Wal-Mart is trying to brand itself a leader in health care. They've rolled out cheap prescriptions, changed their employee coverage (as paltry and sad a change as it was), and opened in store clinics. CEO Lee Scott even chastised business leaders for not weighing in on health care policy (we won't harp on the obvious irony). But this latest news from the Wall Street Journal is likely to throw a wrench in Wal-Mart's PR plan. It seems that Walk In Clinics are hard to manage, and they're hard to make money with. What with Wal-Mart's obsession with making gobs and gobs of money, it'll be interesting to see how long Wal-Mart's clinics will last. Wal-Mart had long touted these clinics as a cost effective solution to health care. It would eliminate doctors visits and safe people money, they said. It was, in essence, Wal-Mart's scheme to fix our health care crisis. Instead, we think Wal-Mart should offer affordable, quality health care to its workers, and legitimate policies on sick days. They can't make a ton of money off of it, but I'm pretty sure it'll work better than walk in clinics at keeping people healthy.
Here's the story from the Wall Street Journal:
Health Clinics Inside Stores Likely to Slow Their Growth
The boom in walk-in health clinics located inside pharmacies, supermarkets and big-box retailers is showing signs of slowing.
Hailed as an inexpensive option for treating minor health ailments like sore throats and rashes, the retail clinics have grown in
number to 963 as of May 1 from just 125 three years ago. The clinics typically feature nurse practitioners who can prescribe basic drugs, and the price for a visit ranges from $50 to $75.But in recent months, retail health-clinic operators based in New York, Nevada, Indiana and Alabama have closed their doors, shuttering 69 clinics in 15 states, including ones operating inside outlets of Shopko Stores, Meijer Inc., Bi-Lo LLC, Wal-Mart Stores Inc. and the Medicine Shoppe unit of Cardinal Health Inc.
Now, the biggest retail-clinic operator, CVS Caremark Corp., says it is scaling back expansion plans for its Minute Clinic brand.
"We have seen fallout in this industry, on a smaller scale, that is not unlike the dot-com bubble," says Tom Charland, the owner of industry consultant Merchant Medicine LLC and a former vice president for strategy at Minute Clinic. "The big mistake was for people to think they could reach break-even in six months," he says. "People are learning this is an 18-to-24-month process to get to break-even."
Mr. Charland says the venture capitalists and private-equity firms that backed many of the retail clinic operators failed to appreciate how complicated and expensive the clinics are to operate. Research shows that patients are enthusiastic about the clinics' convenience and quality of care, but acceptance has been slow.
CVS, which operates more than 500 Minute Clinic facilities, says its plan to scale back expansion is part of a change in strategy. David Rickard, chief financial officer, told analysts last week that the company expects to add 100 clinics this year, down from a prior estimate of 200 openings. He said the company may also close some Minute Clinic locations that aren't in CVS outlets. He said that CVS will focus on "enriching" services at Minute Clinic facilities rather than expansion, and that the company believes Minute Clinic will be a "terrific, successful little business."Some operators are finding that the clinics are complex to manage. Earlier this year, Check Ups, a clinic operator based in New York, abruptly closed 23 clinics that it operated inside Wal-Marts in Florida, Mississippi, Alabama and Louisiana. It was stretched thin by operations in multiple states, says company spokesman William Armstrong.
"You have to have a critical mass of stores seeing a high number of patients to get somewhere," he says. He adds that new clinics need to spend a lot of money on marketing to build public awareness and that the clinics become expensive quickly. "We ran out of operating funds," he says.
Not everyone is trimming sails. Walgreen Co. says it still plans to more than double the number of its Take Care health clinics this year by adding about 240 locations between now and the end of the year, bringing it closer to the number operated by rival CVS. The expansion will cause a drag on earnings in fiscal 2008 of five cents a share, the company says.
Tina Galasso, an analyst who follows the retail clinic industry for Verispan LLC, says the cost of setting up an in-store clinic runs about $500,000. That is one reason why much of the future growth in walk-in health centers is expected to come from big companies with deep pockets and from hospital systems that are already well-known within a community and don't have to spend so much on marketing.
In a strategy that combines both elements, Wal-Mart plans to partner with hospital systems to open as many as 400 co-branded store clinics by the end of 2010, up from about 50 sites in operation now. That approach is a departure from an earlier strategy under which Wal-Mart leased space to operators like Check Ups that weren't associated with hospital systems.
Posted by Taylor - May 7, 2008 05:19 PM - Health Care