Consumer demand will drive burgeoning retail clinic industry
NEW YORK —Since emerging on the scene in 2000, in-store health clinics have strived to fill a void in today’s health care system—which, on more than one occasion, has been classified as broken by industry observers—by treating common ailments and vaccinations in a convenient, affordable setting, but will that remain the case going forward? Some industry observers believe that it is the consumer who will dictate the future of the convenient care industry.
There is no doubt that today’s health care system is in need of an overhaul as patients battle rising health care costs (which are expected to be $1 for every $5 spent in this country by 2015, according to the Convenient Care Association), long waits to see their primary care provider and an overflowing emergency room where people often wait hours to receive care. Then there are the 47 million patients who are uninsured and another possible 30 million who are underinsured.
Looking to provide patients with convenient, quality and affordable health care, food, drug and mass merchants are increasingly working with clinic operators to implement retail-based clinics. By the end of July 2007, the number of facilities had grown to more than 500. CCA expects that 700 clinics will be in operation by year-end 2007.
Not only are retailers working in partnership with clinic operators, but CVS and Walgreens went as far as to acquire MinuteClinic and Take Care Health Systems, respectively. Obviously, that is a strong testament to the value retailers see in such clinics.
The concept, while still in flux as retailers figure out how best to generate profitable revenues, is attractive to patients as the clinics are open extended hours and weekends, with most visits taking about 15 minutes and requiring no appointment.
They are typically staffed with certified nurse practitioners who provide diagnosis and treatment of common family illnesses, administer vaccinations, perform diagnostic screenings and conduct physical exams. The menu of services generally ranges in price from about $30 to $100, and many major health plans cover the services.
Growth focuses on coasts
|State||No. of clinics||Operator|
|California||15||QuickHealth, Sutter Express Care, Lindora Health Clinic|
|Nebraska||5||Alegent Quick Care|
|Kansas||7||Minute Clinic, TakeCare|
|Texas||31||MedBasics, MinuteClinic, RediClinic, My Healthy Access|
|Minnesota||48||HealthPartners, MinuteClinic, NOW Express Care, Target Clinic, Mayo Albert Lea Medical Center|
|Iowa||5||Mercy QuickCare, Trinity Medxpress|
|Missouri||24||InstaClinics, MinuteClinic, TakeCare, NOW Express Care|
|Wisconsin||28||Aurora Quick Care, Take Care, Gunderson Lutheran Express Care|
|Michigan||26||Affordable Basic Care, MinuteClinic, Early Solutions Clinic|
|Illinois||29||InstaClinics, MinuteClinic, TakeCare, Corner Care Clinic|
|Indiana||30||Affordable Basic Care, MinuteClinic, MedPoint Express, The Little Clinic, Corner Care Clinic|
|Kentucky||5||The Little Clinic|
|Alabama||11||Checkups USA, Wellspot|
|Florida||44||Checkups USA, MinuteClinic, Solantic, The Little Clinic|
|Georgia||50||MinuteClinic, RediClinic, The Little Clinic|
|South Carolina||6||Wellspot, Corner Care|
|North Carolina||18||MinuteClinic, Corner Care Clinic|
|Ohio||20||MinuteClinic, The Little Clinic, Premier HealthNet Express Care, Corner Care Clinic|
|Maryland||13||MinuteClinic, My Health Access|
|Pennsylvania||15||Geisinger CareWorks, Take Care, Corner Care Clinic|
|New Jersey||15||Atlanticare Healthrite, ExpressCare, MinuteClinic, Corner Care Clinic|
|New York||13||DR Walk-In Medical Clinics, MinuteClinic, Corner Care Clinic|
|Connecticut||10||MinuteClinic, Corner Care Clinic|
But will the future of health care demand more?
“This is being driven by the consumers,” said Tine Hansen-Turton, executive director of the CCA, which was founded in October 2006 to support the exploding industry.
Judging by some recent research, consumers not only welcome the convenient care that such clinics provide, but also believe that they should provide a broader array of services.
“I think consumers are savvy in what [the clinics] are or not or what they could be,” Hansen-Turton added.
According to the study released earlier this year by Market Strategies, 30 percent of respondents believe that retail clinics should compete with primary care physicians by offering a broader variety of more complex care and diagnostic services.
The study, which is MSI’s first wave of retail clinic research, featured 1,500 online surveys conducted with people age 21 and older between Feb. 7 and 19. Of those who completed the surveys, 900 had not yet used a retail clinic and 600 had recently visited a clinic.
“I see continued growth, but the one thing that will remain steady is convenience, but offerings will be dependent on the individual operators,” said Hal Rosenbluth, co-founder and chairman of Take Care, who also serves as senior strategy consultant of health care for Walgreens and president of the CCA. “It will depend on the marketplace.”
There already is evidence that the convenient care industry sees a need to branch out beyond acute care. One such example is Lindora Health Clinic, which provides non-emergency health care services and weight-management programs.
Lindora currently operates 35 clinics specializing in the non-surgical treatment of obesity. Last fall, it partnered with Rite Aid to open in Costa Mesa, Calif., the first retail-based clinic. The Lindora Health Clinic focuses on weight loss and wellness services in the Southern California area. It plans on having 10 retail-based locations by the end of the year.
There’s also Early Solutions Clinics, which currently operates about a half dozen clinics within Meijer stores. In addition to focusing on acute care, the company has developed a health promotion disease prevention program, which includes treatment for diabetes, asthma, weight loss and screenings for depression.
Meanwhile, several clinic operators are offering, namely in select markets, travel medicines.
“There are talks about chronic-disease management and health-education services but it is important to look at the limitations,” Hansen-Turton said. “The important aspect is that it needs to be integrated within the medical home.”
Hansen-Turton also believes that the convenient care industry could see more provider demand for additional service offerings going forward, given the shortage of health care providers and the current strain on the health care system.
“If it expands, it will be in partnership with the local medical community,” she said.
She added, “The focus is to have a sustainable model and one that fits in with continuum care…but it is a community that grows quickly but also grows with what the [patient] needs are.”
Rosenbluth noted, “The most important thing is that quality care is provided at all times and the standards that operators have put forward [are followed].”
Grocer sings new tune in community involvement
Meijer is taking another step in community relations, to the tune of promoting and selling CDs of local musicians.
The Michigan-based 176-unit grocery chain launched the Outside the Mainstream promotion in February with a solo CD from Josh Davis, a singer from Lansing, Mich., whose Fool Rooster CD was recognized by Performing Songwriter magazine for its lyric.
Each month, the chain is featuring a new performer in its circulars, which are sent weekly to 7 million households in Ohio, Michigan, Illinois, Indiana and Kentucky, according to company vice president of public affairs Stacie Behler. Meijer purchases 1,000 of the artist’s CDs and offers them for sale in all the chain’s stores for $7.49.
“The goal of the program is to bring some of the talent that we find in our own backyards to a wider audience than they can normally reach by themselves,” Behler said. “And by supporting this with a low price and a feature in our circular, hopefully it will lead people to gamble on the purchase of music that is worthy of discovery.”
Meijer, according to Behler, is trying to create regional loyalty to its stores by promoting local talent.
CDs chosen for promotion, according to the chain, must have a UPC and be professionally duplicated. Submitted CDs are sorted according to state and chosen on the basis of whatever state will be featured that month and how different the music is from the previous month.
Featured in April is Michigan-based Potato Moon with its CD “The Life of The Lonely Jones.”
CVS wins Caremark battles
WOONSOCKET, R.I. —The battle for Caremark Rx has finally come to an end. And, to the dismay of Express Scripts, CVS has emerged the winner, creating a $75 billion pharmacy benefit management powerhouse that is likely to serve as a benchmark for additional mergers within the industry.
“CVS/Caremark will offer end-to-end services, from plan design to prescription fulfillment, as well as the opportunity to improve clinical outcomes, which will result in better control over health care costs for employers and plan providers,” stated Tom Ryan, president and chief executive officer of CVS/Caremark, late last month when the deal closed. “The company will improve the delivery of pharmacy services and health care decision-making, enabling consumers to benefit from unparalleled access, greater convenience and more choice.”
With the close of the transaction—ultimately valued at $27 billion—CVS/Caremark has moved into a strong, competitive position. The combined company will be No. 1 in pharmacy sales, PBM-managed lives, specialty pharmacy sales and retail-based health clinics. It will be No. 2 in mail services.
That adds up to a lot of extra leverage for the retail health care juggernaut with suppliers, as well as insurers and payers.
In terms of synergies, CVS expects to realize between $800 million to $1 billion in revenue synergies in 2008, and significantly more thereafter. The company expects about $500 million in cost savings, largely related to better purchasing.
“We would like to note that every deal that both CVS and Caremark have done historically has yielded synergies significantly in excess of original guidance,” stated Citigroup analyst Deborah Weinswig in a recent research note. “We believe this deal will be no exception.”
Charles Boorady, also of Citigroup, believes that if the company achieves cost savings from the drug-procurement process, it likely will come from a combination of the following: manufacturers accepting the lower price or offering greater rebates, the wholesalers and distributors accepting lower prices and manufacturers bypassing the wholesalers and selling directly to the combined CVS/Caremark entity.
While many industry observers view the merger as a boon for the companies, it undoubtedly will have major implications on the industry, in general, as vertical integration is a new paradigm that—if successful—could clear the way for more mergers moving forward, with Medco and Express Scripts likely being the next targets.
“The fragmentation in the past may be the reason why vertical integration did not work, but the sheer scale of the CVS/Caremark company may be able to make it work,” Boorady said. “The only test will be whether customers buy into the concept or the concerns over the perceived channel conflict will outweigh it.”
Either way, Boorady sees it as a win-win for rival PBMs. “I see Medco and Express Scripts winning either way. If this integration works, they are likely to be the ones that are acquired next. If it doesn’t work then they could stand to gain customers that prefer a standalone [PBM] instead of a vertically integrated model.”
Another issue such a deal brings to the forefront is network restriction. If customers are willing to restrict the retail pharmacy so that employees can get their prescriptions filled at a single chain, or just a few chains in the market, then it will make the synergy from a vertical integration more obvious, according to Boorady.
However, this has been a concern for several years and has yet to materialize.
“I think most employers have concluded, and will continue to conclude, that the sheer hassle factor that you are putting on your employees by making them go to a CVS instead of a Walgreens, or vice versa, isn’t really worth what little savings you can get relative to other things you can do that present less of a hassle to the employee but can save a lot more money,” Boorady said.
However, prior to the deal, CVS Pharmacare controlled a provider network of more than 56,000 retail pharmacies. Meanwhile, Caremark’s network numbered more than 60,000 retail pharmacies, so it is unlikely that the combined company, post-merger, would suddenly pull back the size of its network—particularly, if the end goal is to remain attractive to insurers and payers and competitive with stand-alone PBMs.
According to William Blair & Co. analyst Mark Miller, the combined company is facing its first big test as it expects an announcement on the large Federal Employee Program contract—currently up for negotiation—as early as May. Three years ago, Caremark won this contract from Medco and it is likely that the two PBMs, among others, will bid for this business aggressively.
“While there are many moving parts to these types of negotiations, this will be the first big test for the new CVS/Caremark, and may provide some incremental perspective on the current state of the competitive environment,” Miller stated in a research note.
In related news, CVS/Caremark has announced the members of the company’s board of directors. As previously disclosed, the 14-member board was evenly split among designees from CVS and Caremark.
Former Caremark chairman and chief executive officer Mac Crawford has been elected chairman of the board of the combined company. Ryan will continue to serve as president and chief executive officer.
The following individuals named to the board from CVS are:
Ryan, president and chief executive officer of CVS/Caremark Corp.
David W. Dorman, senior advisor and partner, Warburg Pincus LLC.
Marian L. Heard, president and chief executive officer, Oxen Hill Partners.
William H. Joyce, chairman and chief executive officer, Nalco Co.
Terrence Murray, former chairman and chief executive officer, FleetBoston Financial Corp.
Sheli Z. Rosenberg, former vice chairman, president and chief executive officer, Equity Group Investments LLC.
Richard J. Swift, former chairman, president and chief executive officer, Foster Wheeler Ltd.
The following individuals named to the board from Caremark are:
Mac Crawford, chairman of CVS/Caremark Corp.
Edwin M. Banks, founder, Washington Corner Capital Management LLC.
C. David Brown II, chairman, Broad and Cassel.
Kristen E. Gibney Williams, former executive of Caremark’s Prescription Benefits Management division.
Roger L. Headrick, managing general partner, HMCH Ventures; president and chief executive officer, ProtaTek International
Jean-Pierre Millon, former president and chief executive officer, PCS Health Systems
C.A. Lance Piccolo, chief executive officer of HealthPic Consultants