Thursday, June 25, 2009

Will Wal-Mart revolutionize clinics in the same way they have revolutionized prescriptions?

While Washington talks about controlling health care costs, Wal-Mart is actually doing something about it. Its low-cost prescriptions, which have been matched by some other pharmacies, have had a major impact on health care costs for many Americans.

But another health care effort by Wal-Mart has met more rocky ground:

Two years ago, Wal-Mart Stores (WMT) announced plans to have retail medical clinics in 400 of its stores by 2010 and said it saw the potential for as many as 2,000. By February 2008, the retailer had 78 clinics. But now,—after failed venture-capital collaborations, a few faulty partnerships, and a reassessment of the business model—it has only 31.

So what happened? According to BusinessWeek, the status of one of Wal-Mart's competitors tells the story:

Retail clinics need customer traffic to cover their $500,000 to $600,000 yearly operating costs....Walgreens (WAG) subsidiary Take Care Health Systems, for example, operates more than 345 offices and sees patients as young as 18 months. By expanding its hours and services, Take Care Health had estimated sales of $450,000 per location in 2008

Until you get more traffic, this will be a money-losing operation. And Wal-Mart's clinics are not owned by Wal-Mart, but by third parties who may not have the deep pockets to build a client base. And they may have problems getting investment:

Wal-Mart requires its independent operators to hire health professionals to deliver care, says Mary Kate Scott, founder and CEO of Scott & Co., a health-care consultancy. For venture capitalists looking to invest in a rapidly profitable business, running a co-branded clinic with two partners is a difficult proposition. "When you don't deliver the service or own the brand or own the space, you have almost nothing," Scott says. "Essentially, the investors lost with the Wal-Mart strategy."

In January 2008, nascent clinic operator CheckUps closed its 23 Wal-Mart locations across the South after failing to raise enough money. Then in June, Colorado-based SmartCare Family Medical Centers shuttered all 15 of its in-store businesses. RediClinic, whose largest investor is AOL (AOL) co-founder Steve Case's Revolution Health Group, parted ways with Wal-Mart in December, shelving plans for 200 co-branded clinics nationwide.

But part of the problem may be Wal-Mart itself:

Wal-Mart's clinics, however, are typically situated inside near the store's main doors—along the same row as its photo studios and Subway sandwich shops—rather than near its pharmacies, and may catch a consumer's eye only on the way out. Plus, the company doesn't allow signage directly outside the store to promote the clinics and restricts indoor signs to areas near the clinic offices....

But before these stumbles, people were already speculating that the effect of the Wal-Mart clinics on health care would be substantial. detailed some effect in February 2008. A sample:

1. More immunizations: With immunizations available at Wal-Mart, they're much more convenient for those that may not have time to go to the doctor. As a result, more people will be immunized, and the risk of contagious disease will be lowered.

Read the other 19 here.
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