Growing Retail Clinic Industry Could Impact Self-Pay Collections Volume

As more consumers become comfortable with and begin to use retail clinics, the trend could put a dent in physician practice self-pay collection volume and shift a growing number of receivable balances away from traditional health care providers to retailers.

According to the trade association that represents the nation’s nearly 1,200 retail clinics, most private insurers now contract with retail clinics owned by or housed in pharmacy chains, grocers, big box retailers and corporate headquarters (“Retail Clinics Poised to Gain from Medicaid and SCHIP Expansion,” February 20). And as the retail clinic services evolves some industry experts think the relationships insurers have with retail clinics could broaden.

Although the retail clinic business model was built on price transparency, convenience and cash for service, the relationship with insurers is deepening as insured patients advocate their use as an alternative for non-urgent care. Many retail clinics collect applicable insurance co-pays or deductibles at the point of service, said Tine Hansen-Turton, executive director of the Convenient Care Association.  But like traditional health providers, some retail clinics also bill patients who can’t immediately pay for service, she said.

“It would be very similar to going to any health care provider,” Hansen-Turton said. “When you have a record on them, a bill can be sent.”

Experts say that prospect opens the door for collection agencies to serve a growing pool of retail clinic owners, including Walgreens, CVS, Wal-Mart, Target Corp. and The Kroger Co.  Still, self pay bad debt volume from insured patients could take a hit if insurers follow Blue Cross Blue Shield (BCBS) of Minnesota’s lead and waive the co-pay for members who go to a retail clinic instead of a traditional doctor’s office for non-urgent care.

Last year the insurer announced that it will waive the co-pay for its fully insured small and large group plan members who use retail clinics.  BCBS said the initiative aims to encourage members to use the clinics for the treatment of simple medical conditions such as sore throats, ear infections, and seasonal allergies and routine vaccinations.

“We created this new option because it helps hold health care costs down and is responsive to consumers’ wide acceptance of retail clinics,” said Shawn Patterson, BCBS of Minnesota’s vice president of marketing, when the plan was announced last July.  He added that BCBS found the average cost of a retail clinic visit was $47 or about half of the $97 average for a visit to a traditional medical clinic. Overall, BCBS estimates that employers and members saved more than $1.25 million in health care cost in 2007 by using the clinics.

“By eliminating co-pays for retail clinic visits, Blue Cross is making it easier for members to use cost-effective care,” Patterson said.  

Although retail clinics’ growing appeal to consumers may appear more damaging to private physician practices, eliminating co-pays for insured patients who visit the clinics could cut into self-pay volume, said ACA International President Jay Gonsalves.  Still, he anticipates opportunity for collectors to do business with the new health care providers if consumers are billed for any services.  He added that the trend of employers passing a portion or all of their rising health care costs onto consumers will likely continue, and retail clinics’ bad debt volume is likely to grow and require skilled collection services.   

“The law of averages is that not everyone will have the means to pay at the point of service,” Gonsalves said. “Logic would still follow, there will be higher co-pay and deductibles, and balances would end up getting bigger and end up needing to be addressed.”

Kaulkin Ginsberg analyst Michael Klozotsky cautioned that the emerging retail clinic industry may not signal growth opportunities for collectors, but rather a shifting of medical bad debt to different providers. Kaulkin Ginsberg is an advisory firm to the accounts receivable management industry and a sister company of insideARM.com.

“There’s no creation of new business,” Klozotsky said, adding that patients previously at risk of defaulting on their debt will continue to be at risk of defaulting whether they visit a traditional doctor office or a retail clinic.

One risk to experienced medical debt collectors, however, could be competition from retail collectors who may have business relationships with the retailer.  Gonsalves said if retail collectors do pursue the work, they will need to recognize that medical bad debt is a different type of consumer debt and that they should adhere to the standards set by the ACA International for collecting that debt.