How retail medicine lost its way

June 17, 2015
Doug Smith, MD

,
Rick Krieger

If most patients are not going to exceed their deductible in a given year, they are now “consumers” and are looking for differentiators that offer fixed fee care.

Retail health clinics, by definition, are when the consumer pays the provider directly at point of sale. It was a model created to compete for the co-pay, the patient’s money, by providing a better care experience.   

Read: Consumerism increases retail opportunities and access to coverage and care

Doug Smith, MDThe original QuickMedx/Minute Clinic model that we created in 1999 was a flat fee $35 for each visit; paid when care was received and with no insurance submittal. This model lowered the cost of care significantly taking a billable insurance visit of $100 and lowering the care delivery cost by avoiding the insurance billing. It was a retail sale in the truest sense and a major disruptor as patients came to us knowing exactly what the cost of care was. It was also profitable.

Today’s retail health clinics are a traditional care payment model in a retail location. As recently reported by Forbes, Minute Clinic announced that third parties paid for 84% of their 2014 visits. This shows how far off the tracks the retail health clinic model has evolved from its original design. Even while using lower cost providers, the clinics no longer disrupt the traditional care cost model. In fact, we would argue it is simply an access extension into a non-economic location.

Read: What retail clinic growth can teach physicians about patient demand

Retail health clinics are only adding care capacity, which is already available at other healthcare locations using the same reimbursement model. It is a shift in delivery point, but not a shift in cost. Hence, the increased reimbursement by third parties is heralded as an improvement in revenue to CVS by increasing their earnings. No longer do the majority of retail clinics, including Target and Walgreens, strive to reduce the overall cost of care. Instead, they are chasing more revenue by expanding their scope of care in direct competition with existing primary care providers.

Next: How retail clinic demand might change

 

 

As very high deductible plans become the norm, many patients are spending all their own money for care in a healthy family on an annual basis. Like the original “compete for the co-pay” QuickMedx/Minute Clinic model, if a provider offers convenient quality care at a competitive price, they will capture market share. Forty percent of the initial QuickMedx/Minute Clinic consumers were uninsured looking for a fixed cost of care.

There is one major exception, Wal-Mart. In an August 2014, Forbes article: Wal-Mart stressed that their new in-house clinics will be a low-cost alternative to traditional care options: All visits will cost $40. “That is setting a new retail price in the healthcare industry,” stated Jennifer LaPerre a company official. It also sets a very competitive benchmark for not only retail clinics, but also the entire medical industry to match.

If most patients are not going to exceed their deductible in a given year, they are now “consumers” and are looking for differentiators that offer fixed-fee care. The movement by providers into direct-pay business models will continue to grow and the true retail clinics will return to the model roots as flat fee, point of sale care.

Douglas Smith, MD, is a board certified family physician with over 25 years of practice experience. He has started and been involved in many entrepreneurial ventures such as co-founder of MinuteClinic and the retail clinic model, Chief Medical Officer of Consult-A-Doctor a start-up company sold to Teladoc and co-founder of WorkPartners Medical Triage.

Rick Krieger was creator and co-founder of QuickMedx/Minute Clinic, and over a three-year period, he served as its CEO from Beta conception through the opening of 12 operating units. Rick has a broad background in economics, business development and finance. With over 30 years of experience, he has participated in the founding of eight successful startups in healthcare, manufacturing, oil and gas exploration and finance, with over 30 years’ experience. Currently, Rick continues to own and operate three privately held businesses. Rick’s newest project is EvisitMyDr.com.