Retail Responding to Market Demand for Primary Care

First the bad news: Fewer doctors and the retail sector's knack for delivering price transparency and convenience are collectively putting physicians on notice. Now the good news: There's plenty of work for everyone.

Someone needs to respectfully inform physicians that, at least on the primary care front, they've already lost the scope-of-practice battle they've been waging from coast to coast against nurse practitioners, physician assistants, and other nurse clinicians with advanced degrees.

As in so many battles, it comes down to numbers.

1. A Dearth of Doctors
For starters, there aren't enough physicians around to provide access to care, especially as the Patient Protection and Affordable Care Act extends health insurance coverage to millions of people. The American Medical Association reports that the median age for all physicians in the United States is about 51 years, and so the physician shortage is expected to worsen as more physicians retire in the coming decade.

2. Price Sensitivity Ratcheting Up
Second, the rise of high-deductible health plans means that patients will become much more price sensitive and start acting more like consumers. Primary care practices led by physician assistants and nurse practitioners most likely can be run with the same efficiencies as physician-led practices and probably with reduced labor costs.

3. Retail Understands Consumers
Third, retail businesses understand the potential for creating vibrant walk-in clinics and other on-site provider services that will mesh with the demands of savvy healthcare consumers for price transparency and convenience. When CVS Caremark announced last week that it would no longer sell tobacco products, the retail chain wasn't just looking for good PR.

CEO Larry Merlo made that apparent when he said in a prepared statement: "Put simply, the sale of tobacco products is inconsistent with our purpose. As the delivery of healthcare evolves with an emphasis on better health outcomes, reducing chronic disease, and controlling costs, CVS Caremark is playing an expanded role in providing care through our pharmacists and nurse practitioners."

CVS and other retail giants such as Rite Aid, Walgreens, Walmart, and regional supermarket chains across the country have for years been experimenting with various on-site outpatient services. The move by CVS suggests that the trend will intensify. The people who run these businesses are very smart. When it comes to succeeding in highly competitive markets with tight margins, retailers are light years ahead of just about everyone in traditional healthcare.

Much more so than traditional medicine, retailers understand what customers can afford. People making $25,000 a year with a $4,000 healthcare deductible are essentially uninsured except for catastrophic coverage. They are going to be paying for most, if not all, of their healthcare services. Retailers have figured this out and they'll be cost competitive on the primary care services most in demand. In traditional provider settings many clinicians often don't know the price of the drugs or procedures they're recommending.

4. Retail Knows How to Build Loyalty
Fourth, retailers understand labor costs. They see the value in hiring two physician assistants for the price of one primary care doctor, especially for clinics with extended operating hours. I am speculating here, but I would imagine that retailers can run outpatient facilities at a much lower cost than can traditional providers.

In addition to keeping the doors open longer, retailers can rely on steady walk-in traffic and more convenient locations. It's conceivable that they'd advertise for flu shots, cholesterol screenings, or other primary care service loss leaders to get customers in the door.

And it's all about getting customers in the door and developing brand loyalty, another retail strong suit. As they expand clinical services, retailers will become even more sophisticated and will continually assess and experiment to determine what customers want.

The patient with diabetes, for example, may be directed toward an aisle carrying skincare and products for feet. An overweight or obese customer at a supermarket-based walk-in clinic might be directed towards the fresh vegetable aisle. Patient satisfaction is a relatively new idea in traditional medicine. In retail, it's always been about customer satisfaction.

What are physicians to do about all of this? First, they should acknowledge that they probably cannot go toe-to-toe with retail chains that can stay open longer, and have cheaper labor costs, more convenient locations, and see more foot traffic.

Retail Has Limits
Rather than attempting to delay the inevitable, or attempting to compete at a retail level with businesses holding decades of expertise, physicians should instead play to their own strengths. Retail clinics are convenient and cheap, but they have their limits.

In this new era of outcomes management and value-based reimbursements primary care physicians are perfectly suited to practice at the top of their licenses to treat more complex medical issues, to oversee population health measures, and to devise care plans for patients with multiple chronic conditions.

The irony here is that for all of the kvetching we have heard in some quarters about the shift away from fee-for-service and toward value-based payments, that very reimbursement scheme may prove to be the salvation of many traditional practices. Physicians do not want to find themselves competing against retail giants for who can provide the cheapest services.

The good news is that regardless of the care setting, there is plenty of work for everyone. The venue may evolve but patient demand is not going away.