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Retail Health Clinics: The Free Market is Bending the Cost Curve (Update)

John on September 1, 2009 at 2:29 am

walmart1An important and very timely pair of new studies by the Rand corporation shows that retail health clinics do as good or better job as doctor’s offices at greatly reduced prices:

Retail clinics — free-standing, walk-in medical providers located in drug stores, shopping malls and stores like Wal-Mart, Target and Walgreens — are rapidly becoming to the health-care industry what Fotomat was to the camera world. There are roughly 1,000 clinics now operating in the U.S., offering acute care for such routine problems as throat infections and earaches as well as providing diabetes and cholesterol screenings, routine checkups and vaccinations. The fees are low — and conspicuously posted; nearly all of the clinics treat both the insured and uninsured, and there is little or no waiting time.


In twin studies published this week in the Annals of Internal Medicine, the Rand Corp. reports on an extensive survey of cost, quality and availability of retail health operations, and on nearly all measures, the clinics scored high.


Retail clinics are more convenient for patients, less costly and provide care that is of equal quality.If the results are any indication, the next time you have a routine medical need, you should probably make haste to a clinic. On a quality scale of 0% to 100%, the clinics finished first with a 63.6% while urgent-care centers and doctor’s offices followed within a couple of points. Habitually overcrowded emergency rooms came in last at a distant 55.1%. When it came to fees, the results were even more dramatic. For the various kinds of services studied, the average visit to a retail clinic cost $110, versus $156 for urgent care and $166 for a family doc. As for ERs? A cool $570. While even $110 for a clinic visit seems pricey, that is only the average for the three procedures studied. Minute Clinic, the industry leader with 514 outlets, charges just $62 for a minor illness or injury exam and $20 to $66 for a wellness or prevention visit.


“These findings provide more evidence that retail clinics are an innovative way of delivering health care,” says Dr. Ateev Mehrotra, a professor at the University of Pittsburgh Medical School and the lead author of the study. “Retail clinics are more convenient for patients, less costly and provide care that is of equal quality.”

Why is all this terribly important right now? Because we’ve heard a million times about the need to “bend the cost curve” but the means for doing this now on the table — digital medical records, preventative care — won’t actually accomplish it, at least not according to the CBO. The one thing proponents of ObamaCare have left is the public option which, they claim, will drive costs down as people choose the superior government option.

But what this study shows so clearly is that the marketplace is already in the process of addressing the need for cheaper, better, more equitable primary care. It’s doing this by decentralizing the system, i.e. simple problems can be handled farther away from the hub (and expense) of hospitals and doctor’s offices by nurse practitioners who cost less to train and therefore less to employee.

Inevitably, this leaves doctors and hospitals free to focus on more serious problems instead of wasting their $200K education looking at sore throats and ear infections. Reduced demand on doctor’s offices and hospitals will also force doctors to begin competing for patients. Competition will drive prices down.

In short, you have the beginnings of a better system, one that doesn’t require excessive government regulation of the marketplace or a complete takeover of the insurance industry. One that doesn’t lead to rationing or long wait times to see a care provider. One that relies on decentralization, rather than centralization.

1,000 health care flowers are already blooming.But as the article reports, this is all in mid-stream. At present 44% of the 1,000 odd retail clinics in the US are found in just five states. One thousand is a significant number but probably not enough to alter the system. But if you imagine 5,000 such clinics, one in every town that has a Wal-Mart or Walgreen’s, that’s a different story. As more people choose the cheaper, better option costs will inevitably begin to come down.

What these twin studies show is that 1,000 health care flowers are already blooming. We just need to give them time to propagate, perhaps add a little miracle-gro in the form of financial incentives, and most of all keep the government’s giant bozo feet from treading them out of existence.

Update: Ed Morrissey wrote his column this week on these studies. He does a little extra math and makes some great points here.

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