HERE’S A NEW HEALTHCARE BUSINESS MODEL THAT IS POISED to transform primary care in the United States and is likely to upset any number of traditional clinical relationships in this country.
The business model is the walk-in, 15-minute clinic located in a retail store. These types of clinics can already be found in stores operated by Wal-Mart, CVS, Rite Aid, Osco, Savon Drugs, Kroger, Shoprite, and Piggly Wiggly.
The concept was created by MinuteClinic of Minneapolis, Minnesota. Its first clinics opened in 2000. MinuteClinic caught THE DARK REPORT’S attention when it opened six clinics in Target stores in Baltimore during the summer of 2004.
Since then, the company has opened 83 clinics and 66 of these are located in CVS Pharmacies. On July 23, 2006, CVS disclosed that it was acquiring privately-held Minute Clinic for a purchase price estimated at $170 million.
Simple Business Plan
The business model is extremely simple. In a space of 200 to 500 square feet, a nurse practitioner (who is under the supervision of an on-call physician) is available to treat patients. The service menu is limited to common conditions that can be diagnosed quickly and for which prescriptions can be written. Some of these conditions include strep throat, ear infection, pink eye, influenza, and seasonal allergies.
The service goal is to diagnose and treat the patient within 15 minutes. If the nurse practitioner is busy, the patient is given a pager and can shop in the store until paged. Cash payment is encouraged and fees typically range from $40 to $80 for most services. The patient can have the prescription filled by the pharmacy located in the store.
Here are several remarkable facts about this rapidly developing healthcare delivery vehicle. First, there are already 12 “rapid clinic” companies with at least 143 clinics now operating in retail stores in various regions of the United States. Second, this business sector is likely to expand quickly. MinuteClinic plans to open more than 150 clinics this year. Competitors RediClinics (Houston, Texas) and Take Care Health Systems (Conshohocken, Pennsylvania) have announced plans to open 75 and 200 clinics, respectively, during the next 12 months.
Third, integrated healthcare systems are entering the rapid clinic business. These include Aurora Healthcare (Milwaukee, Wisconsin), AtlantiCare Health System (Atlantic City, New Jersey), and Memorial Health System (South Bend, Indiana). Fourth, one expert in this field has predicted in The Wall Street Journal that there could be as many as 10,000 of these clinics in operation by 2010.
Not Yet Profitable
THE DARK REPORT wants to add another remarkable fact. To date, no company operating these rapid clinics has publicly admitted to making a profit. That implies high risk for this business concept.
It also could mean that these companies are following the business strategy adopted by Amazon.com back in the 1990s. During those early years of the Internet and e-commerce, Amazon lost huge amounts of money, but told its investors that it needed to spend that money on rapid expansion so it could capture a dominant market share while the competition was weak. In the case of Amazon.com, the company did eventually show profits and has achieved its goal of being a dominant player in its market niche. It remains to be seen whether the business concept of rapid clinics located in retail stores will produce long term profits.
THE DARK REPORT expects this trend will eventually begin to alter patient flow in ways that affect clinical laboratories. Assuming that the long-term financial viability of the rapid clinic business model is established, companies such as Wal-Mart and CVS Pharmacies, with 3,800 and 6,100 stores respectively, have the ability to offer multiple “primary care clinics in most cities.
As more consumers opt to use these types of healthcare facilities for simple ailments, primary care physicians will see fewer patients. That may cause a moderate reduction in the volume of laboratory testing performed by office-based primary care physicians. However, these retail, walk-in clinics will alter the referral flow of patients— something that is important to most primary care physicians. This threat has already stirred a few healthcare systems to act. In some cases, as noted above, they have established their own rapid clinic operations. In other cases, health systems and physician groups are signing contracts with these rapid clinic companies to provide medical oversight and similar clinical services, in exchange for patient referrals.
At a minimum, laboratory administrators and pathologists should understand that the emergence of this healthcare business model, located in retail outlets, is a response to consumer demand. Who likes to go to the emergency room, or even a busy doctor’s office? It is particularly frustrating for such patients when they already know what is likely to be wrong with them— a minor case of the sniffles, a bladder infection, an earache, or similar. What they seek is speedy confirmation of the obvious and a prescription they can fill quickly that will make them feel better. That is why this 15-minute clinic model, from exam to diagnosis, has proven popular almost everywhere it has been tried.
Lab Tests In Pharmacies?
This is an important trend and THE DARK REPORT will be providing more intelligence on this topic in the coming months. It is significant that these walk-in, 15- minute clinics are generally going into retail stores which also have a pharmacy. Over time, the success of in-store clinics may provide pharmacies with a patient flow that allows them to expand their services to include on-site laboratory testing, x-rays, and more complex clinical treatments.
That is just one reason why the laboratory industry should not underestimate the potential of this new business model to trigger a cascade of changes, some of which may affect clinical labs.