Seeing value in the optical care business
More than 11 million Americans are living with an uncorrected vision problem, according to the Vision Council of America, and 1-in-4 children have a common eye disease or other vision problem that goes undetected.
That void in health delivery is one factor that compels retail giants like Walmart, Sam’s Club and Costco to maintain big stakes in the store-based optical care business. Another is the sheer size of the vision care market: roughly $28 billion in total sales of vision care products and services sold at all optical retail locations in 2010, according to Jobson Publishing’s Vision Monday report — mass merchants captured $2.3 billion of that.
While it has made no definitive announcement that it intends to open optical centers here in the United States, one area of the Alliance Boots business that Walgreens no doubt will watch and learn from is Boots’ substantial optical business, which represents about 5% of the company’s revenues.
Besides their direct sales contribution, optical centers also can be a significant source of prescriptions, both for vision correction and related eye treatments.
No doubt fueled by the aging baby boomer market, “cheaters” were the top-selling optical item last year, up 6.5%, according to the Vision Council. Contact lenses were up 3.9% and eye exams grew 4.9%.
Diagnostic centers at nexus of health care
No picture of the evolving landscape of retail health care would be complete without including the growing nationwide network of diagnostic screening centers. Serving patients on both an appointment and walk-in basis, the centers sit at the nexus of healthcare decision-making, serving as a bridge and decision-making tool for primary care doctors, specialists, hospitals, ambulatory care centers and pharmacies.
The field is dominated by Madison, N.J.-based Quest Diagnostics, which now operates testing labs and patient service centers throughout the United States and in many foreign countries, but many regional and local testing centers also are luring patients and their physicians with a growing menu of health screenings.
Diagnostic work at the centers can range from blood work for a wide range of disease screenings to MRIs, ultrasound, digital mammography and radiology. Results are quickly available both to patients and their health providers.
The market for such services is significant. To cite an example, Quest reported revenues of $3.8 billion for the first half of fiscal 2012 ended June 30, with operating earnings of $670 million.
Retail clinics gain new respect
As health costs and doctor wait times mount and health reform ushers in an integrated team approach to patient care, retail health clinics appear poised for another growth surge.
Among recent developments: CVS Caremark’s MinuteClinic unit will expand to roughly 1,060 clinics by 2015 to keep up with booming demand; Massachusetts has broadened the preventive and diagnostic services clinical nurse practitioners can provide; and South Carolina’s retail clinics now can provide preventive and acute care to Medicaid patients.
Two powerful forces are driving the surge: access and cost. There’s growing recognition among providers and payers that retail clinics are a cost-effective solution to both the shortage of primary care physicians and spiraling health costs. “Patients will go any place that saves them money,” observed Ken Berndt, CEO of Careworks Convenient Healthcare, the clinic and urgent-care division of Geisinger Health System in Pennsylvania.
But “even above cost” on patients’ priority list, he said, is to have ready access to a health professional — be it a pharmacist, a nurse practitioner or physician’s assistant in a walk-in clinic, or a primary care physician. “Patients want care when they want care,” said Berndt.
With “the increasing shortage of primary care physicians across the country,” noted Tine Hansen-Turton, executive director of the Convenient Care Association, “nurse practitioners and physician assistants … will, more and more, be looked to as key front-line primary care providers.” What’s more, she added, the industry’s nearly 1,400 clinics comprise “the lowest cost, nonsubsidized providers of primary health care” at a time when “many consumers’ out-of-pocket costs go up.”
Retail clinics — along with the nation’s roughly 9,000 urgent care centers — also will play a critical role as reform spawns new concepts like accountable care organizations and medical homes.
The medical establishment, for its part, seems at last to be embracing retail care centers as a source of relief to overcrowded waiting rooms and overloaded primary care physicians. In May, the influential Journal of the American Medical Association featured an article extolling the virtues of retail clinics and a team approach to primary care.
“With good communication between multiple specialists, convenient access in evenings and on weekends, and familiarity with local community resources, the retail clinic potentially could be an important component of coordination of care aimed at reducing disease exacerbations, unnecessary hospitalizations and adverse drug interactions,” noted JAMA contributor Christine Cassel.