Clinics Grow, but Small Operators Fade: Analyst

MICHAEL GARRY

SHOREVIEW, Minn. — Along with the rapid growth in the number of retail convenient-care clinics in the United States, 10 third-party companies representing a total of 139 clinics called it quits during the past year, according to an industry analyst.

The closings by such operators as CheckUps USA, which ran clinics in 23 Wal-Mart Supercenters, and Affordable Basic Care, which had 18 clinics in Meijer stores, were detailed by Tom Charmond, chief executive officer of Merchants Medicine, a research and consulting company located here, in his “Merchant Medical News” newsletter. The closings were tracked between Aug. 1, 2007, and Aug. 1, 2008.

Of the 139 shuttered clinics, 51 were operated at Wal-Mart Supercenters (by three different third-party companies), and 25 treated patients at Medicine Shoppe/Kerr Drug outlets under the direction of Corner Care, the newsletter said. The other closings took place at a range of retailers, including Meijer, Schnuck Markets, Carnival/USA Drug, Shopko, Kmart, Winn-Dixie, Bi-Lo and Bruno's.

“People started paying attention last month when we said that the total went down [by 12 clinics] in June,” Charmond said. This was the first monthly decline in the number of clinics.

At Schnuck Markets, St. Louis, four InstaClinic units were closed last month, though two of them “are set to reopen pending additional partnership negotiations [by InstaClinic],” said Lori Willis, a spokeswoman for Schnucks. “We're still committed to the idea.”

Overall, the retail clinic business experienced a net growth of 427 clinics during the same 12-month period, bringing the nationwide total on Aug. 1 to 981 (222 in supermarkets), said Charmond. Since then, Bashas', Chandler, Ariz., announced the signing of a long-term contract with MediMin, Avondale, Ariz., which will run clinics in the company's Bashas', Food City and Ike's Marketplace stores. Charmond predicted that another 300 retail clinics will be added over the next year, and that about 3,000 clinics will be open in five years.

Tine Hansen-Turton, executive director, Convenient Care Association, Philadelphia, a trade group for retail clinics, said the retail clinic industry experienced its largest growth last year, an increase of 400%. “We recognized that we would not continue to see that kind of growth,” she said.

The retail clinic operators who opted to shut down during the past year were “without exception” those who lost the support of venture capital firms, Charmond said. “The clinics were not generating cash quickly enough to satisfy the private investors,” he added. It takes a minimum of 24 months on average for a retail health clinic to break even, he noted.

A retail clinic's ability to attract patients depends on a number of factors, including participation in the major insurance company networks, backing by local employers, buy-in from local hospitals and physicians' groups, marketing by the operator and promotion by the host retailer. “You need all of the stars aligned to make this work,” Charmond said. “But once you get people to try the clinics the first time, they usually come back.”

Retailers should support the clinics in their stores with exterior signs, circular mentions and in-store promotions, Charmond said. “If the retail pharmacy is not behind this, I honestly don't know why they would have a clinic.” Willis of Schnucks said the chain promoted its clinics “like in-store banks, with ads, signage and special events.”

The economy was not a factor in the closings, Charmond noted. “Health care runs counter to downturns in the economy,” he said. “People don't stop getting sick.”

Clinic operations that have remained in business are those financed by retailers or by health care organizations, with the most growth driven by the latter, Charmond said. The only food retailer with a stake in a clinic operation is Kroger Co., Cincinnati, which has a “significant” investment in The Little Clinic, said Hansen-Turton.

More food retailers with pharmacies could be targeted by clinic operators seeking financing as well as space, Charmond said, especially since two of the large drug chains, CVS and Walgreens, are no longer available, having already made financial commitments to their own clinics.