Retail Health Proves Profitable for Health Systems

Marianne Aiello, December 15, 2010

Just 2% of retail health clinics were owned by health systems in 2009, according to a Deloitte report. But  the few providers that are taking a risk in the retail market say it’s proving to be a profitable venture. Wuesthoff Health System and Lehigh Valley Health Network both recently launched retail health clinics with different business models and both are happy with their investment.

Initially, health systems were wary of opening retail clinics because of physician opposition, possible disparity in the quality of care, and unproven profitability. Now, many organizations have found that the benefits of operating a cobranded clinic far outweigh the risks.

“In the past few years, local hospital systems and medical groups have entered the retail clinic market, typically offering turnkey clinic operational services on an exclusive basis to leverage their brand or protect patient referral patterns,” Deloitte reports. “Hospital systems [in 2009 had] more than 120 clinics in operation, a 60 percent increase from 2008.”

Wuesthoff approached Walmart with the idea of opening a retail clinic in 2005, but it wasn't until 2008 that the superstore agreed to partner with it. So far, the 400-bed system has launched two clinics at local Walmarts; the first opened in December 2009 and the second in August 2010. The clinics are cobranded and are called "The Clinic at Walmart Operated by Wuesthoff Health System."

"Partnering with the world's largest retailer was not simple," said Lisa Crites, associate director of media strategy and business development for the health system, in the December issue of HealthLeaders magazine. "We literally spent 14 months dealing with the legalities, but we finally made it work out."

Wuesthoff has complete authority over the clinics' operations and is allowed to charge whatever it wants for services, so long as there is complete price transparency.

"Walmart said, 'We could put any price we want on those services, but we want transparency,'" Crites said. Walmart wants "customers to see what they're going to pay when they come to the window and before they see a nurse practitioner," she says.

LVHN wasn't so convinced about the retail clinic model. But it decided to partner with Geisinger Health System's Careworks Convenient Healthcare in 2008 after it opened two clinics in the Allentown, PA, system's market.

"We were, as a network, reluctant to get into the retail clinic business for fear of some of the issues that go with it, like competing with physicians and different standards of care," says Jon Larrabee, senior strategic planner for the 459-bed system. "However, Geisinger Health System put two clinics within our primary service area---outside their primary service area---and approached us about providing a clinical local network link. We took advantage of that opportunity out of fear if we didn't do it they would approach others in our market."

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