriented toward “reassurance and education,” they are still valuable. Integrated health systems can derive value from every patient contact “with point-of-care decision support facilitating wellness measures and chronic illness updates.” And as the article authors themselves stated, the data did not allow them “to assess the extent to which retail clinics may improve access to care.”

A more recent article in the Annals of Emergency Medicine (April 2016) found that retail clinics sited near emergency rooms have not to date been associated with a meaningful reduction in low-acuity ER visits.

Other caveats include laws in some states that prohibit corporate retailers from owning or operating clinics; other states impose “scope of practice” laws restricting mid-level practitioners from prescribing medicine or performing other services unless under the direct supervision of a physician.

Finally, the market for episodic care is limited and there are too many competitors – retail clinics, urgent care clinics, telehealth players and worksite clinics. Tom Charland thinks CVS MinuteClinic’s torrid growth over the last few years will slow down. “The available market for episodic illness visits is just not big enough to sustain a clinic in every CVS pharmacy.”

The retail clinic sector is a work in progress. A functioning model is beginning to come into focus based on a compelling value proposition combined with powerful sustaining forces. Importantly, the consumer will determine how the retail health opportunity will play out.