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Are Retail Clinics Competitors or Potential Partners?

April 08, 2013

When Walgreens announced last week that it will expand the services offered by its Take Care Clinics to include the diagnosis and treatmen t of patients with chronic illnesses, such as diabetes, hypertension, and high cholesterol, it may have seemed to some healthcare financial executives that their competition just got stiffer. Yet expanded retail clinics could be a potential revenue source—if you can establish a partnership quickly.

Retail clinics originated in stores such as Walgreens, CVS, and Walmart to provide treatment of acute, minor injuries. Staffed mainly by nurse practitioners and physician assistants, the clinics typically see patients in need of basic services like flu shots and strep tests.

Now that Walgreens is moving further into the realm of primary care, Kathy Bourgault, vice president, revenue cycle at Mary Washington Healthcare in Fredericksburg, Va., thinks it is a model that could provide hospitals with referrals.

"It would be a smart move for health systems to take advantage of a retail clinic as a feeder system for their hospitals," she says. "If you partner with them, then as soon as a patient walks in who isn't within the scope of services and needs something more, the clinic can transfer them to the hospital, either through the ED or another department. These clinics offer a menu of services with bundled pricing, usually low-level pricing, but they can't treat everything."

"A hospital that establishes a relationship with medical records that can be shared or transferred will establish where the business will go when it's something beyond the scope of the clinic. … It's an interesting concept and, structured right, it could probably work well," she adds.

Bourgault says the retail clinics could also potentially ease the burden for primary care physicians who are struggling to keep pace with a growing patient load.

"In most health systems, primary care is usually stretched pretty thin, and the wave of the future is most people will only see their PCP once every three years. … For health systems that decide to get into this business and partner with a clinic to develop a relationship, it could be a win-win for both, and it could definitely be a win for consumers."

There is little doubt that consumers are increasingly warming up to the idea of receiving care in a retail clinic. The popularity of these clinics has grown substantially in recent years, according to a survey from healthcare market researcher Kalorama Information, which reports that 21.3% of U.S. adults had used a retail clinic as of 2012. That's a big jump from six years prior, when only 10% had visited a clinic. The survey cites convenient hours and lower costs as two major factors driving the growth.

Not surprisingly, some physician groups, such as the American Academy of Family Physicians, warn against consumers using retail clinics for chronic disease management.

"This piecemeal approach to healthcare concerns me—that it will ultimately fragment care and frustrate patients, resulting in higher costs and lower quality. My hope is that my patients and our country get the best care, and we know the best care comes from continuous care over time," says AAFP president Jeffrey Cain, MD, a family doctor based in Denver.

Cain also says the retail clinic model can lead to "missed opportunities to provide coordinated care."

"We are concerned the clinics will further fragment an already fragmented healthcare system and create potentially higher costs. … Walgreens isn't going to allow for continuous service where a patient develops a relationship with a physician over time," he says.

Tom Charland, CEO of healthcare consulting firm Merchant Medicine and former senior vice president of strategy and business development at CVS's MinuteClinic, says he has "very little patience" for the AAFP's argument and thinks hospitals and physician groups should look at the expansion of retail clinics as a business opportunity rather than market competition.

"I do not see it as a threat to primary care doctors. I deal much more with the urgent care industry. … [That] industry was seeing retail clinics as a threat, but they quickly discovered it was a way of getting more referrals," Charland says.

A hospital and retail clinic can sign a clinical affiliation agreement to form a partnership, Charland explains. "What it boils down to is, the health system provides a collaborating physician for the nurse practitioner, which is required in virtually all states, and the health system or medical group receives preferential referrals for patients who present out of scope."

This type of basic clinical affiliation agreement can be "the basis for a longer-term relationship," Charland says. "It is one strategic alternative that has to be considered. I can tell you that right now the retail clinics are pretty much overwhelmed with calls from hospital systems seeking to partner with them."

In the HealthLeaders Media 2013 CEO Industry Survey: Optimism on the Upswing, 42% of hospital CEOs identified strategic partnerships as one of the top priorities for their organization over the next three years. Forming a joint venture with a retail clinic may be just the kind of opportunity they are seeking, if they can lock down the deal before another hospital in their market beats them to it.

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