A few weeks ago, Walgreens, the giant drug store chain, announced that it was planning to close the 157 in-store health clinics that it owns. It will continue to keep those clinics run by third parties.
Why close their own stores? They didn’t make money.
Instead, Walgreens is partnering with weight loss company Jenny Craig, which will place Jenny Craig consultants in approximately 100 Walgreens locations.
What this means for retail healthcare is unclear.
Walgreens profit is driven by sundries and over the counter products as well as by prescription drug sales. If, as it turns out, their foray into retail medical care didn’t make money, and didn’t drive more traffic into, and more sales from, stores, then it had to go.
On the other hand, despite Walgreens’ status as a large chain, it’s small compared with CVS Health and its well over 1,000 in-store retail clinics. With only approximately 150 owned clinic locations, some analysts believe that Walgreens lacked the scale to make retail health profitable, but of course, that’s just a guess.
My analysis is that Walgreens discovered that it’s more difficult to operate clinics than imagined. Retail stores are driven by sales and profit per square foot. Apparently, their third party partners are not clamoring to back out of their in-store clinic space leases.
Retail primary care remains a growth opportunity, especially when it can be leveraged by multi-specialty medical groups as a referral funnel.
Some specialty areas present similar opportunities, such as retail orthopedic clinics.
And, of course, for those medical groups which control ASCs or physician-owned hospitals, retail centers with high traffic and visibility are prime locations to facilitate new patient relationships.
Think health system moves, even if you aren’t a health system.
