Walgreens enters work-site clinic market

The pharmacy chain plans to launch a health and wellness division that will include new retail and clinic acquisitions.

By Pamela Lewis Dolan — Posted April 28, 2008

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Thanks to two pending acquisitions, Walgreen Co. is poising itself to become a strong force in the world of work-site health clinics.

Walgreens announced in March it is purchasing Chadds Ford, Pa-based I-trax Inc., and Cleveland-based Whole Health Management, which have a combined total of 369 of the estimated 7,600 work-site clinics across the country.

The drugstore chain said the acquisitions are part of its strategic plan to launch a health and wellness division that will also include Take Care Health Clinics, the store-based retail clinics located inside Walgreens stores. The company plans to connect its work-site clinics, store-based clinics and its pharmacy business into a single, integrated electronic system.

The work-site clinics, usually located at companies that are self-insured, offer services ranging from fitness centers to work-site pharmacies. In some cases, they offer primary care. The level of service is determined by each employer who contracts with the clinic operators.

According to Watson Wyatt, an Arlington, Va.-based consulting firm, nearly one-third of companies have or plan to have work-site clinics in 2009, up from 27% in 2006.

Because the Walgreens deal has not yet closed, the companies said they are not able to discuss expansion plans. But CHD Meridian Executive Vice President and Chief Operating Officer Peter Hotz said his company had its own expansion plans in the works before Walgreens entered the picture. CHD Meridian is the I-trax subsidiary that operates work-site clinics. Another subsidiary, ProFitness Solutions, provides wellness services.

Bob Esgro, a pharmacist and attorney from Villanova, Pa., said he is concerned with the limited choices patients will have as a result of the work-site clinics. He said pharmacists were initially concerned with competition from mail-order services; now "we are competing with ourselves." He expects the same competitive environment will exist for family physicians in the communities these clinics serve.

American Medical Association policy relating to corporate health care calls on physicians to disclose any conflicts prior to referring a patient to a facility or business in which they have a relationship. It also passed a resolution last year that called on state and federal regulators to investigate conflicts of interest between pharmacies that own and/or operate retail health clinics.

Walgreens spokesman Michael Polzin said while the company prefers that clinic patients use Walgreens to fill prescriptions, patients do have choices. He said each clinic has an electronic medical record and e-prescribing system that can transmit health information or prescriptions to any physician or pharmacy of the patient's choosing.

Esgro said while it's true the patients do have a choice as to where they go, the reality is that incentives to stay in-house would give Walgreens a significant competitive advantage. Most employers with clinics offer reduced or waived co-pays for using the work-site clinics or pharmacies.

Helen Darling, president of the National Business Group on Health, said physicians have no need to worry about competition, as most employers are using the clinics to fill a gap in care as opposed to becoming the medical home for employees.

Darling said she sees Walgreens' move simply as a way for the company to expand its portfolio by entering a growing market that has some overlap into areas Walgreens already knows something about.

In a study released earlier this year, Watson Wyatt found 32% of the existing work-site clinics have opened since 2000. Of those, 44% provide nonoccupational health services, and 74% provide a wellness center with clinical services. The survey did not specify how many provide a primary care home for its employees, but said the clinics "offer opportunities for employers to provide primary care services."

But their potential "is not fully tapped," the study said.

Hotz said primary care is a small part of the overall services CHD Meridian offers. It's up to each employer to determine what services are offered at each site, and about 10% of CHD Meridian's existing clinics offer primary care, Hotz said.

The ones that do offer primary care generally are located in small communities where primary care is lacking, he said.

In other regions, the clinics have established relationships with the primary care physicians who serve those areas. He said many young employees who use the clinics have no primary care physician, and the clinics help to find medical homes for those patients.

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What's driving growth of work-site clinics

A study published in March by Watson Wyatt found that 32% of existing work-site clinics have opened since 2000. Companies surveyed were asked to give the reasons they opened the clinics.

Reason for opening clinic Clinics opened in 2000 or after Clinics opened before 2000
Reduce medical costs 70% 49%
Enhance worker productivity 67% 67%
Improve access to care 44% 33%
Improve integration of health and productivity efforts 37% 40%
Improve quality of care 30% 12%
Address occupational health and safety needs 26% 54%
Offer concierge service as a perk 15% 7%

Note: Respondents could give more than one answer.

Source: "Realizing the Potential of Onsite Health Centers," Watson Wyatt survey, March

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Work-site clinic services

A March Watson Wyatt survey looked at benefits offered at work-site clinics that opened in 2000 or later compared with those that opened earlier.

Service provided 2000 or after Before 2000
Immunizations 81% 91%
Screenings 78% 88%
Urgent care 63% 75%
Chronic disease management 48% 54%
Pharmacy benefits 44% 23%
Physical therapy 22% 44%
Mental health or EAP counseling 15% 46%

Note: Respondents could give more than one answer.

Source: "Realizing the Potential of Onsite Health Centers," Watson Wyatt survey, March

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