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In Retail Medicine, Opportunity for Market Share Growth

February 17, 2014

As patient volumes shift from inpatient to outpatient settings, some hospitals and health systems are entering the retail medicine space in new ways.


When CVS Caremark announced on Feb. 5 that it will stop selling cigarettes and other tobacco products in its 7,600 U.S. stores by Oct. 1, 2014, it was a clear indication to anyone in healthcare—or who covers the healthcare finance beat—that the company is banking its future in large part on its retail medicine strategy.

"Ending the sale of cigarettes and tobacco products at CVS/pharmacy is the right thing for us to do for our customers and our company to help people on their path to better health," said president and CEO Larry J. Merlo in a press release. "Put simply, the sale of tobacco products is inconsistent with our purpose."

Since 2000, when it opened its first MinuteClinic where nurse practitioners and physicians' assistants provide treatments for basic illnesses and injuries, part of CVS Caremark's purpose has been to meet patient demand for same-day care and more convenient hours. The business model appears to be working: There are now more than 800 MinuteClinic locations in 28 states and Washington, D.C., and MinuteClinic's services have expanded to include chronic disease management.

According to the press release, CVS Caremark expects to lose about $1.5 billion in annual tobacco sales, as well as about $500 million in related sales. Although these are big numbers, the company obviously believes it can generate even more revenue by growing its primary care market share through its retail clinics.

Patient Demand Drives New Approach
As patient volumes shift from the inpatient to the outpatient setting and patients become more demanding in their desire for convenient hours and locations, many hospitals and health systems are also looking for ways to enter the retail medicine space. In the HealthLeaders Industry Survey 2014, 43% of respondents cite retail healthcare as an opportunity for their organization.

One health system that is making a foray into retail medicine is Main Line Health, a 1,295-bed health system with $1.4 billion in annual operating revenue based in Bryn Mawr, PA. In mid-January, the organization opened its Main Line Health Center at the Exton Square Mall in the Philadelphia suburbs—a move it considered for a long time before making it a reality, says CEO Jack Lynch.

"If we are going to lower the cost of services and increase patient satisfaction, we have to do a better job of delivering care in a more efficient, convenient environment," Lynch says of the new location, which offers complimentary valet parking, extended evening and weekend hours, and one-stop registration.

The 32,000-square-foot health center offers primary and specialty care along with ancillary services, including laboratory, imaging, and radiology.

"The driving factor was we needed more space, and we needed something more visible and accessible," Lynch says. "The goal was to be more convenient to patients who either were already using us or who we wanted to be using us."

The Traditional Hospital Model is Evolving
Lynch says MLH's new retail setting is part of the organization's efforts to transition to a new care delivery model where the hospital campus is no longer the central focus.

"We are moving away from the inpatient mindset and hospital hub to being more of a provider of healthcare as opposed to a sick care provider," he adds. "To say we are not interested in feeding our main campus would not be true, but at the same time, we know inpatient volume will be smaller in the future, and more people will be expecting to get their care in an outpatient environment."

MLH invested roughly $4.5 million to renovate the new space. Although the health center may wind up being a loss leader for the organization, it's an important part of MLH's strategy to grow volume in its ambulatory settings, Lynch says.

"I don't know that we've sat down and said that we want the center to make money on its own," he says. "I don't know if that is reasonable because I don't know if we have enough high margin services there. In my opinion it is all about access. If people end up in our primary care network, we believe there is a much better chance that they will use us for other services. It is part of our overall strategy to expand our market share. Once they use us for primary care, we believe we can keep them in the system."

If You Can't Beat 'Em, Join 'Em
While Lynch knows his organization is competing with CVS Caremark for primary care market share, he says Main Line Health has a strategy that may turn the situation into a financial win.

"We have signed a deal with CVS to provide medical direction for their MinuteClinics, which enables us to get into the community where the non-traditional way of delivering care is becoming the traditional way," he says.

Lynch says the hope is that this relationship with CVS Caremark will turn Main Line Health into "part of the referral network of secondary and even primary care for people who need to be referred out of CVS to another care setting."

"Years ago, the thought of entertaining that kind of relationship with a direct competitor in primary care would have been very dangerous," Lynch adds. "But, now we understand that this is what consumers want. They want easy access to care for the really basic stuff, and when they need the next level of care, we want it to be our doctors who provide it."

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