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Health Care on the Go

With retailers facing flagging sales growth in their core businesses, many are turning to an unlikely place to increase revenues: in-store health clinics.

More than 40 million Americans are now without health care — which has contributed to the birth of this nascent industry. Retailers ranging from grocery stores to pharmacies and even department stores — are teeming with for-profit clinic operators and opening the makeshift health centers across the country.

The industry standard for the clinics calls for a one-person staff consisting of a nurse practitioner or physician's assistant, with a licensed doctor available for consultations and oversight. As a general rule, each clinic costs about $50,000 to open. Industry insiders expect that within nine months each clinic should become profitable and quickly generate revenues in excess of $500,000 a year.

The in-store clinics are opening in urban markets where individuals live nearby and where targeted marketing and advertising can be effective with clinics readily accessible in a five- to 10-minute drive.

These self-contained health care clinics sit at the front of stores such as Target, CVS pharmacy, Kroger and other well-known chains. The clinics treat patients with minor ailments, not chronic or emergency conditions

“The industry right now is in its infancy,” says Greg Moerschel, a partner with Beecken Petty O'Keefe & Co., a private equity firm based in Chicago. “You may see this become a billion-dollar industry rather quickly.”

In July, CVS Corp. announced it will acquire Minneapolis-based MinuteClinic, which currently operates 83 clinics in 10 states, 66 of which are in CVS stores. The drugstore giant made the deal because executives believe the retail clinics are “the right concept” for consumers, insurance companies and providers, remarked Thomas M. Ryan, CEO of CVS, in a news release. The transaction is expected to close this summer.

As a wholly owned subsidiary of CVS, MinuteClinic plans to continue opening clinics both inside CVS stores and other retailers. MinuteClinic plans to add another 150 to 200 clinics this year alone.

Prior to that, in March, Beecken Petty O'Keefe invested $77 million in Take Care Health Systems, which currently operates 16 clinics in Portland, Ore., and Kansas City's metro area. That infusion of capital will be used to add nearly 200 clinics in the next year and more than 1,400 clinics by the close of 2008.

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