American Journal of Law & Medicine

Retail health clinics: how the next innovation in market-driven health care is testing state and federal law.


The emergence of in-store retail health clinics (RHCs) has sparked a debate that pits quality of care concerns against the advantages of consumer choice in the marketplace for health care. RHCs appear in pharmacies, grocery stores, and big-box retailers like Wal-Mart, offering basic health care services on a walk-in basis that are administered primarily by nurse practitioners (NPs). Proponents of these clinics hail their pro-market effects: convenience and cost-savings associated with consumer-driven health care; lower prices from increased competition between providers; and increased access to basic health care. Critics of RHCs raise concerns that quality of care is hindered by the lack of physician oversight, disruption of the "medical home," and the conflicts of interest arising from prescribing drugs at pharmacy-housed clinics.

Due to the novelty of RHCs, their operators face significant uncertainty as to several key legal issues. At the state level, it is still unclear how these clinics will fit into laws governing the corporate practice of medicine, scope of practice, physician supervision, and certificate of need. Likewise, there is uncertainty about the extent of potential liability under federal Stark II and anti-kickback laws. Throughout this legal analysis, it is important to step back and recognize that RHCs were not created in a vacuum. They are modern versions of past experiments in market-driven health care delivery solutions. Analyzing comparable innovations like urgent care and freestanding emergency centers can help clarify many of the legal issues affecting RHCs. Understanding the law is important not only for RHC operators looking to expand into new states, but also for future innovators of consumer-driven models for delivering health care. Restrictive and inflexible laws may prevent RHCs from acting as beacons for testing the ability of the market to provide cheap, convenient, quality care.

This note will synthesize the different legal issues surrounding RHCs into a cohesive summary of the law. First, it will discuss the context and historical roots of these clinics, fitting them into the consumer-driven health care movement. Second, it will outline the public policy arguments made for and against RHCs. This debate centers around the two critical concerns about all consumer-driven models for delivering health care: what are the potential economic benefits and quality of care implications of allowing the free market to provide health care? Third, with these

public policy debates in mind, this note will analyze the key state and federal laws that affect RHCs. Where vague law or government inaction paints an unclear picture of the legal framework, this note will use for clarity the legal and historical context of other consumer-driven models of health care delivery.


Changes in the delivery system of services are often responsible for the greatest health care cost-savings. In the 1980s and 1990s, the managed care organization (MCO) sparked a market-based transformation in the health care industry by putting cost-pressures on providers through utilization review, patient steering, and selective contracting. (1) At the same time, hospitals faced a revolution of their own. Competitive pressures force them to act more and more like ordinary businesses--cutting costs, increasing margins, and competing with new providers. (2) One new type of provider that emerged in this free-market environment was the entrepreneur physician, who spawned the physician practice management corporation (PPMC). PPMCs made physicians owners and employees of large combined physician groups in an attempt to cut administrative costs, generate synergies, and increase bargaining leverage against MCOs. (3) However, the industry imploded in the late 1990s because PPMCs did not yield their expected cost-cutting returns and salaried physicians proved difficult to manage and unproductive. (4)

At the end of the century, MCOs and large employers increasingly focused their cost-cutting efforts on imposing more cost-sharing provisions on consumers' health insurance plans. (5) In return, consumers required health care provider alternatives to choose from. Many providers shifted their focus to consumer-driven health care, infusing competition into the health care market by creating freestanding facilities that were more affordable, convenient, and consumer-oriented than a hospital or doctor's office. (6)

Entrepreneurial primary care physicians established privately owned urgent care centers and freestanding emergency centers (FECs), also known as "doe-in-a-box" shops. FECs emerged in the 1970s, offering consumers a convenient and lower-cost alternative to hospital emergency rooms. (7) After a slow start, urgent care clinics gained traction in the 1990s and today are a growing method of delivering primary care services in a setting that is more consumer-friendly than a hospital emergency room or doctor's office. (8) Both of these models revolve around customer satisfaction and providing cost-effective acute episodic care at locations close to where people spend their day-to-day lives. (9) Both FECs and urgent care centers rely on licensed physicians and nurse practitioners to provide care. (10)

Building on the same core belief in a health care industry driven by consumer satisfaction and convenience, entrepreneurs today are experimenting further with the "doe-in-the-box" model and creating retail-based health clinics. (11) RHCs operate inside pharmacies, grocery stores, and mass merchandisers like Wal-Mart. (12) They employ nurse practitioners and physician assistants (PAs) (13) to provide customers, on a walk-in or appointment basis, with basic health services that are typically reserved for trips to a primary care physician's office. (14) The average price of services is $40 to $80 and the average wait-time is fifteen to twenty minutes. (15) There are just under 1000 such clinics (16) and industry experts predict that number will rise to 6000 by 2011. (17) The clinics are popular with consumers. One study found that one out of twenty households visited an RHC in 2007; it also showed high consumer satisfaction in areas like quality of care, cost, and convenience. (18)

If successful, RHCs may be the next step in the consumer-driven health care movement, transforming the way that basic health care is delivered and paving a path for future market-driven innovations. (19) Due to their unique ability to match up contemporaneous demand for basic health care services with a convenient, consumer-oriented method of delivery, RHCs have the potential to compete for consumer dollars in ways that previous providers could not. (20)


The debate over RHCs is in its early stages, but advocates on both sides have voiced their opinions. Influential interest groups like the American Medical Association (AMA) and American Academy of Family Physicians (AAFP) question the ability of RHCs to provide good medical care absent proper guidelines and limitations. Proponents of market-based solutions argue that quality of care at RHCs is adequate and that their cost-savings and convenience improve the market for health care. Little research specific to RHCs exists, but economic literature suggests that competition in general, and consumer-driven innovations in particular, should create a more efficient market for health care services.


Though taking several forms, the chief criticism of RHCs has been their quality of care. At the root of this concern is a common practice among RHCs to administer care without on-site physician oversight. Instead, these clinics rely almost exclusively on NPs, and sometimes PAs, to provide their services. The AMA supports a clear demarcation from physicians of the scope of services that NPs and PAs can provide. (21) RHCs, on the other hand, benefit from the ability of NPs to provide a broad scope of services. In this way, the public policy debate over quality of care at RHCs is a new battlefield for the scope of practice wars fought between NPs and physicians during recent decades. (22)

To maximize the quality of care provided to patients, the AMA recommends "direct access to and supervision by physicians." (23) In response, RHC proponents stress that, even if there is no on-site supervision, physicians often remain in "close contact" throughout the process of providing care for a patient. (24) This is especially true of RHCs affiliated with a local hospital or health system. (25) Furthermore, RHCs may be capable of providing a high quality of care even without physician supervision. Studies measuring patient outcomes and treatment quality show that NPs are capable of providing a standard of care equivalent to that of a family doctor. (26)

Another quality of care concern regarding RHCs is their impact on continuity of care. By design, RHCs only provide "episodic care," unlike a primary care physician who is supposed to track a patient's condition over a long period of time. (27) As a result, practitioners at RHCs may not be familiar with a patient's medical history. (28) Without the full picture of a patient's history, proper diagnosis can be difficult and there is an increased likelihood of "serious underlying health conditions going undetected." (29) As a result, RHCs potentially disrupt the "medical home" created by the patient's primary care physician's office. (30) If individuals use their primary care physicians for certain treatments and RHCs for others, neither provider may ever have a full picture of a patient's health. Therefore, the AAFP and AMA recommend that RHCs establish formal connections and referral systems with physician practices, as well as implement electronic systems to share health records with them. (31)

Although many studies have shown a correlation between continuity of care and patient satisfaction, the evidence is less conclusive on its effect on health outcomes and lowering costs. (32) Regardless of the merit of the medical home theory, RHCs have responded favorably to the AMA's concerns. Many require referral of patients back to their primary care physicians for services outside the scope of the RHC, and they maintain extensive lists of local primary care physicians to help those customers who do not have one already. (33) RHCs with hospital or health system affiliations have a built-in network that ensures a flow of patient information to physicians. (34) Above all, RHCs are designed as a supplement, and not a substitute, to primary care physician's offices. They treat a limited scope of "self-identif[ied]" acute, episodic care needs, and do not dissuade or undermine the importance of regular visits to the doctor's office. (35)

Quality of care may also be implicated by potential conflicts of interest arising out of the RHC model. Chief among these is the concern that in a pharmacy-RHC joint venture, a conflict of interest may lead to excess drug prescriptions. (36) Critics argue that retailers housing pharmacies next to RHCs will face a strong incentive to promote prescription of medication beyond the medically necessary level. For example, a big-box retailer could give incentives to its RHC tenant to increase prescription of certain high-cost drugs, counting on customers to walk across the aisle to the pharmacy tenant to buy the pharmaceuticals. The business rationale for such behavior is obvious: RHCs already average approximately one drug prescription per patient and pharmaceuticals are pharmacies' highest-margin products. (37)

Consumers echo many of these quality of care concerns. A 2005 poll found that although 89% of RHC users were "very satisfied" with the quality of care received, 75% feared the risk of a missed diagnosis of a serious ailment and 71% were concerned about inadequate staff qualifications. (38) These results suggest that consumer quality of care concerns are tempered by limiting the use of RHCs to minor ailments and by ensuring qualified staff are present. A recent RAND study also showed that consumers are using RHCs appropriately for "stop-gap" treatment of minor illnesses and injuries, as only 2.3% of the visitors surveyed were referred to an emergency room or primary care physician. (39)

RHCs have responded to many of these concerns by adopting clear medical protocols that guide clinic operation, often based on guidelines laid out by the AAFP and American Academy of Pediatrics (AAP). The Convenient Care Association (CCA), which has among its membership several major national RHC chains, attempts to ease physician fears by promulgating national standards that promote high quality of care and a minimal competitive threat from RHCs. CCA standards require RHCs to hire credentialed staff, conduct collaborative physician review of patient treatment, "build relationships with traditional health care providers and hospitals," refer patients to primary care providers for "follow-on care" and serious conditions, and maintain electronic health record systems. (40)


Advocates of RHCs mainly point to their cost-saving advantages: "[c]linics keep costs down by using lower-cost labor, maintaining electronic records, and limiting the scope of services. Serious ailments are referred to physicians or emergency rooms, so there is no need to maintain expensive equipment." (41) RHCs may even have more cost-saving potential than their predecessors, FECs and urgent care centers. (42) Use of NPs to provide care and the minimal space requirements for housing an RHC also contribute to lower costs. (43) These lower costs translate into lower prices for the consumer: the average price of a visit to an RHC is $60, half the price of a doctor's visit, and up to one fifth the price of a trip to an emergency room. (44) A RAND study recently estimated that the medical costs of comparable treatments were: $75 at RHCs, $124 at urgent care facilities, $127 at primary care physician's offices, and $356 at emergency room departments. …

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