Wal-Mart Clinic Operation Declared Officially “Dead”

Nothing makes a patient feel secure and cared for like having their doctor pick up and vanish into the night. That’s what happened with CheckUps, an independent clinic operating in Wal-Mart stores. The 23 clinics in Wal-Marts across the country closed so suddenly that many of the staff are still owed money.

As we’ve mentioned before, these clinics are run by independent operators that need no medical license to set up shop. Often the operators have little to no experience in the medical field and apparently are a bit unstable financially. Is this where Wal-Mart wants to take American health care?

A death in the walk-in clinics market [CNN Money]

Walk-in clinic operator CheckUps, the resident provider for Wal-Mart, closed its doors last month. What does the company’s demise tell us about the walk-in clinic industry, hitherto fertile ground for entrepreneurial small companies?

Walk-in clinics appeal to patients who want basic care without an appointment. Patients visit the clinics, most of which stay open seven days a week, for basic health screenings and treatment for routine ailments. Most clinics are busiest during evenings and weekends when doctors’ offices are closed and emergency rooms are the only other treatment option.

Walk-in clinics tend to treat about 25 to 30 common ailments, which tend to be upper respiratory ailments in the winter and rashes in the summer, says Tine Hansen-Turton, executive director of the Convenient Care Association (CCA), which represents 95% of clinic operators. She estimates that about 30% of the walk-in clinic patients don’t have a primary care physician.

There are currently a total of 920 walk-in medical clinics in U.S. drugstores and supermarkets, up from 160 last year, according to the CCA. The industry leader, MinuteClinic, dominates the market with 476 clinics, mostly housed inside CVS (CVS, Fortune 500) drugstores.

Backed by private investors, CheckUps started running clinics out of Wal-Mart stores in August 2006. Last year CheckUps added 20 new clinics to stores in Alabama, Florida, Louisiana and Mississippi, but the company quickly ran out of cash and stopped paying its bills in December 2007.
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For obvious reasons, consumers tend to be conservative about their healthcare choices. Successful clinic operators spend time educating consumers and medical professionals about how the walk-in model fits into the health care system.

“A lot of companies came out thinking they could break even in 12 months, but we really learned as an industry that it takes two years,” said Hansen-Turton.

MinuteClinic started out in 1999, running clinics based in Target (TGT, Fortune 500) and CubFoods stories in Minnesota. In 2005 CVS approached the chain about operating clinics in its stores and decided to buy them the next year.

When CEO Michael Howe joined the 81-person company in June 2005, MinuteClinic ran 19 clinics in two markets. Now it’s in 25 states and 50 markets with 2,100 employees.

“We wouldn’t have grown nearly as fast without CVS,” said Howe.

Economies of scale matter a great deal in the walk-in clinic industry. With experienced back office and construction teams, CVS quickly built out the clinics, which can cost up to $600,000 a year to run. Each clinic must serve 25 to 30 patients a day to cover its costs. MinuteClinic broke even at the 400-clinic mark.

Howe expects to open between 100 and 250 new clinics this year.

Posted by Alex Goldschmidt on Tuesday, February 05, 2008