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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.
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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.
==============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
======
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
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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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