One new retail care clinic opens in the United States every day. Whether it’s 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?
“Healthcare 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 that’s not going to go away,” says AtlantiCare Health Systems President Don Parker.
AtlantiCare’s two New Jersey-based clinics were among the first hospital-affiliated retail clinics to open in the United States. They won’t 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.
“Two years ago, a lot of healthcare systems really weren’t sure that this was something that they should be participating in. As healthcare systems’ curiosity about participating in this type of business has increased, we’re finding that the depth of interest is greater than it was in the past,” says Web Golinkin, chief executive officer of RediClinic, a national independent retail clinic provider.
Health systems’ 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 wouldn’t normally reach.
Most healthcare systems aren’t 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 System’s entrepreneurial arm, Geisinger Ventures. Instead, Geisinger looks for a more indirect ROI from its retail clinic business; nearly 40 percent of the CareWorks clinics’ 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. “I see these hospitals spend all this money on billboards. I basically have a billboard in a store that’s attracting thousands of people every week,” 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. “A 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,” Lin says. Physician oversight:
Physician oversight can drastically increase a clinic’s operating expenses. Different states have different requirements, which may affect a clinic’s oversight model. “People may perceive that having a physician on-site provides you with a greater quality of care and therefore lowers your risk or liability. I don’t think that’s particularly true if you have good, standard protocols and you limit the types of services that you are going to be providing,” says Shea.Payer relationships:
The ability—or inability—to accept insurance has a significant impact on a clinic’s success, Scott says. Healthcare systems need to consider their payer relationships and the requirements of each during every step of the process. Physician opposition:
Geisinger’s 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. “We’ve designed the clinics with certain principles to not compete, but to complement. We’re not going to put them out of business,” 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 system’s financial risks and reduce the investment in start-up research. “Will people like this? That question still keeps me up at night, but I’m optimistic that this will continue to grow,” Lin says. Molly Rowe is leadership editor of
HealthLeaders magazine. She can be reached at email@example.com.
- 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