Becker's Hospital Review

74 THOUGHT LEADERSHIP Kenneth Kaufman: Can Legacy Providers Afford to Give Up on Low-Intensity Care? By Kenneth Kaufman, Chair, Kaufman, Hall & Associates, LLC I n 2009, Wal- greens began to offer flu vaccina- tions at all of its phar- macies and clinics. Today, aer an ar- rangement to offer vaccinations to more than 8.5 million VA patients, Walgreens is second only to the federal government in the number of flu shots provided in the U.S. In 2000, the first retail clinics opened. Today, there are more than 1,800 such clinics. CVS Health owns about half of those clinics and plans to expand its sites to 1,500 by 2017, with the long-term goal that half of all Americans will live within 10 miles of a CVS MinuteClinic. CVS Health recently announced that it had surpassed 25 million visits in its retail clinics, and nationwide, retail clinics have more than 10.5 million visits annually. In 2013, telehealth revenue was estimated at $240 million. By 2018, it is expected to reach $1.9 billion. ere were an estimated 75 million virtual clinician visits in North America in 2014, with the potential for up to 300 million annually in the future. Telemedi- cine provider Teladoc says that its revenue has doubled in each of the past two years. In late 2014, Wal- greens partnered with MDLIVE to launch a telemedicine platform in two states through the Walgreens mobile app. Access to that app will expand to 25 states by the end of 2015. For the nation as a whole, these and other new options for low-intensity care hold the poten- tial to reduce the burden of health- care costs. According to one study, up to 27 percent of hospital ED visits could be managed appropri- ately in retail clinics and urgent care centers, with potential savings of $4.4 billion per year. Another study suggests that telemedicine could save employers more than $6 billion per year. For consumers, these new options represent not only lower costs, but also a significant reduc- tion in the friction of a typical visit to a legacy provider. In most cases, these non-traditional providers have longer hours, don't require appointments, can see patients promptly and are closer to home —or, in the case of telehealth, don't even require that you leave home. Just a few years ago, flu shots, physicals, blood tests, treatment of ear infections and seasonal allergies, and similar low-intensity services were within the primary domain of traditional healthcare providers. Today, a powerful group of innovative companies is encroaching on that domain, with strong momentum for future growth. ese non-traditional compet- itors have significant advantages over traditional health systems. Some have national networks. ey have the luxury of focusing on a band of services that don't involve the kind of high fixed costs that a health system carries. Some have deep and sophisticated connections with consumers. For example, Walgreens serves more than 6 million customers daily, and its loyalty program has more than 100 million members. Given this strong and growing competition, hospital executives are faced with a critical strategic question: Should they fight to keep their low-intensity business? Lessons from the Internet economy An answer to this question can be found in the two key lessons from the Internet economy. ese lessons form the strategic founda- tion of Internet giants like Goo- gle and Amazon. And in today's socioeconomic climate, they are at the root of all successful retailers, including the new competitors for low-intensity healthcare. First lesson: e more traffic the better On the Internet, the founda-

• Cover