Manhattan Institute for Policy Research.
Subscribe   Subscribe   MI on Facebook Find us on Twitter Find us on Instagram      

Wall Street Journal Market Watch


CVS, Walgreens Get Helping Hand From Obama

April 11, 2014

By Diana Furchtgott-Roth

As the Affordable Care Act reshuffles the health-care deck, some of the winners are walk-in clinics in drugstores and supermarkets, which offer treatments for simple illnesses and provide some preventative-care services such as flu shots.

These clinics are booming because they offer streamlined medicine in a less-regulated environment. Walk-in clinics do not have the cost burden of malpractice insurance borne by physicians' offices. Nor do they have the conflict-of-interest rules that prevent some doctors from offering X-rays.

Walk-in clinics are staffed by nurse practitioners and physician assistants who are able to write prescriptions, but are paid far less than doctors. The "menu" of services is limited, and the pricing is straightforward. People often pay out of their own pockets, and so they shop around.

When a patient is treated by a nurse practitioner or a physician's assistant, there is no patient-physician relationship, according to a 2010 research paper written by Kristin Schleiter, who is now an attorney with the American Medical Association. "Since some states require patients to have a formal relationship with their physician before the patient can file a medical malpractice claim, this lack of a relationship would hinder a potential plaintiff's ability to file suit directly against the physician," Schleiter wrote in the paper, making the care cheaper.

There are about 1,600 walk-in clinics in 42 states, up from 1,100 in 2008. This number is projected to double by 2016 as more people gain access to insurance through Obamacare. Walk-in clinics differ from urgent-care clinics, which treat more serious illnesses and injuries that require immediate medical attention. There are over 5,000 urgent-care clinics.

CVS's (NYSE:CVS) MinuteClinic has about 800 locations and plans to open another 150 this year, and the number is projected to double over the next four years. Walgreens (NYSE:WAG) has more than 400 clinics with plans to open nearly 100 new locations this year. Target (NYSE:TGT) currently operates 70 in-store with plans for 10 more this year.

In a previous column, I suggested that CVS's decision to stop selling tobacco products a decision immediately praised by President Obama could be a quid pro quo for favorable treatment by regulators of these clinics. CVS gave up $2 billion in annual revenue with the move, but stands to gain far more from walk-in clinics.

The Stark Law, named for California Democratic Congressman Pete Stark, attempted to reduce conflicts of interest in medical practices. The law made it more difficult for non-radiologists to have imaging equipment in their offices. Another provision prohibited doctors from referring patients to hospitals in which the doctor had a financial interest, such as ownership or investment.

The Affordable Care Act made changes to the Stark Law by adding disclosure requirements for self-referrals. As of Jan. 1, 2011, physicians had to clearly notify patients, in writing, that they may receive this treatment from other providers and then supply a list of providers within 25 miles of the referring physician's office.

Walk-in clinics do not have the same conflict-of-interest rules. People can get the diagnosis, get the prescription right there and leave. Clinics do not have to inform patients that they might be able to get drugs cheaper elsewhere.

As one radiologist told me, the profit margin on pharmaceuticals is lower than that of a PET scan. But walk-in clinics still benefit from the business of selling drugs.

MinuteClinic and CVS are owned by the same company, CVS Caremark, since 2007. MinuteClinic benefits CVS by improving and deepening customer relationships, increasing sales of both prescription and over-the-counter medication, and leading to more purchases of general store merchandise.

CVS offers people a 20% off shopping pass when they get a flu shot at its MinuteClinics. Flu and pneumonia shots are covered at no cost to patients under Medicare Part B, and many insurance plans cover flu shots at no cost to patients.

Naturally, the American Medical Association, the American Academy of Pediatrics and the American Academy of Family Physicians are critical of walk-in clinics because they can provide disjointed care. The short-term convenience may lead patients to neglect finding a primary-care physician. Harvard Medical School's Ateev Mehrotra says the typical patient at a retail clinic is a young adult between 18 and 44 without a regular primary-care physician. However, as the Affordable Care Act reduces the numbers of physicians on people's health-insurance plans, more people are turning to walk-in clinics.

There are benefits to drugstore clinics, especially for relatively healthy young people who are rarely sick. They offer clearly priced services and accessible hours of operation. Many patients visit clinics when their primary-care providers are closed after-hours or on weekends. Another reason patients visit clinics is if they believe the illness isn't serious. The level of care received to treat a condition is comparable to urgent-care clinics and primary-care physicians.

Walgreens said a year ago it will be the first walk-in clinic to diagnose and treat chronic conditions such as asthma, diabetes and high cholesterol.

To translate the cost savings from walk-in clinics into other areas of medicine, states could embark on tort reform to lower malpractice insurance premiums. Congress could level the playing field and make regular medical care simpler too, by reforming the Obamacare regulations that drive up physician care. With the Affordable Care Act making health care more bureaucratic, walk-in clinics will gain in popularity and teach us how to lower other health-care costs.

The "fast fashion" chains like Uniqlo, H&M and Abercrombie that replaced older, interesting stores in Midtown are hurting, too, as mid-price clothing sales have cratered.

The Apple stores where today's Tower Records generation works? It'll be more of a surprise if they are around in 10 years (or even five) than if they're not.

Meanwhile, there's the "luxury" boom. Nordstrom is coming to 57th Street. Stores that cater to rich foreign tourists (escaping high sales taxes in their own countries) are doing fine. Landlords are kicking out longtime commercial tenants and demolishing buildings because they're dreaming of Longchamp and James Perse.

But the big force behind closures and teardowns is that the world wants our residential real estate. Rich Chinese, Russians, Mexicans and even some Continental Europeans are terrified at leaving all their money in their home countries.

Some fear inflation; others, confiscation whether by redistributionist politicians or (in the case of corrupt oligarchs) by new, just governments.

How long will it last?

Well, what's driving up New York real estate isn't exactly free-market forces. Investing in a luxury-condo project can get you an American visa (for, supposedly, creating jobs, although the government oughtn't be in the business of selling visas).

Plus, the global capital markets are getting crazy signals from the US government. We've had zero interest rates for five years running; that means nobody really knows what anything's worth in the stock and bond markets but rich people figure that Manhattan real estate will always be worth something.

Today's luxury condos could be tomorrow's real-estate glut. That seems unlikely but if and when it happens, we'll wonder why we never saw it coming.

Original Source:



America's Legal Order Begins to Fray
Heather Mac Donald, 09-14-15

Ray Kelly, Gotham's Guardian
Stephen Eide, 09-14-15

Time to Trade in the 'Cadillac Tax' on Health Insurance
Paul Howard, 09-14-15

Hillary Charts the Wrong Path on Wage Inequality
Scott Winship, 09-11-15

Women Would Be Helped the Most By an End to the 'Marriage Penalty'
Diana Furchtgott-Roth, 09-11-15

A Smarter Way to Raise Paychecks
Oren Cass, 09-10-15

Gambling with New York's Pension Funds
E. J. McMahon, 09-10-15

Vets Who Still Serve: After Disasters, Team Rubicon Picks Up the Pieces
Howard Husock, 09-10-15


The Manhattan Institute, a 501(c)(3), is a think tank whose mission is to develop and disseminate new ideas
that foster greater economic choice and individual responsibility.

Copyright © 2015 Manhattan Institute for Policy Research, Inc. All rights reserved.

52 Vanderbilt Avenue, New York, N.Y. 10017
phone (212) 599-7000 / fax (212) 599-3494