Parks Associates Blog

Monday, April 06, 2009

Free MedicalService from Walgreens, But…

Last week, Walgreens kicked off a campaign to begin offer free basic medical care through its walk-in clinics in retail stores. Recipients of the free care must be people that recently lost their jobs and their immediate family members. There are other strings and restrictions. For instance, annual exams and vaccinations are excluded. Walgreens’ Take Care Clinics are not as widely available as its drug stores. The retail clinic chain now has about 340 stores in 30 metro locations, or approximately 1 in every 10 drug stores in those areas. Finally, the biggest catch may be: you have to be a walk-in clinic customer in the past.

We have seen a slow-down in retail clinic expansion after a gold rush of store openings back in 2006-2007. We were dubious whether the retail clinic expansion was too fast too risky at that time, and apparently the industry is now on the same page with us. A profitable retail clinic operation requires a steady customer stream, and I suspect that many clinics opening for more than a year are still struggling to breakeven. Walgreens’ free service is clearly a PR win for the company, but it may also reflect a difficult operating environment for retail clinics in this down economy. After all, people with no insurance—the primary target market for walk-in clinics—are more likely to skip medical care due to economic hardship. The Walgreens offer can be a good incentive to attract new customers to stores and the announcement is also likely to raise its clinic brand’s visibility. The only thing we don’t know is how strong the demand will be. Neither does Walgreens. Therefore the company has put up a number of restrictions to limit the potential risk on profitability. In other words, it does not want too many free services to overwhelm its clinic staff and turn away paying customers.

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