Bobbi Radford came to CVS MinuteClinic in Batavia, Ohio, last Thanksgiving because she was experiencing pain in her arm.
“I waited an hour and then was told to go to the (emergency room),” Radford said. After the employee provided her with her history of congestive heart failure, she was directed to go to the emergency room. But Radford says after she did that, it was found in the emergency room that she had tennis elbow.
“It was a waste of my time, and I still had to go to my family doctor,” Radford said.
Despite the early promise of convenience and accessibility, in-store clinics have not been the golden goose that many retailers originally envisioned. That's why Walmart recently announced it would close its 51 full-service health care centers. One symptom of a faltering market is Walgreens, which announced the closure of 160 VillageMD locations (Walgreens owns a 53% stake in VillageMD, which also operates free-standing clinics). CVS's MinuteClinic, the largest in-store clinic with more than 1,100 locations, announced the closure of dozens of clinics this year in Southern California and New England.
Not all patient experiences are negative. Carla Lemon of Conway, South Carolina, says she uses CVS's MinuteClinic for vaccines or sinus infections. “I had a good experience with them,” Lemon said.
But the business experience in retail health clinics has been largely disappointing. This isn't a big surprise to Timothy Huff, professor of health care systems management at Northeastern University. Huff has researched retail health clinics and how they deliver primary care, and says margins can be slim to none, and that numerous other challenges have hindered their success. What was not long ago seen as the “2.0” version of primary healthcare is now falling into disuse in the wake of the closure of in-store clinics.
“1.0 was the advent of urgent care centers. These places 20 or 30 years ago gave people alternatives to primary care doctors,” Huff said. But about 15 years ago, Huff says, the space began moving into heavily trafficked stores like grocery stores and department stores as health care tries to meet people where they are. But this presents challenges that many retailers, and even some service providers, are not aware of.
“Some of these organizations have developed this part of their business too quickly and haven't realized the cost model in maintaining it,” Huff said. Insurance reimbursements at these clinics are low, but expenses have risen dramatically. “I don't think the math fits right now in a lot of places to get a lot of these organizations. Some of these big organizations are cutting down the moat and pulling out,” Huff added.
Retail clinics depend on the volume of sale. “If you can't pump a lot of patients, it's not going to work,” Huff said. Recruitment was also a struggle. “It ended up being more expensive to operate than they thought, combined with a manpower shortage, and they didn't succeed.”
There is also the issue of cross-selling. Many retail chains use clinics as loss leaders to direct customers to other products and services they sell: attracting customers, hoping to buy other things. But the model was not achieved. If someone is sick enough to require care, they probably won't be in the mood to buy a pint of ice cream or socks while they're out and about. Likewise, “people who come in to buy groceries won't necessarily jump into a clinic,” Huff said.
MinuteClinic Retail Reality Check
Colleen Sanders, a family nurse practitioner in Washington, D.C., who now works in health care education, worked for MinuteClinic for two years. She pointed to the margin and staffing issues she witnessed.
“Health care is a business in the United States of America; as we look at the sheer numbers of billions being generated, that doesn't mean there's going to be huge profit margins. I think retailers have realized that they're not going to make millions and millions of dollars,” he said. sanders. “The margins are small.”
At the same time, staffing costs, squeezed to already slim margins, meant that when Sanders worked at MinuteClinic, she was doing everything from screening people, to billing and cleaning up the clinic at the end of the day, and any untrained support staff were at their best. Conditions, she said. “This was the model to ensure they could do that so they didn't have to add staff. But with the volume, you need additional staff so that the professional can devote time to patient care, because that's where you bill the insurance and the revenue comes in.”
The 15 minutes allotted to her to see a patient were often not enough to treat the complex diseases that people sometimes suffered from. For some patients, the service wasn't fast enough: Sanders recalled a 7-year-old girl being treated saying the treatment took more than a minute. Ultimately, Americans' “want to get it now” culture is incompatible with medicine, as the closing of retail clinics indicates. “The pace at which we want health care to operate is not consistent with providing the level of service that we should be providing, along with the cost of having support staff,” Sanders said. “If we wanted to make an impact in retail health care, we would hire registered nurses instead of medical assistants, but that would cost too much.”
CVS has not commented directly on the closures, but a spokesperson described the latest strategy as a combination of care delivery capabilities — a mix of virtual, in-store and in-home services — that provides a “more convenient experience.”
Walmart and the problem of size versus price
In 2019, Walmart announced a bold initiative to open 4,000 in-store health clinics by 2029. But those plans ended with the closure of the 51 clinics it recently opened.
“Primary care is a low-margin business,” said Arielle Trzecinski, a principal analyst covering health care at the research firm. Forrester. “Compared to what they see in traditional retail, healthcare is a radically different business,” Trzcinski said, citing the challenges of dealing with insurance companies and the administrative burdens that healthcare brings.
Retailers cannot recover money from providing primary care as a loss leader in the same way that other healthcare organizations can.
“Primary care is a feeder for patients who need high-precision services, like surgery or specialists. Hospitals make money on the back end, and Walmart or Walgreens didn't have that,” Trzcinski said. CVS is doing better because of its merger with health insurer Aetna that now allows it to sell other services, including mental health.
“Walmart ultimately believed it was solving an important problem,” Trzecinski said, but she added that Walmart had not put its full marketing muscle behind the effort or established relationships with other employers to open a path to the clinic. “They set out to make health care affordable and convenient for their customers. But to do that you need volume. … It takes volume or a different pricing structure to make it work, and in the end, Walmart didn't have either of those calibrated right.”
A missed opportunity for rural America
Sanders says the limitations imposed by the business model have undermined one of the great promises of the retail clinic concept: bringing health care to rural areas.
“Walmart has tried to go into rural areas where providers are scarce and to meet the needs of the community; I think it's a great idea because everyone knows where their local Walmart is,” Sanders said. “But getting providers to go into rural areas and operate is a real challenge. The quality of life and the things that “People can do it in a small town that's not as attractive as urban centres, so they pay the providers a premium to work there,” which is another thing that erodes revenue.
Retailers will continue to experiment with the model.
For example, Dollar General has tried to find a “workaround” by offering mobile clinics that visit some of its rural locations, offering a variety of simple medical services.
Amazon's recent launch of One Medical, which features a $9 per month subscription fee for existing Prime members, offers another way to make money.
“They get your money whether you end up using the service or not, and it's a good price if you need care,” said Virgil Brantz, CEO of Washington-based fintech health platform MacroHealth. Care is virtual, but you can come in if you are near a One Medical facility. Unlike most models that make money when patients come in, “Amazon makes more money if you don't come in. So there's something a little different about this retail model,” Brantz said.
In-store health clinics can be profitable and viable, and retailers are experimenting with incremental approaches tailored to the local market. Walgreens recently announced the opening of a handful of in-store health clinics in Connecticut, which will be operated by Hartford HealthCare, with the clinics being named “Hartford HealthCare at Walgreens.” Patients will be able to go beyond typical small-scale clinic services and benefit from Hartford's larger network of specialists and care options.
In Phoenix, the Be Well Health Clinic operates in a Walgreens near the Arizona State University campus and serves only sexual health issues.
“The common thread is that it is a local partnership with a local provider with a shared goal of providing convenience and access,” a Walgreens spokesperson said.
Meanwhile, in Atlanta, smaller clinics, operating within Kroger, are shifting services to focus on senior care.
Walmart and Kroger did not respond to requests for comment.
This is all part of what Hoff calls “Healthcare 3.0,” the continued disruption and evolution of primary care delivery based on market and customer needs, including retail clinics. New models will emerge, and not every model will succeed.
“Every few years, there's a group of outsiders trying to make changes to health care, both good and bad,” Brantz said. They are bound to “hit a brick wall of the reality of how complex health care is.”
Explanation: Walgreens had a 63% stake in VillageMD, but the stake was reduced last year to 53% as part of a reorganization. The story has been updated to reflect this.
