Reality Check on the Retail Health Spending Survey

by | Mar 16, 2016

By now you’ve probably seen the Health Affairs study (and requisite mainstream media coverage) stipulating that retail health clinics actually add to the nation’s healthcare spending by encouraging the use of medical services. The study is not without merit, but it’s worth taking a step back and getting to the root of why retail health has increased utilization and spending.

The study (abstract here), which examined Aetna claims data from 2010 to 2012 in 22 cities, found that 58 percent of retail health clinic use represented new utilization, compared to 42 percent for services that would otherwise occur in urgent care or an emergency department (ED). All told, these visits led to a “modest” healthcare spending increase of $14 per person per year.

The natural conclusion, as study co-author Dr. Ateev Mehrotra of Harvard Medical School told CNBC, is that payers and employers should think twice about covering retail health visits since, on the face of it, they don’t save money. This conclusion may be correct, but it misses the bigger picture.

New utilization isn’t necessarily bad. Some consumers visit the retail clinic and receive a diagnosis of a “cold” when a trip down the over-the-counter cold remedy aisle would do. Others visit the retail clinic only to discover that they should, in fact, go to urgent care, their primary care physician, or even the ED. Yes, such visits constitute waste. However, to deny a consumer who wishes to engage in their care just because that care isn’t occurring in the correct venue is poor service at best and a violation of the Hippocratic Oath at worst. Healthcare needs to accommodate those who actively seek services, not push them away. (Besides, wouldn’t the average physician receiving a referral prefer a diagnosis from a retail health clinic to one from Dr. Google?)

Retail health fills a void. Half of the customers at CVS Health Minute Clinics don’t have a PCP, according to the Washington Post. Forty percent of Walgreens Healthcare Clinic visitors say they would otherwise get care at a more expensive venue or skip care altogether. For these consumers, retail health clinics offer a foot in the door – one that leads to shorter waits, faster answers, and better customer service than a trip to urgent care, the PCP, or the ED.

Retail health is transparent. The healthcare industry has been quick to force consumers to pay more for services but slow to actually tell them what those services cost. Retail clinics, operating in an industry where price transparency is paramount, make pricing readily available at the consumers’ fingertips.. There’s no obfuscation or chargemaster at work.

It’s simple economics. As a good or service becomes less costly and more accessible, people are more likely to be willing to pay for it. As this happens, overall spending on that service increases, even as the cost decreases. (Think about it: When was the last time you changed your own oil or cut your own hair?) And treating common conditions is cheapest at retail clinics, according to Mehrotra’s own research.

Momentum is building. There’s a reason payers and employers are willing to cover retail health (and, for that matter, telehealth). The promise of consumer-driven health is meeting patients where they are – and, despite the billions of dollars spent erecting lavish facilities during the last construction boom, patients are less likely than ever before to be in ambulatory care let alone an acute care facility, regardless of the beauty of the edifice. Retail health visits topped 10 million in 2015, and the number of retail clinics topped 2,000. As patients face a heavier burden for the cost of their care, these numbers will only rise.

Smart healthcare organizations (HCOs) partner with retail health clinics instead of dismissing them as a costly fad. CVS Health has more than 50 clinical partners, while Advocate Health Care and Providence Health & Services run Walgreens clinics in Chicago and Seattle, respectively. This helps eliminate duplicate services while also steering patients without PCPs or specialists toward physicians within that system. Meanwhile, both retailers are implementing Epic electronic health record (EHR) systems, which will enable retail clinic data to be folded into the one of the most prevalent EHRs in the market today to create a more complete longitudinal patient record.

Overall, Chilmark Research remains bullish on retail health. Traditional healthcare is inefficient, wasteful, inconvenient, cold, and driven by volume. Healthcare organizations (HCOs) excel at high-touch engagement for high-acuity patients, but they treat low-acuity patients – the vast majority of the population, and those increasingly likely to be selective about where they receive care – little better than cattle en route to market. Only about one in four ED visitors is seen within 15 minutes, according to the National Center for Health Statistics. That’s the norm for retail health.

Retail health usage does merit additional scrutiny. After all, the last thing the industry needs is higher healthcare costs (even if $14 per patient amounts to a handful of tongue depressors). However, a prudent strategy for incorporating retail clinics into low-acuity care, personal wellness, and even disease management will relieve overburdened EDs and PCPs, give patients an accessible venue of care, improve patient education and communication, and ultimately drive costs back down. It will take effort, but the potential impact of retail health cannot be ignored or dismissed, nor should it be perceived as adding to the total costs of care delivered to any given population. That is a conclusion that has no merit, going against the grain of improving the health of a community and one of the primary tenants of the triple aim – removing disparities to accessing care.


  1. Sue Ann

    You wrote:

    Retail clinics, operating in an industry where price transparency is paramount, make pricing readily available at the consumers’ fingertips.. There’s no obfuscation or chargemaster at work.
    It’s simple economics.

    It’s also Simple Fraud. We as an ambulatory contracting provider with health insurance companies must charge everyone the same, so we have to do “charge capture,” the process by which we make certain the highest paying payers reimburse us completely. This process is what I call “Health Care Poker.” We don’t like the game, either.

    And if (as we do) we offer a “cash pay today” option, our payers don’t like it and want to “cash in” on that — but with all the usual flack that comes with an insurance company reimbursement.

    Obfuscation is mostly a function of 3rd party payers in the mix. I’m not saying doctors can’t be difficult, but for the most part, their nature is empathetic caregivers. It’s a gigantic game of telephone between the Doctor to billing to insurer claims to policyholders to patients … and then back again.

    • Brian Eastwood

      Sue Ann,
      Thanks for taking the time to comment. The onerous process that you describe is part of the reason why patients who are increasingly on the hook for their own healthcare costs (as a result of high-deductible health plans they may or may not have had a choice in participating in). I think it’s fair to say that no one likes the game. To borrow another gambling term, it’s a crapshoot trying to figure out who’s going to cover what, when, and to what extent. Retail health, in being up front, is trying to take the guesswork out of pricing, but there is definitely potential for other types of providers to do the same thing — but it will admittedlty be an uphill climb.

      • Sue Ann

        Well, we’ve essentially been doing retail health for 12 years with our cash-pay service. The problem is, once they get back to the provider, there might be any number of unexpected issues that arise which cost more:
        ie, a fever becomes strep, a cold/running nose becomes ear infection,


        Worse … and we have had that.

        Unfortunately, transparency on prices does not necessarily translate into transparency on medicine – we see a lot of unnecessary antibiotics, steroids and breathing treatments, and then NO FOLLOW UP. Or they expect US to do the follow up.

        So, while we understand patient attraction to these services, and realize the market IS out there for it –
        it’s still cherry-picking, and it remains to be seen what the impact will be.

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