Markets & Finance

Drugstore Clinics Are Bursting with Health


After suffering from a bad bout of flu in December, Arun Kumar didn't want to take any chances for the rest of the flu season this past winter. So in February, the engineer from Cary, N.C., called his primary-care physician to get a flu shot. But the doctor's office didn't have any of the shots and recommended he visit a clinic in a retail store.

So Kumar, who had never heard of these clinics before, turned up with no appointment at a MinuteClinic located in the neighborhood CVS drugstore and got a flu shot in less than 15 minutes for $30. "It was such a pleasant experience that I figured that I would be happy to go back there for minor ailments and avoid the long waits at my doctor's office," says Kumar.

His visit is part of a growing phenomenon in the health-care industry. Walk-in clinics in retail outlets and drugstores like CVS (CVS), Duane Reade (DRD), and Wal-Mart (WMT) are becoming all the rage these days. People have been flocking to them because they tend to be cost-effective and convenient, with no need to stress about getting an elusive appointment; and many have wait times of less than 15 minutes.

MORE AGGRESSIVE. Now, retailers are getting even more aggressive about staking their claim to this fast-growing business. On July 13, CVS Corp., the largest drugstore chain in the country, acquired Minneapolis-based MinuteClinic, the pioneer and largest provider of such retail-based health clinics in the U.S. "We've seen success by offering simple health-care solutions in the pathway of consumers," says Michael Howe, chief executive officer of MinuteClinic, which has grown from 19 clinics in two states to 83 in 10 states in just one year. The company plans to triple in size to 250 by the end of the year. The financial terms of the agreement were not disclosed.

While CVS' deal may be the most aggressive move, other retailers are also expanding rapidly. Lee Scott, CEO of giant Wal-Mart, said earlier this year that it will add 50 more clinics to the current 12 by the end of the year. Wal-Mart has allowed several different companies to run the clinics in its stores. One of them, RediClinic, is run by InterFit, a private company with backing from AOL founder Steve Case.

There are 11 RediClinics in the country today; InterFit plans to add 75 more by the end of the year, and 500 new locations by 2009. The other big competitor is Take Care, which runs 16 clinics in Rite Aid (RAD), Osco, and Walgreens (WAG)stores, and plans to open 1,400 clinics by the end of 2008.

MEETING A NEED. "With their quick and easy access and low prices, the store-based clinics are obviously meeting a need," says Dr. Rebecca Patchin, secretary of the American Medical Assn., the organization that represents American physicians.

MinuteClinic is the furthest ahead and will likely receive a huge boost from the CVS acquisition. CVS has 6,100 stores around the country, and even though Chief Financial Officer David B. Rickard says there won't be a MinuteClinic in every CVS location, there is enormous potential. CVS has already seen some early benefits from increased patient visits to pharmacies where a clinic is located. "We don't have a lot of statistics on this, since these are early days, but anecdotally there has been some additional business in those locations," says Rickard.

The clinics are typically staffed by certified nurse practitioners and physician assistants. They offer treatments, for illnesses that range from ear infections to flu—which cost $49 and $83, respectively. Compared those prices with $150 for the average visit to a doctor or $400 at the emergency room. The clinics also accept most major health plans and will administer vaccines for illnesses such as polio, hepatitis, and flu.

CLIENTS ENTHUSIASTIC. "Nurse practitioners are trained to do the same things that family physicians would do," says Jan Towers, director of health policy with the American Academy of Nurse Practitioners. "Besides, if you're in pain or are sick, you might end up getting sicker waiting for a doctor's appointment or in an emergency room."

People are enthusiastic about the clinics. A recent Harris Interactive poll showed that 83% of respondents felt these clinics could provide basic medical services when doctors' offices were closed, and 78% felt they offered fast, easily accessed medical services.

The clinics, however, have caused unease among family practitioners, who feel most threatened by their fast growth. The American Academy of Family Physicians, an organization that represents family practitioners, said on June 22 that it does not endorse any particular retail health-clinic business model or company.

The organization also said that retail health clinics can only complement the work of family doctors and other primary-care physicians. "Retail clinics cannot replace a personal physician who is familiar with a patient's medical and family history, coordinates and manages care, and can perform much more sophisticated testing, diagnosis, and treatment," says Larry S. Fields, president of the organization.

DOCTORS COMPETING. The organization also recommended that its 94,000 member physicians adopt a system called "open access" scheduling and provide same-day service for even routine physicals to keep patients happier and healthier in the long run.

Indeed, despite their still small numbers, retail clinics like MinuteClinic are already causing physicians to change their practices. In many parts of the country, physicians have started competing by extending hours. "We're seeing family physicians, internal medicine, and even obstetrician-gynecologists offering same-day appointments," says the AMA's Patchin.

John Bachman, a family physician and Saunders Professor of Primary Care at the Mayo Clinic in Rochester, Minn., wrote on the subject in the May issue of Family Practice Management, a journal published by the American Academy of Family Physicians. Bachman did not offer a reassuring assessment for his colleagues. He thinks that these retail clinics offer exactly what consumers want.

In addition, he wrote that a logical future step for the facilities is to tackle hypertension or even diabetes care, because chronic disease management is handled poorly in the United States. "By following protocols, the retail clinics could very well achieve excellent outcomes. And if they can provide laboratory work on-site so people can have tests done on the weekend, the appeal would be strong," wrote Bachman.

Bachman predicts a lot more upheaval ahead. Health-care clinics in retail stores like CVS and Wal-Mart are going to grow rapidly in number in the years ahead. And if people like Kumar are any indication, customers are going to flock to them.


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