Health Care Retail Clinics Continue Gradual Expansion Through 2012: Deloitte Center For Health Solutions Report

WASHINGTON, D.C., Nov. 16, 2009 — Despite the recession, overall growth of the heath care retail clinic market has increased approximately 15 percent in the past two years, according to a new report released today by the Deloitte Center for Health Solutions. Retail clinic market growth, however, will likely slow to 10-15 percent from 2010 through 2012 and will accelerate above 30 percent from 2013-2014, according to the report.

The report, “Retail Clinics: Update and Implications,” suggests that consumer adoption of retail medicine is strong and growing. Additionally, the report suggests that the industry’s potential to expand its revenue opportunities will support its long-term sustainability. The four factors that will likely contribute to the sector’s growth include:

• Increased use and satisfaction by consumers
• Increased use and acceptance by commercial health plans and large employers
• Increased services provided through the retail medicine model
• Increased demand for preventive and primary health care services as a result of health reform and consumer demand

“The growth and evolution of retail clinics reflect opportunities for disruptive innovation and an improved value proposition of price, quality and service for the U.S. healthcare system,” said Paul Keckley, Ph.D. and executive director, Deloitte Center for Health Solutions. “While the current economic downturn has incited a period of contraction, the retail clinic industry will emerge with a more refined business model to drive a second, albeit slower, wave of growth in the next three years.”

Key findings highlighted in the report include:

• Patient Volume Remains Strong: According to the report and Deloitte’s 2009 Survey of Health Care Consumers, 33 percent of consumers indicate they are willing to use a retail clinic, especially younger and middle-aged working adults. Moreover, 30 percent of respondents are likely to use a retail clinic if it would cost them 50 percent less than seeing their physician.

“Retail clinics represent a new channel that can deliver primary care services more conveniently and at lower cost to consumers,” added Keckley. “Clinic services are typically safe and effective, due in large measure to medical management programs that are evidence-based and supported by electronic medical records. Additionally, health insurance plans are increasingly offering coverage of retail clinic visits in their benefits packages for individuals and employers — ‘covered lives’ is a key to growth.”

• Existing Locations: Most retail clinics operate in retail pharmacy settings (82 percent), or as a department or wholly-owned subsidiary of the host organization, such as a grocery store (12 percent) or big-box discount store (6 percent). Notably, 2009 has seen increased activity by acute care organizations entering retail medicine via contractual arrangements with drug store and grocery chains.
• Potential Locations: The market potential for retail clinics remains strongest in retail pharmacies, as within 10,000 retail pharmacies, there are currently 801 clinic locations. However, big-box discount stores and grocery stores have expansion opportunities if these channels selectively leverage services, given:
  • Within over 5,000 big-box discount stores, there are currently only 58 clinic locations
  • Within over 5,000 grocery stores, there are currently only 115 clinic locations
• The Evolving Business Model: Core services at retail clinics typically include preventative health screenings, prescriptions and over the counter (OTC) therapeutics and uncomplicated primary care. The retail clinic business model is capable of supporting additional revenue streams (zones) unrelated to its core operations:
  • Zone Two: Core extenders including medication management, health coaching for chronic issues and employee wellness
  • Zone Three: New revenue programs including care management services for chronic issues; referral management services for acute, specialty or OTC issues; and health insurance for individuals or groups
• Challenges to Growth: The retail clinic industry faces a few challenges, including labor shortages, compensation inflation, price pressures from new entrants and regulatory pressures from state governments — all of which may slow growth or impede retail clinics from opening. In fact, in some states and localities, regulators are fearful that retail clinics represent a compromise to safe and effective care. Additionally, some local physicians have actively campaigned against retail clinic openings and advised patients to seek care elsewhere.

“As a new entrant to the health care industry, retail clinics represent a threat to many traditional health care stakeholders,” added Keckley. “However, to consumers, health plans and employers, retail clinics offer an important health care alternative with a strong value proposition. Therefore, we expect this new sector to mature while growing its scope of services, locations and impact on population-based health status.”

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