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Have retail clinics changed the structure of our health system? Have they changed the way players in the system compete or interact with each other?
This article was written by Jon Christianson, PhD, Medica Research Institute senior fellow and James A. Hamilton chair in health policy and management at the School of Public Health at the University of Minnesota.
There are 2 narratives surrounding retail clinics. Under one, they embody the “mallification of health care,”1 “medicalization of symptoms,”2 fragmentation of care3, and perhaps patient cream-skimming.2 A second characterization of retail clinics is that they are positive “disruptive innovations” in healthcare,4 conjuring up visions of more convenient, accessible medical care for patients5 and consequently better access and lower costs across the healthcare system.
One thing is clear: The traditional medical care community has been skeptical about the value of retail clinics,6 if not outright hostile.7 Operated under for-profit corporate umbrellas, staffed by clinicians without MD degrees, and often located in “big box” retail stores, retail clinics provide a sharp contrast to the old Marcus Welby primary care model of the past and its comfortable-sounding reincarnation, the “patient-centered medical home.”8
The development of retail clinics has created new opportunities for health services research, with 2 recent publications receiving attention for findings that challenge long-held positions in the retail clinic debate. As context for understanding the significance of these studies, it’s helpful to describe the current status and impact of retail clinics in the American healthcare system. Have they changed the structure of our health system? Have they changed the way players in the system compete or interact with each other?
Retail Clinics in Practice
The first retail clinic was opened in a grocery store in the Twin Cities, my hometown, in 20009. The typical retail clinic is staffed by a nurse practitioner and occupies about 400 to 600 square feet, which often includes a reception desk, a waiting area and 2 exam rooms9 (Page 48). Prices are displayed prominently. It is estimated that 30 patients a day are needed for clinics to break even financially, considering only the medical care they provide. Retail clinics deliver about one percent of the number of visits patients make to physician offices10, but up to 7% of visits for 11 common, simple acute conditions.11
The prototypical patients served by retail clinics to date have been children, whose parents value the after-hours convenience, and young adults, who have no strong connections with a primary care physician.9,10,11 There is a relatively high rate of return visits for people using retail clinics,9,10 suggesting user satisfaction, and people using retail clinics are less likely to return to primary physicians for subsequent visits,12 perhaps raising continuity of care concerns.13
There have been 2 relatively recent comprehensive overviews of the growth and status of retail clinics.9,10 Both note that retail clinics have encountered several “speed bumps” (in Minnesota, “potholes” might be more apt) in their expansion.14 Their numbers grew steadily in the early 2000s, but the great recession essentially brought that growth to a halt, raising questions about whether retail clinics were indeed at “the cutting edge of a ‘convenience revolution’”10 in healthcare. Growth has picked up since then, with some forecasts as high as 2800 clinics in operation by the end of 2017.15
Ownership of retail clinics is extraordinarily concentrated. CVS has the largest presence, with 950 clinics in 2014 and a stated (at that time) goal of 1500 clinics by the end of 2017. Walgreens follows with about 400 clinics, and Krogers with 20016. In the past, Walmart leased space to retail clinics but now is switching to an ownership model, a move that is being closely watched because of Walmart’s enormous size and scope.17 In a recent development, approximately 260 clinics are owned by hospital systems10. The concentration of ownership means that the growth or decline of retail clinics in the United States health system depends on the decisions of a small number of organizations. For example, if CVS were to withdraw from the retail clinic market, the number of clinics nationally would be reduced by 50% or more.
Based on sheer numbers and volume of patient visits, retail clinics could not be called “disruptive innovations” yet.18 However, they are changing their business models and provoking responses on the part of other healthcare organizations in ways that suggest a larger influence than these measures might suggest. The ownership structure of retail clinics may be one explanation. Retail clinics have provided an avenue for the largest retail product and service providers in America to enter healthcare delivery. These companies, with large existing customer bases, a focus on consumer service, and convenient locations pose potentially formidable competition for physician groups and hospitals.
Retail Clinics Change, Traditional Providers Respond
The initial business model for retail clinics was relatively straightforward. They offered a limited set of services, payment was in cash, and convenience—measured in terms of location and hours of operation—was their calling card.19,20 They tended to be located in areas with relatively high income and education levels21 and generated modest, if any, profits for their investors. The owners of retail clinics have made two noteworthy changes in an attempt to increase profits. First, they have moved away from “cash payment,”22 with their owners now negotiating contracts with insurers. Visit copays and deductibles are sometimes waived to attract business. As a result, out-of-pocket costs for consumers can be substantially less than was the case under the cash payment model. This change increases the potential for retail clinics to draw patients away from traditional primary care providers.
The second major change involves service expansion.15,23 As a first move in this regard, retail clinics began to provide basic preventive care, such as flu shots and travel-related immunizations.24 This meant increased patient volume and revenue for the stores in which they were located. In a second more recent change, retail clinics began providing basic care for people with chronic conditions.10,16 This threatens the bread-and-butter revenues of primary care physicians. When retail clinics are located in stores with pharmacies, providing chronic illness care can improve overall store profitability, as prescriptions often accompany chronic illness visits.
Traditional providers have responded to these changes, although the extent of their responses is difficult to document. Some primary care offices have introduced same-day scheduling and extended office hours, for instance,25 chipping away at the retail clinic convenience advantage. The recent growth in the number of urgent care centers, which feature physicians and imaging equipment on site and a wider array of services than retail clinics, could be interpreted as another competitive response. (However, this growth has been driven by factors more compelling than retail clinic expansion, such as competition among integrated delivery systems for patients and the need for systems to reduce emergency department use under new financial incentives.)
Some organized physician groups and integrated delivery systems have pursued a product differentiation strategy, trying to shift the competitive dynamic to quality over convenience. Retail clinics have pushed back, noting research findings that retail clinic quality is just as high as that in primary care physician offices for the services that retail clinics provide,9,16,26,27,28 and that clinicians in retail clinics are equally or more likely to adhere to treatment guidelines.9,27,28
Other traditional providers have stressed more collaborative approaches, such as record sharing or supervision of retail clinic clinicians.29 More impressive is the growing number of high profile physician groups and delivery systems that own and/or operate retail clinics.9,30 This is an arrangement that may facilitate cost-management under new risk contracts. Retail clinics can be positioned as a less-expensive gateway into the system-managed care continuum,31 when compared to primary care physician offices, and they can function as “safety valves” when primary care practices are full.
Recent Research Stirs the Pot
The impact of retail clinics on costs of care has been difficult to assess. Four different cost concepts are important in thinking about this question. The first is cost-per-visit for the patient. When patient payment is in cash, the patient cost-per-visit could well exceed the cost of an insured visit to a primary care physician. This has changed as insurance coverage for retail clinics has become more common and as some clinics have waived insurance copays. Consequently, the cost to the patient of a retail clinic visit likely is less than the cost of a physician visit in many cases.
The second concept refers to the cost to the payer: the insurance company or the employer. This cost is the result of a negotiation process and typically is not known to the public. However, the growing number of payers who provide coverage for these visits suggests that payer costs are less per visit if the patient seeks care at a retail clinic.
Third, there is the per-visit cost to the healthcare system. Retail clinics would seem to have the advantage, given that their overhead costs are less than the costs of maintaining a primary care physician office.
Finally, there is the overall cost to the healthcare system, which depends not only on the cost per visit, but also the number of visits made and other resources used when retail clinics are present, versus when they are not.4 The case for encouraging, or at least applauding, the growth of retail clinics is not as strong if they add to overall system costs. Here is where the two new studies referred to earlier come in.
The first study, published in Health Affairs in 2016,32 advances previous work done by RAND researchers and colleagues.33 It uses data from a commercial insurer to assess use of services for 12 “low acuity” conditions, comparing utilization and costs for retail clinic patients with those who sought care for these conditions at a non-retail-clinic facility. (Obviously, the study design is more complicated than this.) The “headline” result of the study was that “…58 percent of retail clinic visits for low-acuity conditions represented new utilization, and retail clinic use was associated with a modest increase in overall spending”32 (Page 449). The costs of the new utilization were balanced to some extent by lower costs-per-visit for utilization judged to be not “new.” The researchers concluded: “These findings do not support the idea that retail clinics decrease health care spending.”32 (Page 449) Owners of retail clinics immediately challenged the study findings.34
There is a bit of confusing history to this study. In introducing their work, the authors state: “Whether retail clinics actually decrease spending is unknown, since—to our knowledge—the impact of retail clinics on utilization has never been assessed.”32 (Page 449) But authors of a paper published in The American Journal of Managed Care® (AJMC®) in 2013 addressed the same topic, noting that “the impact of retail medicine on the total cost of care has not been rigorously studied.”35 (Page e148) The authors, some of whom were associated with CVS Caremark, then undertook a study to do so. Using a sample of CVS Caremark employees who sought care at retail clinics in CVS stores, they found that “retail clinic use was associated with lower overall costs of care compared with that at alternative sites.”35 (Page e148) The Health Affairs paper32 didn’t cite the earlier AMJC® paper. To add to the story, in their AMJC® paper, the authors noted a presentation at the 2012 AcademyHealth research meeting by the authors of the 2016 Health Affairs paper. This presentation, which was based on earlier data, also found no evidence of a reduction in costs of care associated with retail clinic use. It was not referenced in the Health Affairs paper, but was alluded to by the authors in a subsequent letter.33
A second paper published in 2016 addressed whether opening retail clinics near emergency departments reduced the use of emergency departments for low-acuity visits.36 This paper, with lead authors again from the RAND Corporation, did not address overall costs of care. But given the current pressures on emergency departments nationwide, a positive finding would add another argument in favor of the benefits of retail clinics.37 Using a different dataset than employed by the authors of the Heath Affairs article, the researchers found that there was no “meaningful reduction in low-acuity emergency department visits”36 (Page 1) in the population as a whole. But they did find a small, statistically significant reduction among privately insured patients. Their work challenged previous findings that retail clinic use is associated with lower emergency department use,35 although the study questions were posed somewhat differently.
Inventing a Future?
Retail clinics are likely here to stay, even though continuation of many existing clinics depends mainly on the strategic decisions of a small number of pharmaceutical retailers. One reason is that retail clinics offer potential value to a new and growing set of sponsors: integrated delivery systems trying to manage costs and patient flows under risk-sharing contracts.
In the past, the care delivered in retail clinics was not well-coordinated with care delivered by mainstream providers. It is not surprising that research studies described above, which used data collected in a relatively uncoordinated environment, raise questions about whether retail clinics reduce system costs. Looking forward, the challenge for retail clinics will be to demonstrate their value in controlling population health costs in contractual or ownership relationships with integrated delivery systems.
This would seem to conflict with the desires of current retail owners to generate new revenues through prescriptions. For health services researchers, this particular question is familiar. Will the same number of prescriptions simply shift to a lower cost supplier? Will the total number of prescriptions rise? Or will lower costs-per-prescription filled in pharmacies where retail clinics are located balance out increases in prescription numbers? More broadly, will retail clinics function as relatively small profit centers in large retail environments, or will they establish themselves as important players in efforts to control health spending and rationalize care delivery?
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2. Arvantes J. Questions About Retail Health Clinics Yet to be Resolved, Says Former AAFP President. AAFP News. Published on July 12, 2012. http://www.aafp.org/news/government-medicine/20120621kellermanretailclinics.html
3. News Staff - American Academy of Family Physicians. AAFP Board Takes Tough Stand on Retail Clinics. AAFP News. Published on July 31, 2015. http://www.aafp.org/news/practice-professional-issues/20150731retailclinics.html
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7. Marco M. American Medical Association Goes After Walmart-Style Retail Clinics. Consumerist. Published on June 27, 2007. https://consumerist.com/2007/06/27/american-medical-association-goes-after-walmart-style-retail-clinics/
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24. PRNewswire. (2016). MinuteClinic Announces New Travel Health Services Just in Time for Summer Vacation Season. Published July 7, 2016. http://www.prnewswire.com/news-releases/minuteclinic-announces-new-travel-health-services-just-in-time-for-summer-vacation-season-300294943.html
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