May 8, 2008
Pace Slows for Opening In-Store Clinics
The easy money that many saw in opening in-store clinics was a bit harder to come by than expected so fewer new facilities are being opened as companies in the space try to bring operational expenses in-line with the realities of the marketplace.
As a piece in The Wall Street Journal pointed out, a number of operators have been forced to close in-store clinics. The paper’s website puts the number of clinic closings at 69 in 15 states in recent months.
The biggest operator of in-store clinics, CVS Caremark, recently announced that it was scaling back plans to open new locations. The company, which opened its 500th location back in March, has gone from plans to open up between 150 and 250 additional clinics in 2008 to adding another 100 locations instead.
Tom Charland, the owner of Merchant Medicine and a former vice president for strategy at MinuteClinic, told The Journal, “We have seen fallout in this industry, on a smaller scale, that is not unlike the dot-com bubble. The big mistake was for people to think they could reach break-even in six months. People are learning this is an 18-to-24-month process to get to break-even.”
While MinuteClinic scales back, it appears as though its full steam ahead for Walgreens’ Take Care health clinics. The company is looking to open roughly 240 new clinics before the year’s end.
While CVS and Walgreens chose to buy in-store clinic companies, Wal-Mart has taken the approach of working with partners including hospital systems in local areas to operate co-branded facilities. The retailer plans to have up to 400 clinics open inside its stores by 2010. It currently has roughly 50 sites with in-store clinics.
Discussion Questions: What is your take on developments in the in-store clinic business? Are recent closings along with plans by some to slow openings a temporary blip that signals the business is slightly ahead of consumers or is it an indication that this is not the money making opportunity that evangelists predicted?
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Rob Eder, what he said.
You wouldn’t pick on a sophomore would you?
That is more or less what I told an executive from a mid-tier pharmaceutical manufacturer at a business conference I attended several weeks ago, one of several conversations I had over the course of the event regarding the current state and the future of retail clinics in America. I couldn’t help but recall that conversation yesterday as I read the WSJ story.
You see, most people these days want to talk about the growth, which, at the time, was up about 800 percent over the prior year, and was on pace, as it still is, to double year over year for the next three to five years. But a few others wanted to know what we thought about the small handful of clinics that had been forced to close shop, a cruel and somewhat predictable result of the early evolution of the retail clinic model. Predictable not because these were bad companies that did not know how to run clinics; predictable, because you had to believe with as much venture capital that was coming at this whole thing in the very early days that there was going to be some kind of shakeout–and some degree of consolidation to be sure–before this industry even began to sense its own maturation.
At one point, Retail Clinician had tracked more than 40 different companies that had emerged as clinic providers. We never imagined it would stay that way for long. If the typical retail pharmacy takes two to three years before it begins to reach profitability, why would the expectation for a new clinic be much different? The truth is the models are quite similar from that standpoint. While these companies are not openly reporting these numbers, Drug Store News has learned that where their clinics have been up and running for about two years, the convenient care industry’s leading operators have reached profitability in these more mature markets.
Still, some people–it would seem even fewer than the actual number of clinics that have closed in recent months–aren’t quite so convinced of the viability of the model.
“What about the doctors?” they ask.
You tell them that all the top operators actively build their referral networks with the local physicians, urgent cares and hospitals in the communities where they operate their clinics, and that in general, the AMA is on board; that it was only ever a handful of splinter groups within the AMA that ever really challenged the clinics at all.
“What about the nursing shortage?” they ask.
As much as I hate to answer a question with a question, what about the dwindling ranks of America’s family physicians? The number of third-year medical students who opt to pursue a career in general internal medicine has plummeted over the past 10 years while the number of nurse practitioners continues to grow.
Moreover, if you take a look at job satisfaction among nurse practitioners working in a retail clinic setting like we do–Retail Clinician magazine polls its readers, which now include several thousand nurse practitioners, twice a year–you would know that getting NPs to migrate over from other practice settings to work in the clinics isn’t really a very tough sell. Almost 99 percent of our readers describe themselves as very or extremely satisfied in their current positions, and as almost 90 percent came either from a physicians office or an urgent care, or a hospital setting, they have a frame of reference to compare it to. Our readers use words like “empowered” and “energized” to describe practicing in a retail clinic environment.
And then there are other signs out there; sure signs that retail clinics are still in their relative infancy in terms of the impact they can make in improving access to quality, affordable health care in this country. Indeed, this is only the tip of the iceberg. Drug Store News recently reported on the nation’s first retail-based dental clinic, All Smiles Dental, which last month opened in a Carnival Food Store in Plano, Tex. Then there is Hear At Last, which earlier this year opened its first retail “hearing solutions” retail outlet in south Florida, its first U.S. location. While that store is a freestanding location, the company also operates 18 of its hearing aid clinics, which use high-tech equipment to assess the cause of hearing loss and match customers up with the appropriate system.
Or you could just concentrate on the leaders: CVS, recently celebrated the opening of MinuteClinic no. 500, and although it recently trimmed back its projected clinic openings for the year from 200 to about 100, the company has earned a solid reputation for setting conservative goals and then blowing the doors of those goals. Meanwhile, in addition to about 150 retail-based clinics currently in operation and plans for as many as 250 more by the end of the year, Walgreens will now look to transition the more than 350 corporate-based clinics it acquired from I-Trax over to the Take Care brand. And, to help build national awareness for the Take Care brand, Walgreens is sending 10 RVs on the road to 300 U.S. cities this year to provide free health screenings and counseling to customers across the country, as part of its Take Care Health Tour.
To be sure, while Take Care and MinuteClinic and a few other clinic operators have been at it longer than that, this is really just year two for the organized retail clinic industry. It may be a slightly awkward time, to be sure, as evidenced by the recent fallout in the industry. Still, in the span of just two years, more than 1,000 of these retail-based clinics opened in this country, and only 69 of them have closed; that’s not too shabby–not even for a sophomore.
The bottom line is that if you are a pharmaceutical manufacturer, branded or generic, or an OTC drug maker and you aren’t trying to make a meaningful connection with this key group of influencers, that is, the nurse practitioners, physicians assistants and in some cases, physicians, that are staffing these clinics and pioneering this brave new frontier of health care–and most important prescribing and recommending your products, or NOT–you are missing a major opportunity.
Drug Store News knows that this model of care is a major part of the future of health care in America, and how it will be delivered. We know this because we have watched and reported as growing numbers of payers and patients have embraced the model. And why not? In terms of closing the gap on access and affordability to health care in this country, it is probably the single most progressive idea to come along since Lyndon Johnson’s Great Society created Medicare.
Slower growth = better profitability. Closing locations = better profitability. Nursing shortage = baloney. You can hire as many nurses as you wanna. Just pay them. If your compensation plan = “competitive” then you can’t find nurses. You believe in-store medical clinics were formed as a customer service? I have a great bridge to sell you. Think 1,000 in-store clinics is a lot? Well the National Association of Chain Drug Stores’ membership operates 37,000 drug stores.
Maybe what this is demonstrating is that the companies who were so quick to get into the in-store clinic business were not so interested in servicing the customer with convenient services, rather looking at the addition as another income generating attribute. From cleanliness, which was missing during my fellow contributors visit, and shutting down because times are tough shows a lot about the real purpose behind the launch.
Nothing is wrong with a return on your investment, but if it is marketed as being customer-focused, all efforts much be geared toward serving the customer and being willing to suffer losses until the customer sees and takes advantage of the service.
I think one problem is that some businesses were under the impression they could actually make a profit when in fact this is just a loss leader department to get people into the store. I think Walgreens, HEB, CVS, and Wal-Mart understand this. Wal-Mart was smart enough to find someone other company to buy into the idea so they didn’t have to invest themselves.
I don’t see the clinics ever being profitable. Larger medical clinics have opened small satellite clinics in Wal-Mart but their job is mainly to refer patients to the larger clinics that are staffed by doctors. Some insurance companies are encouraging the use of these clinics because of their lower costs.
Personally I’ve seen several dozen of these clinics and they are never busy. Usually staffed with one person who sits out front reading a magazine.
Funny you should mention Walgreens. When I was at FMI in Vegas, I stopped into one store on Las Vegas Blvd and peeked into the clinic.
It was dirty, contained a few barely usable chairs, had very little information except for a menu board and what I assume was a nurse practitioner who didn’t seem aware of my presence. I don’t care who’s running the operation, customer service still counts.
I’m certainly not implying that all of Walgreens’ operations look like this, but the lesson here is not to ignore the clinics and leave them to their own devices.
The brief does not mention consumer attitudes towards the clinics. Why have consumers chosen not to use the clinics? Is it because they are not aware that they are available? Is it that they don’t trust the quality of medical advice they would receive? Are consumers concerned about the confidentiality of their medical information?
Until we have more information, it will be hard to determine why they are not more popular.
A note on Vegas… I have been in the Walgreens and CVS on both sides of the Strip and they are clearly challenged by the geography and the overwhelming hordes of tourists that pass through those stores each day; keeping those stores clean is not quite as easy as it is in the middle of America, at the corner of Main and Main. On side note, I wonder if CVS will ever replace the giant roll of Kodak film on the roof of its Vegas Strip store with a smart card?
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Rob Eder, what he said.
You wouldn’t pick on a sophomore would you?
That is more or less what I told an executive from a mid-tier pharmaceutical manufacturer at a business conference I attended several weeks ago, one of several conversations I had over the course of the event regarding the current state and the future of retail clinics in America. I couldn’t help but recall that conversation yesterday as I read the WSJ story.
You see, most people these days want to talk about the growth, which, at the time, was up about 800 percent over the prior year, and was on pace, as it still is, to double year over year for the next three to five years. But a few others wanted to know what we thought about the small handful of clinics that had been forced to close shop, a cruel and somewhat predictable result of the early evolution of the retail clinic model. Predictable not because these were bad companies that did not know how to run clinics; predictable, because you had to believe with as much venture capital that was coming at this whole thing in the very early days that there was going to be some kind of shakeout–and some degree of consolidation to be sure–before this industry even began to sense its own maturation.
At one point, Retail Clinician had tracked more than 40 different companies that had emerged as clinic providers. We never imagined it would stay that way for long. If the typical retail pharmacy takes two to three years before it begins to reach profitability, why would the expectation for a new clinic be much different? The truth is the models are quite similar from that standpoint. While these companies are not openly reporting these numbers, Drug Store News has learned that where their clinics have been up and running for about two years, the convenient care industry’s leading operators have reached profitability in these more mature markets.
Still, some people–it would seem even fewer than the actual number of clinics that have closed in recent months–aren’t quite so convinced of the viability of the model.
“What about the doctors?” they ask.
You tell them that all the top operators actively build their referral networks with the local physicians, urgent cares and hospitals in the communities where they operate their clinics, and that in general, the AMA is on board; that it was only ever a handful of splinter groups within the AMA that ever really challenged the clinics at all.
“What about the nursing shortage?” they ask.
As much as I hate to answer a question with a question, what about the dwindling ranks of America’s family physicians? The number of third-year medical students who opt to pursue a career in general internal medicine has plummeted over the past 10 years while the number of nurse practitioners continues to grow.
Moreover, if you take a look at job satisfaction among nurse practitioners working in a retail clinic setting like we do–Retail Clinician magazine polls its readers, which now include several thousand nurse practitioners, twice a year–you would know that getting NPs to migrate over from other practice settings to work in the clinics isn’t really a very tough sell. Almost 99 percent of our readers describe themselves as very or extremely satisfied in their current positions, and as almost 90 percent came either from a physicians office or an urgent care, or a hospital setting, they have a frame of reference to compare it to. Our readers use words like “empowered” and “energized” to describe practicing in a retail clinic environment.
And then there are other signs out there; sure signs that retail clinics are still in their relative infancy in terms of the impact they can make in improving access to quality, affordable health care in this country. Indeed, this is only the tip of the iceberg. Drug Store News recently reported on the nation’s first retail-based dental clinic, All Smiles Dental, which last month opened in a Carnival Food Store in Plano, Tex. Then there is Hear At Last, which earlier this year opened its first retail “hearing solutions” retail outlet in south Florida, its first U.S. location. While that store is a freestanding location, the company also operates 18 of its hearing aid clinics, which use high-tech equipment to assess the cause of hearing loss and match customers up with the appropriate system.
Or you could just concentrate on the leaders: CVS, recently celebrated the opening of MinuteClinic no. 500, and although it recently trimmed back its projected clinic openings for the year from 200 to about 100, the company has earned a solid reputation for setting conservative goals and then blowing the doors of those goals. Meanwhile, in addition to about 150 retail-based clinics currently in operation and plans for as many as 250 more by the end of the year, Walgreens will now look to transition the more than 350 corporate-based clinics it acquired from I-Trax over to the Take Care brand. And, to help build national awareness for the Take Care brand, Walgreens is sending 10 RVs on the road to 300 U.S. cities this year to provide free health screenings and counseling to customers across the country, as part of its Take Care Health Tour.
To be sure, while Take Care and MinuteClinic and a few other clinic operators have been at it longer than that, this is really just year two for the organized retail clinic industry. It may be a slightly awkward time, to be sure, as evidenced by the recent fallout in the industry. Still, in the span of just two years, more than 1,000 of these retail-based clinics opened in this country, and only 69 of them have closed; that’s not too shabby–not even for a sophomore.
The bottom line is that if you are a pharmaceutical manufacturer, branded or generic, or an OTC drug maker and you aren’t trying to make a meaningful connection with this key group of influencers, that is, the nurse practitioners, physicians assistants and in some cases, physicians, that are staffing these clinics and pioneering this brave new frontier of health care–and most important prescribing and recommending your products, or NOT–you are missing a major opportunity.
Drug Store News knows that this model of care is a major part of the future of health care in America, and how it will be delivered. We know this because we have watched and reported as growing numbers of payers and patients have embraced the model. And why not? In terms of closing the gap on access and affordability to health care in this country, it is probably the single most progressive idea to come along since Lyndon Johnson’s Great Society created Medicare.
Slower growth = better profitability. Closing locations = better profitability. Nursing shortage = baloney. You can hire as many nurses as you wanna. Just pay them. If your compensation plan = “competitive” then you can’t find nurses. You believe in-store medical clinics were formed as a customer service? I have a great bridge to sell you. Think 1,000 in-store clinics is a lot? Well the National Association of Chain Drug Stores’ membership operates 37,000 drug stores.
Maybe what this is demonstrating is that the companies who were so quick to get into the in-store clinic business were not so interested in servicing the customer with convenient services, rather looking at the addition as another income generating attribute. From cleanliness, which was missing during my fellow contributors visit, and shutting down because times are tough shows a lot about the real purpose behind the launch.
Nothing is wrong with a return on your investment, but if it is marketed as being customer-focused, all efforts much be geared toward serving the customer and being willing to suffer losses until the customer sees and takes advantage of the service.
I think one problem is that some businesses were under the impression they could actually make a profit when in fact this is just a loss leader department to get people into the store. I think Walgreens, HEB, CVS, and Wal-Mart understand this. Wal-Mart was smart enough to find someone other company to buy into the idea so they didn’t have to invest themselves.
I don’t see the clinics ever being profitable. Larger medical clinics have opened small satellite clinics in Wal-Mart but their job is mainly to refer patients to the larger clinics that are staffed by doctors. Some insurance companies are encouraging the use of these clinics because of their lower costs.
Personally I’ve seen several dozen of these clinics and they are never busy. Usually staffed with one person who sits out front reading a magazine.
Funny you should mention Walgreens. When I was at FMI in Vegas, I stopped into one store on Las Vegas Blvd and peeked into the clinic.
It was dirty, contained a few barely usable chairs, had very little information except for a menu board and what I assume was a nurse practitioner who didn’t seem aware of my presence. I don’t care who’s running the operation, customer service still counts.
I’m certainly not implying that all of Walgreens’ operations look like this, but the lesson here is not to ignore the clinics and leave them to their own devices.
The brief does not mention consumer attitudes towards the clinics. Why have consumers chosen not to use the clinics? Is it because they are not aware that they are available? Is it that they don’t trust the quality of medical advice they would receive? Are consumers concerned about the confidentiality of their medical information?
Until we have more information, it will be hard to determine why they are not more popular.
A note on Vegas… I have been in the Walgreens and CVS on both sides of the Strip and they are clearly challenged by the geography and the overwhelming hordes of tourists that pass through those stores each day; keeping those stores clean is not quite as easy as it is in the middle of America, at the corner of Main and Main. On side note, I wonder if CVS will ever replace the giant roll of Kodak film on the roof of its Vegas Strip store with a smart card?