Retail Health Is Not Dead. How To Get It Off Life Support

When they entered the scene in the early 2000s, retail health clinics were expected to upend healthcare’s status quo. By offering affordable, accessible, and convenient care, it was assumed that consumers would flock to retail clinics located inside a local store.

Flash forward more than 20 years and retail clinics have struggled to fulfill that promise. Some have grappled with clinic financials and have not been able to drive enough increases in merchandise volume to justify the investment. Retailers have slowed or shuttered clinics even while others continue to expand them. Given the array of business models adopted by early movers, many retailers have yet to define their clinic strategy.

Despite the challenges, retail health clinics can still fulfill their promise and be an important part of the broader healthcare landscape. But they need a more holistic approach that includes a mix of merchandising strategies, robust partnerships with payers, and tailoring approaches to local populations. This is easier said than done. Some retailers will continue to chase the healthcare dollar without any clinics, but others show that these clinics can be critical for a successful broader health and wellbeing strategy. There are five key areas that retailers must address with their clinics if they want to participate in healthcare spending in the years to come:

Take a broad view of health and wellbeing: There are many ways retailers can participate in the healthcare ecosystem, including pharmacy offerings, accepting and engaging customers on health benefits acceptance and engagement, diagnostic services, primary care clinics, nutrition, and more. Some retailers have been thinking too narrowly, homing in on one or two of these areas. Instead, they should realize that a comprehensive portfolio can be part of a profitable healthcare strategy and drive merchandising volume, consumer spending, and increased reimbursement from insurers. Moreover, health and wellbeing solutions should tap into an omnichannel proposition with both in-store and digital offerings. It’s about giving consumers access to care where they want it, how they want it when they want it.

Tap into the right wallets: To effectively navigate the healthcare sector, retailers must create flexibility for consumers to use different payment options. While consumers spend a fair amount of money out of pocket, payer-directed spending is roughly 10 times higher. Retail strategies should be built around the importance of insurers in health and wellbeing all the while recognizing the role consumers play in deciding where those healthcare dollars are spent. We estimate total retail-addressable healthy benefit spending through consumer-directed programs like Medicare Advantage supplemental benefits and HAS/FSA to be nearly $100 billion. By allowing consumers to access different wallets, retailers can grow their revenue streams and enhance their value proposition. Again, it’s about putting the customer first.

Understand local populations: The success of retail health clinics hinges on their ability to cater to the specific needs of local populations. The mix of commercially insured; government insured, including Medicare Advantage; or uninsured, varies from community to community. Solutions should be designed in line with how a retailer can partner with payers to develop targeted solutions for each population. By aligning their offerings with the needs of the community, retailers can maximize their impact on health costs and put the customer first.

Measure success by longitudinal impact on risk bearing organizations: There’s a tendency for retailers to hold up short-term impact as evidence of success. In healthcare, those who take on risk — primarily health payers — are increasingly the most profitable. Retailers that lower the total cost of care for payers are well-positioned to monetize their healthcare solutions. That requires taking a longitudinal measurement approach for the overall impact of their programs. Retailers that demonstrate the value they bring to the healthcare ecosystem are more likely to attract partnerships with payers and pharmaceutical companies.

Put the right people in charge of the right elements to drive scale: Healthcare is a highly complex business. Expecting the same people to manage the nuances of merchandizing, pharmacy operations, negotiations with pharmacy benefit management companies, primary care delivery, payer relations, and more will miss out on the value that can be derived from having expertise in each of those areas. Understanding what it takes to stand up for each of these elements will help drive scale. For example, building a profitable clinic business in partnership with a health payer may require filling a patient panel. By thoughtfully considering how to build panels and volume, retailers can achieve sustainable growth and profitability. Scaling clinics before the panels fill may hinder the long-term success of retail health clinics.

Skepticism has swirled around retail health clinics since their launch. Industry pundits have had several opportunities to write the segment’s obituary. Still, retailers can drive positive change in healthcare if they take a more comprehensive approach to serving their markets and lay out their value proposition to consumers, payers, and other providers.