Something Wal-Mart This Way Comes

MedStar, which has about 70 employed primary-care doctors, was worried initially about competing with those physicians and independent doctors who refer patients to its eight hospitals. That's why it nixed previous offers to do deals with retailers under which its brand-name would be a key selling point for patients.

The Rite-Aid/MedStar deal is technically a three-way partnership that includes Consumer Health Services Inc., which will manage the four initial PromptCare clinics and staff them with physicians that have credentials and admitting privileges at MedStar hospitals, differentiating the model from clinics that staff with physician extenders.

"In addition to addressing our physicians' concerns about competition, this model provides some market differentiation from the nurse practitioner models," says Christine Swearingen, senior vice president of corporate strategy and business development with MedStar Health.

But why not just operate the clinics themselves?

"We are pretty good at running big hospitals," she says. "Historically big hospitals aren't very good at running small entrepreneurial operations."

CHS hires staff for the clinics and pays for facility conversion. MedStar does not share in any direct revenue from the practices, but hopes to gain from referrals. Its only risk is providing medical supervision and its brand name, as well as the clinic's IT system—still a substantial, but not directly financial, risk.

"Our model provides care to people who have family physicians but who can't get in to [see] them," says Swearingen, who adds that she expects the clinic strategy to alleviate overcrowding of emergency departments in several hospitals.

No need to partner
Minnesota's Mayo Health System is planning a drive toward walk-in clinics as a key internal strategy. Steve Waldhoff, chief administrative officer for Mayo's Albert Lea Medical Center, pioneered the walk-in clinic for the system a year and a half ago as Mayo Express Care. Now other Mayo hospitals are copying the successful idea.

"We were looking for another point of entry for patients into our system," he says. "By working collaboratively with nurse practitioners with physician oversight and using evidence-based clinical pathways, we could create an access point that would be more convenient to the lifestyles that people seem to be living."

Waldhoff stresses that retailers should be ripe for good business deals for hospitals, noting that potential partners include household names outside of Wal-Mart and Rite-Aid, like Kroger, CVS, Walgreen's, Albertson's, Osco Drug, even Quick Trip. Still, he saw no need to do such a partnership—pointing out the substantial gains retailers can expect to receive from the in-store clinics.

"Let's say they average 15 patients a day over 31 days—that's 465 patients in a month. If the average person gets one script, and the average cost of the script is $70, in gross pharmacy billings that generates $32,550 for that pharmacy that's likely new revenue they're capturing," he says.

Waldhoff says his clinic, which opened in December 2006, needs roughly 15½ patients a day to cover its costs, and that if they go it alone, hospitals shouldn't expect a quick windfall.

"You have to give this time," he says, adding that Albert Lea's Express Care is seeing about 17 patients each weekday and on weekends about 10 a day—about break-even.

1. Do nothing. Coexist and let others move into the marketplace. But accept the consequences. In other words, get your résumé ready.
2. Implement a modified practice model. Stratify your existing fees and base them upon acuity levels or some other metric. Become more customer-friendly and train staff in guest service skills. Extend your hours. Create an open-access appointment model.
3. Partner or acquire assets of existing clinic or clinics or establish an equity position. If one of these clinics is moving in, establish with them that you would like to be a referral source. At least offer to perform their ancillary activities.
4. Compete. Open a de novo practice. "Our 180-square-foot place is tiny but highly visible and meets the needs of our patients. The point of any organization is to create value. We provide an extremely safe, high level of patient satisfaction at a $47 price, and we take cash, credit cards or will process insurance," Waldhoff says.