Report: Retailers are vying for 'a piece of the medical pie.' How should traditional providers respond?

Retail clinics have seen a 200% increase in utilization over the past five years, higher than urgent care centers, primary care practices and hospital emergency rooms, a new report finds.

The extensive report, published last week by Definitive Healthcare, uses proprietary data as well as external sources and aimed to analyze the influence of retailers in healthcare and how traditional providers should respond.

While retail clinics have been around since the early 2000s, they are now a major player in the U.S. healthcare system. With their consumer-centric focus, deep pockets and far reach, “retailers are well-positioned to disrupt the healthcare landscape and compete with health systems and physician practices for a piece of the medical pie,” the report said. 

Market share breakdown 

There are currently more than 1,800 active retail clinics in 44 states. Only 2% are in rural areas. CVS has the lion’s share of the market, at 63%, and owns half the clinics in rural areas.

CVS also operates enhanced retail clinics focused on chronic disease management called HealthHUBs and is expanding its primary care footprint with the acquisition of Oak Street Health. CVS also has a network of clinics for seniors on Medicare and has acquired Signify Health. 

Kroger Health is the second largest, at 12% market share, with more than 220 retail clinics in 35 states. Walgreens is the third largest at 8%, with its primary care clinic chain VillageMD. Other players include Walmart, Amazon, Best Buy and Dollar General. 

There is also a growing trend of hospitals entering the space by partnering with chains like Kaiser Permanente and Target.

Most retail clinics are in the Southeast and the Midwest, with nearly half concentrated in a few populous states, Definitive Healthcare's report found. 

What's in it for retailers? 

Retail clinics have evolved from limited, nonemergency care to more advanced primary care, chronic disease management and even behavioral health. Such new primary care models could grow to a third of the market by 2030, the report said, citing a Bain & Company estimate. This shift is driven by rising costs and demand for more convenient care.

Retailers’ transparent and fixed pricing is in line with their efforts to act as discount superstores and thus enhances their brand value. Entering the healthcare space also enables them to rely less on traditional retail sales. 

For pharmacy giants like CVS and Walgreens, investing in clinics also boosts prescription drug sales. And expanding to chronic disease care can help diversify patient mix and offset declines from a competitive market alongside urgent care centers and telemedicine. 

Top use cases for retail clinics

Looking at the most popular diagnoses reported by retail clinics, patients coming in for immunizations was in the top spot (39%), followed by exposure for COVID (31%) and Type 2 diabetes mellitus. About 1 in 10 diagnoses were related to chronic conditions. Many clinics treating these were physician-led, like VillageMD, or health-system-owned, like Advocate Health at Walgreens. 

As free COVID tests and vaccinations come to an end, Definitive expects the growth rate of retail clinic utilization to slow. Nevertheless, they will continue to play an important role in healthcare delivery, especially as retailers branch out to offer a wider range of services, from chronic disease management and primary care to mental health and wellness programs, the report authors wrote.

Retail clinics offer affordable care, but gaps for underserved populations remain

Providers have raised concerns over quality of care and the disruption of established patient-provider relationships. But retail clinics do offer more affordable care. Definitive Healthcare found that among the most common diagnoses reported by retail clinics, retailers charge $38 less than claims from urgent care centers, $471 less than claims from physicians' offices and $746 less than claims from hospitals.

For uninsured patients, retail clinics offer transparent and fixed pricing, enabled by less expensive providers, delivering care in smaller settings and mostly treating low-acuity conditions.

Some studies suggest retail clinics could drive overall healthcare spending up by complementing physician care instead of replacing it, the report highlighted. As more consumers use alternative care sites, they will need to be educated to prevent the overuse of services, the report authors noted.

Quick access to retail clinics can help improve access to basic care, given the typical wait time for a primary care physician was 26 days last year and the fact there could be a shortage of 14,000 PCPs by 2035, the report said.

However, the unequal distribution of retail clinics across areas does little to improve access to care for underserved populations. Rural areas are in dire need, where the population is generally older and sicker and more likely uninsured, yet few retail clinics operate there. 

Retailers are reluctant to open clinics in these areas for similar reasons as providers, the report said, like workforce challenges. “If retail clinics are to be part of the solution to provider shortages in underserved communities,” the report said, “they will need to open their doors in these communities.” 

Retail clinics can also help reduce ER use for preventable and minor acute conditions, freeing up resources and lowering excess spending. Up to 1 in 4 ED visits could be treated elsewhere, according to one study. And some evidence shows retail clinics reduce ER visits by up to 13%.

One major criticism of retail clinics is they accentuate fragmentation of care. But studies have found most retail clinic customers don’t have a PCP to begin with. Citing one survey, the report said more than a quarter of retail clinic patients would have sought care in an ER if a retail clinic were unavailable.

However, those that had a retail clinic visit and have an established PCP were found not to have been referred back to their PCP after a clinic visit. To mitigate this issue, stronger relationships between retail clinics and PCPs are needed, the report said.

Strategies for traditional providers to stay competitive

As retailers continue to disrupt the market, providers should see this as an opportunity to develop a relationship with them, the report authors suggested. Retailers have access to consumers, expertise in engaging them, robust data and experience operating in a high-volume, low-cost environment. They can provide an important referral stream for PCPs and specialists. 

Kaiser and Target’s partnership in Southern California facilitates services beyond what is typically available at a retail clinic, provided by Kaiser clinical staff. These clinics are available to Kaiser members and nonmembers. The value lies in expanding access to the health system’s services and attracting new members in popular retail locations. CVS MinuteClinics made 4 million referrals to PCPs in 2019.

Interoperability between electronic medical record software and patient data must be a key part of joint ventures. Epic has the largest EHR market share (40%) among health systems and hospitals, followed by Oracle Cerner (23%) and Meditech (14%), according to Definitive data. EHRs at retail clinics should be embedded with clinical protocols and have established referral processes, the report said.

A health system could alternatively acquire retail clinics to grow its ambulatory footprint and expand access to care. Health systems have strong local brands, nurse practitioners to staff clinics and physicians for oversight as well as community trust. An organization choosing this path should have experience operating a similar clinic, like a community primary care clinic. 

On the flip side, retailers looking to exit should consider selling operations to a health system locally, the report said. In 2019, when Walgreens closed 160 in-house retail clinics to focus on other ventures, it passed ownership to Advocate Health Care and Piedmont Healthcare. 

“By prioritizing the patient experience and offering frictionless care delivery, retailers are setting a new standard that traditional healthcare providers will need to meet to compete in today’s changing healthcare landscape,” the report authors concluded. That could look like offering extended hours and walk-in appointments. They could also implement patient-first billing strategies and greater cost transparency. 

Retailers know that convenience, affordability and tech matter to consumers. “By embracing these components of the retail clinic model, traditional healthcare organizations can preserve market share while delivering consumer-friendly healthcare that better serves patients,” the report authors noted.