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Discount Healthcare (and comments)

12 June 06

 

            Remember Health Stop?  Back in 1985, venture capitalists invested millions in the company, which ran small medical clinics in big box retailers like Wal-Mart and Target.  These clinics were designed to do basic family medicine at much less than the cost of a visit to the hospital emergency room or the doctor’s office.  The target customers were people with no family doctor and those who needed care on nights and weekends. 

 

At its peak, Health Stop was doing over $50 million in annual business with more than 100 clinics spread across the east and midwest of the United States.

 

And then the business fell apart.  According to Harvard professor Regina Herzlinger, this occurred because doctors and emergency rooms saw Health Stop as competition, and took action to restrict its growth.  Doctors questioned the quality of care delivered at the clinics, and hospital administrators argued that they needed the revenue from clinic-type patients to subsidize their more expensive services.   The venture capitalists who funded the company came from high tech and had limited experience with a business in the healthcare environment.  After ten years, Health Stop was dissolved.

 

The consumer need for simple and inexpensive medical care has never gone away, however.  A recent article in The New York Times described several new ventures designed to serve pretty much the same market that Health Stop identified in 1985 – those patients in need of quick, straightforward, and inexpensive medical procedures.   

 

 

 

Steve Case’s New Business

 

 

Steve Case, the founder of AOL, is a major investor in one of these companies, called RediClinic.   He told the New York Times about his experience in taking his daughter, who had an ear infection, to his local hospital’s emergency room on a Sunday:

 

"We waited four hours and they just weren't able to see us … [I thought] this is crazy: a society in which everything is convenient other than what people care most about, which is taking care of their health.”

Steve Case, quoted in The New York Times, 14 May 06

 

 

Case is not the only famous entrepreneur involved in developing this kind of business.  Glen Nelson, who was the Vice Chairman of Medtronic, is on the board of a startup called MinuteClinic.  Hal Rosenbluth, who sold his travel business to American Express, is funding a company called Take Care Health Systems. 

 

Whether named MinuteClinic, RediClinic, or Take Care Health Systems, however, these companies all follow the same basic formula. 

 

·        They locate in drug stores like CVS or big box retailers like Target and Wal-Mart;

·        They are staffed by a nurse-practitioner;

·        They post a price list;

·        They emphasize speed and simplicity.

 

For example, here’s a listing of the vaccines available at a MinuteClinic located in a CVS:

 

 

The New York Times                           

 

MinuteClinic Price List

 

 

There have been a number of changes in the healthcare world that make the environment for these new efforts much more attractive than was the case for Health Stop back in 1985:

 

·        The growth of health savings accounts coupled with high deductible insurance policies means that many healthcare consumers are paying directly for low-priced services.  The prices charged by these health clinics are much lower than in a doctor’s office or a hospital emergency room. 

 

·        Medical help on the internet.  The internet contains numerous sites that allow patients to self-diagnose for common symptoms, thereby replacing the need for a doctor in many instances.

 

Even after all this change, however, the physician response has been mixed.  After all, these clinics do represent competition.  Consider the position taken by the American Academy of Family Physicians:

 

“[If the clinics] stick to this limited scope, they may have a small role in providing acute health care to people who are mildly ill, when their only other alternative at the time might be an emergency room."

 

Larry Fields, President of the American Academy of Family Physicians, in The New York Times (my emphasis)

 

Not exactly a ringing endorsement.

 

And the fact is, none of these clinics are successful yet.  Steve Case’s RediClinic has 11 clinics currently in operation.  He plans to expand to 500 by 2009.  MinuteClinic has branches in 73 retail stores.  These companies are at the same kind of stage as Health Stop was when it first got started twenty years ago. 

 

The American Medical Association is preparing a report on the new clinics, which will be published over the next several months.  Negative word-of-mouth by physicians twenty years ago was a major factor in Health Stop’s decline.  

 

But times have changed, and the environment for this kind of venture has improved.  An approach that struggled in 1985 may be a hit in 2006.   

 

More Information:

 

1.                          Regina Herzlinger’s article, “Why Innovation in Health Care Is So Hard,” was published in The Harvard Business Review in May 2006.

2.                          The New York Times story on the new clinics was published on 14 May 2006.

3.                          Health Savings Accounts were one of my Innovations to Watch in 2006.

4.                          Glen Nelson, who is on the Board of Directors of MinuteClinic, was also featured in last week’s update on Chief Growth Officers.

 

Comments

Eric,
 
as to be expected, i have been following this movement for the past couple of years.
 
though to be frank, i did not follow Health Stop back in the '80s.
 
i do think this model could provide great access to care, at an affordable level, conveniently - great for minor issues, folks on the go, good for the uninsured.
 
however, based on this current model, i would not be an investor, as i do not think it is economically sustainable.  should look at the contribution margin per 'store'.
 
instead of a primary care physician, (Family Practice, Internist or Pediatrician), a Nurse Practictioner or Physicians's Assistant would see the patient - which is a lower cost type provider - a good thing.  however, the price has also been lowered - bad news.  Overhead and carrying costs are still the same, or, based on the location, could be even more costly retail space.
 
When you look at how primary care is doing in this country today, independent primary care practices are struggling, with incomes flat or going down. 
 
so, how does this model change that dynamic?  do not see anything radically different really.
 
would expect this model will need to evolve - adding diagnostic testing, raising prices significantly, further diversifying, partner with local physicians/hospitals - in order to survive.  the VC community will not be happy with the return on this model.
 
the VC community took a bath in healthcare not long ago when they invested in something called PPMCs - Physician Practice Management Companies.   i am afraid this new trend will follow that path.
 
i wonder if the underlying cause of the demise of Health Stop was not the economic model itself back in the '80s.  very tough to make this low margin business work as has been seen by independent physicians, hospitals and health systems to date.
 
my bet, if i were to make one, would be on high-tech to provide leap-forward innovation in healthcare and provide a tremendous return for investors.  Two areas: nanotechnology and gene therapy.  what is being contemplated is mind-boggling.  imagine nanos that are programmed to find and 'eat' cancer cells, then pass through your system like waste.  imagine having an injection w/new genes that gives you (a 'white' person) a permanent 'tan' to virtually eliminate you getting skin cancer from the sun. 
 
cant wait for the future...
 
just my two cents.
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First, I just to say that I enjoy very much receiving the ICE Updates. They are very impressive.

Second, with regard specifically to the current update on new developments in the healthcare sector, you also may want to look at Lifeline Screening Systems, which focuses on providing at a low cost diagnostic tests for:

<http://www.lifelinescreening.com/s_stroke.asp>Stroke/Carotid Artery Screening <http://www.lifelinescreening.com/s_abdominal.asp>Abdominal Aortic Aneurysm Screening <http://www.lifelinescreening.com/s_peripheral.asp>Peripheral Arterial Disease Screening <http://www.lifelinescreening.com/s_osteoporosis.asp>Osteoporosis Screening You can find out more at: http://www.lifelinescreening.com Apparently, the business model blends low cost, use of technicians, portable centers of operation around the country, providing screening not normally done by MDs, HMOs, etc initially. I guess the assumption is that if the cost is low enough, Life provides the first line of defense and screening. Floow-up would then be done one's doctor

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Hey Eric,

 

Given your recent musings re: convenient health clinics, I thought you would find this article timely and somewhat déjà vu (all over again.)

 

Rise of retail clinics giving doctors a chill

AMA to make push for more scrutiny of sites staffed by nurse practitioners

By Bruce Japsen
Tribune staff reporter

June 12, 2006

Feeling threatened by the proliferation of retail health clinics staffed by nurse practitioners, the nation's largest doctors group is pushing this week for increased scrutiny of the clinics and the nurse practitioners who staff them.

Basically, the American Medical Association has a problem with caregivers like Laura Maxwell.

Maxwell, a 25-year-old licensed nurse practitioner with a master's degree, checks coughs, gives vaccinations and dispenses other routine medical care at The Little Clinic in a Kroger grocery store in Louisville.

"We see lots of minor illnesses like colds, sore throats, and write a lot of prescriptions, typically for viruses," said Maxwell, who views her clinic as a complement to a physician's care. "It's a place they can go when the doctor's office is closed."

The Little Clinic, which operates eight facilities in three states, opened sites in Mt. Vernon and Carbondale, Ill., within the last year.

As at most other retail clinics, the operators say their offices are open seven days a week, with evening hours, and no appointment is necessary. A doctor comes by to review charts and other decisions made by the nurse practitioners but typically does not see patients.

Such clinics advertise that they will treat patients with routine maladies in 15 minutes or less, the amount of time you might spend in a waiting room at a doctor's office as physicians pack more patients into a day.

Clinics are hiring nurses with advanced degrees to fuel their aggressive expansion, and that is making some physicians nervous about their practices and pocketbooks. They also say it could affect the care people receive.

Some AMA members say the clinics should not be a substitute for the doctor-patient relationship and need more uniform state rules requiring closer physician involvement.

The public should greet this new medical-care model with a healthy dose of skepticism, AMA officials say.

"The AMA is concerned about patients who would seek care in a free-standing clinic and have a more serious disease that would not be initially diagnosed or diagnosed quickly [in the retail clinic]," said Dr. Rebecca Patchin, an AMA board member and pain-management specialist who is a former nurse.

Although nurse practitioners have advanced degrees that can require six years or more of medical education, Patchin said physicians can have twice the education and training.

"When I was a nurse before I went to medical school, I did not always know what I didn't know," she said.

The AMA's annual meeting of its policymaking House of Delegates runs through Wednesday at the Chicago Hilton. A report and recommendations regarding retail clinics are among the dozens of topics the group will consider as it decides where to focus its lobbying clout.

Number mushroomed

The AMA's worries come as the number of retail health clinics has mushroomed from less than a half dozen five years ago to several hundred projected by the end of this year. The clinics are well funded, with some of the nation's biggest retailers and groceries opening kiosklike clinics, usually near their pharmacy counters.

Last month, for example, Deerfield-based pharmacy giant Walgreen Co. jumped into the business, announcing plans to develop more than 20 clinics in its Kansas City area and St. Louis stores in a major expansion.

More than a dozen AMA delegates testified before a committee Sunday, raising numerous concerns, including whether retailers were cherry-picking patients in suburban areas.

"I don't think you will find any of these clinics in the inner city," Dr. Arthur Snow, an AMA delegate and family physician from Shawnee Mission, Kan., not far from Walgreens' targeted expansion in the Kansas City area. "I'm concerned about the care."

Retail-clinic developers and the nurse practitioners on staff defend the model as an important and convenient way for consumers to access the health-care system, particularly for the 45 million uninsured Americans who cannot afford traditional doctors.

Walgreens said fees at its retail clinics will range from $48 to $68 but cost less for consumers with health-care coverage, depending on the person's plan. Most health plans provide some coverage for clinic visits, which cost less than the $100 or more for a typical doctor's office visit, industry analysts say.

"Access to care is very important," said Jan Towers, director of health policy for the American Academy of Nurse Practitioners. "Even with episodic conditions, people end up in an emergency room because they cannot get into a doctor's office, and that costs the health-care system."

Retail-clinic developers say they are not trying to take the place of traditional doctors and want to work with them, as is required by state regulations.

Telephone consultations

Yet AMA members say a physician's affiliation with a retail clinic and the nurse practitioner on site varies widely among states. In some states, AMA members say, a doctor is available only for telephone consultation.

In Illinois, rules are considered stricter than other states because a nurse practitioner must have a collaborative agreement with a physician, who must be on site at least once a month to provide medical direction and consultation. That is not always true in other states, the AMA says.

Among the AMA's recommendations expected to be presented to delegates this week is a requirement that doctors be involved in the protocols of the clinics, and that nurse practitioners establish a referral system with physician practices.

"Definitely, you need a closer relationship with a doctor," said Dr. Peter Eupierre, an internal medicine physician and president of the Illinois State Medical Society.

"It would be very difficult for a nurse practitioner to work totally independent," Eupierre said. "How can you describe a rash over the phone? Describing a rash is not the same as seeing it yourself."

Yet supporters of retail clinics say the relationship between doctors and the retail clinics and their practitioners is fine. They say the AMA is overreacting to something that is filling unmet medical needs.

"It's a new concept, and there is a lot of preoccupation on the part of the AMA to maintain oversight for health-care activities," Towers, of the nurse practitioners group, said, adding doctors shouldn't worry about losing business.

"If a patient has to wait weeks to be seen for something that is acute, they are not going to be in the doctor's office anyway."

 

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