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Retail Clinics—
Cost Saving, or Just Convenient?
N. Marcus Thygeson MD
HealthPartners

The Healthcare Imperative: Lowering Costs, Improving Outcomes


Roundtable on Evidence-Based Medicine
Institute of Medicine
July 2009
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Retail Clinics
•Introduced in the Twin Cities in 2003
•> 1000 clinics in 38 States
•A limited menu of acute and some preventive
care services in
•Retail settings (grocery, pharmacy)
•Staffed by mid-level providers, with remote
medical director oversight
•Largely limited to major urban markets
•95% of clinics operated by four biggest
providers are in top 50 US markets
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Key components of the strategy…


•Menu with posted prices (low)
•Walk-in access
•Minimal support staff and overhead
•Standardized, templated care
•Quality concerns have largely been
addressed
•Comparable revisit rates
•Average-to-excellent HEDIS measures in
MN
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Retail Clinic Growth

Downloaded 7/9/09 from: http://www.merchantmedicine.com/home.cfm


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Recent Market Trends

•Seasonality is a major challenge


•Non-provider operators retrenching
•Local hospital systems adopting the model
–HealthPartners operates 2
–Bellin:
•Partnership with retailer (Shopko) and local
providers in other communities
•Functions as a franchiser (FastCare)
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Nature of the cost drivers targeted…


•Shift of simple acute care services to lower
cost sites of service
•Possible savings related to earlier treatment
preventing complications?
•Preventive care services?
•Cost impact of possible care fragmentation?
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Cost Impact in Urban


Commercial Insured Population*
•Average cost/episode is lower in RC:
•$55 vs OV or UC visit
•$279 vs ER visit
•Five most common episodes (pharyngitis,
otitis media, sinusitis, UTI, conjunctivitis):
•~250/10000 MM (1% seen in ER)
•Estimated savings with 100% conversion to
RC:
•$1.40 PMPM (~0.5% of total PMPM)

*HealthPartners, Health Affairs 2008;27(5):1283


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Possible Cost Impact—


Total US Population
• 10 most common clinical problems seen by RC
make up 13% of adult PCP visits, 30% of Pediatric
visits, and 12% of ED visits
• Health Affairs 2008;27(5):1272
• What if 100% converted to RC care?
• Assume
• HealthPartners episode cost savings, average
visits/episode (1.14)
• US total health care costs $2 Trillion
• No induced demand
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Possible Cost Impact—


Total US Population
Estimated Savings--Conversion of All USRC-eligible Visits
MD Emergency Total
Total visits (millions) 483 112 595
% RC-eligible 18% 12%
RC-eligible visits (millions) 87 13 100
Visits/ episode 1.14 1.14
Estimated episodes (millions) 76 12 88
Savings/ episode $55 $279
Potential savings (billions) $4.19 $3.29 $7.5

$7.5B / $2T = 0.4% of Total US Spend


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But….
• Distribution limited to metro areas
• Reduced ER use not observed in commercial
insured population
– Impact in uninsured population?
• RC patients
– Healthier
– Less likely to have established provider relationship
• Impact on Medicare population?
• Induced demand?
• Adaptive response from existing providers?
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Induced Demand?
•Interviews with 61 RC patients in California
–Mixed insured/uninsured
•“Alternative source of care if RC not
available?”
–Self-care: 30%
–ER: 26%
–MD care or “other”
: 44%

RAND analysis (in press)


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Induced Demand at
HealthPartners—Too Early to Tell
Top Five RC-Eligible Episodes/ 10KMM
265
260
255
250
245
240
235
230
225
220
Pre-RCyear Post-RC Y1 Post-RC Y2 Post-RC Y3
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Adaptive Response
By Bricks and Mortar Inc.
Causal loop diagram:

3
2

Adaptive responses (may do all three): 1) more visits for other patients, 2)
increase price of other services, 3) compete with RCs
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RC Impact on Population
Health Costs
•HealthPartners population health costs for
top 5 RC-eligible episodes continued to
increase about 4.5% per year after Minute
Clinics opened
•Cost/episode: 3.4%/year
•Episodes/year: 0.9%/year
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Potential for implementation…

•Feasibility outside urban areas?


•Seasonality?
•Able to “ move up-market”and provide
more complex care while maintaining
lower operating costs?
•Able to compete with local provider
systems?
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Critical co-factors for success…

•Addressing quality concerns:


–Evidence-based guidelines
–Electronic medical records
–Data integration (with PHRs and other
provider EMRs)
•Convenience
•Product-orientation—price and feature
transparency
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Results achievable in the near term…

•Lower cost/episode for individuals in


urban markets
•Possible transient reduction in population
health costs
–10% of common RC-eligible episodes
(25/10KMM) X $55/episode = $0.14 PMPM
–Offset by any induced demand
•Possible reduction in uninsured ER visits
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Results achievable in the long term…


• If all RC-eligible episodes were delivered using
the RC model: $7.5B (0.4% of $2T US health
costs)
• Metro-only distribution limits savings to < $4B
• Adaptive responses by conventional providers
could eliminate savings potential
• Savings opportunity is limited unless
– RC’ s move up-market and expand geographically
– Policy changes drive adoption of RC design principles
by conventional providers
– Provider supply does not increase
– Care shifts from specialist à PCP à Mid-Level
– Induced demand avoided
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Policy options…
• EMR and knowledge management technology that enables
expansion of mid-level and PCP scope of practice
• Provider price and total cost of care (and quality)
transparency
• Benefit design and provider contracting approaches
(payment reform) that promote
– Product-orientation:
•Standardization
•Feature and price transparency
– Reengineering of care delivery operations
–“ Marketplaces”for provider products
• Malpractice laws that afford higher level of protection for
guideline-driven care
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Summary

•In current manifestation, maximum possible


savings of $4B (metro only) will be offset by
adaptive response of conventional
providers.
•If RC can move up-market as sustainable
disruptive innovation, will be important cost
reduction strategy.
•If not, may actually increase costs.