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Why Retail Walk-In Clinics Have Failed to Change Healthcare Delivery

Posted Jan 03 2014 12:00am

I have followed the evolution of walk-in clinics in retail pharmacies and big box stores for a number of years (see: Study of Patients Patronizing Walk-In Retail ClinicsA New Version of the Walk-In Retail Health Clinic Launches in Walgreens ). I, like many others, thought that these clinics could lead to a transformation of healthcare delivery, offering inexpensive and convenient care for minor problems and decompress hospital ERs. This has apparently not happened according to an article in the Harvard Business Review (see: Why Retail Clinics Failed to Transform Health Care ). Below is an excerpt from the article:

When retail clinics entered the U.S. health care market more than a decade ago, they were greeted with high expectations. The hope was their lower cost structure and focus on convenience and price transparency ...would engender radical changes....Today, there are more than 1,600 clinics across the country, which have had a total of 20 million patient visits. Nonetheless, their performance has been disappointing: Their growth has been less than expected, they have not expanded care to underserved markets ...and their impact on health care spending...remains unclear. Understanding their disappointing performance is particularly important given that retail clinics are viewed as the prototypical example of how disruptive innovation can change the health care system for the better....

Today, retail clinics nationwide receive roughly 6 million visits per year. However, the growth in the number of clinics has now plateaued, and they still account for less than 5% of the 100 million outpatient visits to physicians’ offices and emergency departments for simple acute conditions such as sinusitis and urinary tract infection, a number we might have expected to be higher by this point....{T]he convenience of retail clinics has been a selling point primarily in higher-income communities, where patients have health insurance and access to a physician. Although retail clinics are more affordable than physician practices, they have not been effective in attracting the largest population of nonconsumers: the poor, who paradoxically continue to rely on costlier sources of care such as emergency departments.

The disappointing performance of retail clinics can be attributed to some perversities in regulations and reimbursement in the current health care system. First, the expectation based on the disruptive innovation model was that traditional providers would view the simple acute problems treated at retail clinics as low-margin services they would give up. However, due to a disconnect between reimbursement and actual costs of care, these incumbent providers view simple acute problems as high-margin work that offsets the losses from caring for more complex problems. Second, these clinics are often staffed by nurse practitioners. But regulatory limitations on nursing scope of practice, which vary significantly from state to state, and regulation that fixes reimbursement to nurse practitioners at 85% of physician reimbursement for providing the same care, have impeded more rapid expansion of retail clinics. Third, due to antiquated payment models, Medicaid plans that serve the poor have been reluctant to cover care in retail clinics and therefore shun the very market segment that may benefit the most from the convenience of retail clinics. 

The most insightful point in this article relates to the economics of emergency departments. For decades, we have read articles lamenting the misuse of EDs by patients with non-critical medical problems that would be better and less expensively served in physician offices. Now we have come to understand that these minor ED visits can be billed by hospitals to health insurance companies at many thousands of dollars each. This is high-margin work that the hospitals actually want and need to offset the cost of the complex cases that may not be fully reimbursed. Hospital administrators have sought to increase the appeal of ED visits with " no-wait " guarantees. To finish this point, we now learn that the Affordable Care Act (ACA) may increase ER visits by some newly-insured, lower-income patients (see:  Emergency Visits Seen Increasing With Health Law ). I think that only hope of reversing this trend is large patient insurance co-pays for ED visits. However, patients that present themselves to these facilities must be informed at the start of the visit about its estimated cost and the size of the co-pay.

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