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The Sam M. Walton College of Business

Researchers Examine How Policy Affects Retail Medical Clinics

stethoscope on bill
October 29, 2020

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Retail medical clinics (RMCs) like Walmart Health, Kroger’s The Little Clinic, and Amazon have the potential to revolutionize American healthcare with innovative delivery models informed by the retail giants’ expertise in efficiency and customer service. RMCs offer transparently-priced care whose quality is on par with that offered in more traditional settings, but at lower prices. Out-of-pocket healthcare costs have risen 54% over the last decade, so it’s easy to see the appeal of going to the clinic in one’s local Walmart and paying $30 for a chest x-ray that would cost $378 at a hospital. RMCs also offer an unmatched degree of accessibility. Some offer primary care, labs, vision care, hearing care, mental health counseling, and prescriptions in one location. Moreover, RMCs may be able to combine data from all these services with patient grocery shopping data to provide a comprehensive view of patient health that could prove very beneficial for preventing, diagnosing, and treating many conditions.

Though RMCs have the potential to transform healthcare, regulatory and policy factors will likely determine the extent of their success. A new study by Jonathan Phares (University of Arkansas), David D. Dobrzykowski (University of Arkansas), and Jodi Prohofsky (Health and Wellness – Walmart Stores Inc.) examines these nontraditional healthcare providers and identifies ways regulations can be changed to facilitate healthcare delivery innovation and more patient involvement in healthcare decisions and purchases. The authors present their findings in “How Policy is Shaping the Macro Healthcare Delivery Supply Chain: The Emergence of a New Tier of Retail Medical Clinics.”

Healthcare regulations tend to focus on the supply side, since controlling the structure and conduct of organizations is much easier than policing individuals’ countless daily behaviors that may affect their health. Phares, Dobrzykowski, and Prohofsky contend that RMCs’ emergence presents an opportunity for a more balanced regulatory focus that addresses both the supply and demand sides of the healthcare supply chain. For instance, on the demand side, they suggest that RMCs may lead to a re-emphasis on high deductible health plans. High deductible health plans allow consumers to reduce their insurance premiums in exchange for assuming more personal responsibility for purchasing care for relatively minor issues like common colds and flus. The plans fell out of favor after George W. Bush left office in 2009, partly because a lack of price transparency hindered patients’ ability to make rational, informed decisions about their healthcare purchases. RMCs’ affordable, transparent pricing – combined with their ability to integrate data on patients’ health, food purchases, and lifestyle choices – might lead to a resurgence of high deductible health plans that could both save consumers money and encourage them to be more involved in assuring their personal well-being.

On the supply side, one area of potential reform the authors identify involves Certificate of Need (CON) regulations that limit entry into the healthcare market. CON requires a government agency to evaluate existing healthcare capacity before allowing new facilities to be built or existing facilities to expand. It is meant to assure that existing healthcare capacity is more fully utilized, with the expectation that the cost of providing healthcare will be reduced. While CON was repealed at the federal level in 1987 due to a lack of evidence for its effectiveness, 35 states still retain some form of it. CON tends to favor existing healthcare providers and can pose a barrier to entry for newcomers. The authors suggest that if retail medical clinics prove successful at providing lower costs and better patient outcomes, policymakers may either reform or eliminate regulations that unintentionally impede the development of innovative healthcare delivery models.

The authors examine many other potential regulatory reforms, including revisiting antitrust regulations and expanding insurance network access to nontraditional providers.

Read the full article in Business Horizons.

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