Skip Navigation LinksHome > July/August 2007 - Volume 11 - Issue 4 > THE FUTURE OF RETAIL MEDICINE
ACSM'S Health & Fitness Journal:
doi: 10.1249/01.FIT.0000281228.69385.03
Features

THE FUTURE OF RETAIL MEDICINE

Sol, Neil Ph.D.

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Author Information

Neil Sol, Ph.D., is currently the vice president of Outpatient Services at Valley Care Health System in Pleasanton, CA. He has been a leader in the prevention and health and fitness industries for the past 25 years. With unique experience in creating, managing, and marketing integrated medical fitness products and services in the healthcare environment, he currently has enjoyed great successes with Lifestylerx, his hospital's medical fitness center as well as other hospital retail medical products. His focus is on generating income for hospital unencumbered by insurance reimbursements.

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Abstract

LEARNING OBJECTIVE: • To reveal a significant new trend in health care and how medical fitness and related programs can help a hospital realize or participate in the coming trend.

There is a trend developing in health care called retail medicine. It is not a fad, and there is every indication that retail medicine that extends the continuum of health care is a wave of the future.

As hospital administrators attempt to develop their 2008 budgets, they quickly realize that, to achieve their forecasted or required bottom lines, the historic method of forecasting occupancy, case mix index, and payer mix is, at best, a guess. This is especially true in the current environment where hospitals find insurance reimbursement declining with increasing charity load and increasing self-pay, leading in many cases to bad debt. Additionally, hospitals are losing many outpatient procedures and surgeries to their own physician offices, adding to the loss of projected revenue. As hospitals realize that they cannot increase these potential revenue factors with some consistent level of assurance, the only way left for hospitals to achieve their 2008 forecasted budgets is to cut the only thing they can control, which are expenses. However, it has become obvious that it is difficult, if not impossible, for a hospital to expense its way to profitability; so hospital budget discussions have shifted to developing retail services for cash and, most importantly, to attracting the community to these retail services in hopes of identifying patients who have developing diseases that are asymptomatic but will eventually result in a malady for which they would be admitted to the hospital. The patient mining aspect of retail medicine has become attractive to hospital administration because it became a means of helping the hospital continue to practice traditional health care while increasing bottom line revenue.

Retail medicine/health care refers to the sale of health care-related goods to consumers who are willing to pay a fair and competitive cash price for these services or products. Retail medicine relates to health-care services not currently reimbursed by health insurance payers. In an environment where reimbursement for traditional health care continues to decline because of decisions made by payers or efficiencies of the latest health-care treatment devices, decreasing length of stay, retail medicine, and the development of programs that generate new revenues have received the attention and consideration of hospital administrators.

In fact, 700 hospitals had to cease operations from 1993 to 2000 primarily because of decreased reimbursements, increased charity care, and bad debt resulting from self-pay. To offset this loss, and help save hospitals and the traditional services they provide, hospitals have no choice but to expand into the realm of retail health care and develop programs that generate both a fair cash price and mines for patients.

Some of the programs that reflect retail health care include, but are not limited to, integrated medical fitness centers, complimentary and alternative medicine clinics, medical day spas, and express medical treatment centers. There are many other retail programs that hospitals have creatively developed as both a means to generate cash and an opportunity to identify new patients.

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MEDICALLY INTEGRATED HEALTH AND FITNESS CENTERS

Photo courtesy of Ne...
Photo courtesy of Ne...
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The business of medically integrated health and fitness centers that the Medical Fitness Association (MFA) represents by history can be the most lucrative cash contributor to the hospital offsetting insurance reimbursement loss. Medically integrated health and fitness centers can generate cash profits upwards of one million dollars. In an environment where a hospital institution on average generates small margins, the contribution of medically integrated health and fitness centers can be a significant percentage of that margin.

Interestingly, MFA's forecast indicates that by the year 2010, only 1,500 hospitals in the U.S. will have medically integrated health and fitness centers. This is both bad and good news. The bad news is that only 25% of the hospitals will be able to generate significant unencumbered income to help offset traditional reimbursement losses, leaving the majority to attempt to accomplish their budget by cutting expenses. The good news is that 75% of the hospitals in the U.S., which represents some 4,500 hospitals, have an opportunity to develop medically integrated health and fitness centers as the core of their retail effort to generate this new profitability.

A discussion of a medically integrated health and fitness center cannot occur without the topics of both complimentary and alternative medicine programs, as well as medical day spa programming. Both alternative medicine and medical day spa services can be disbursed from a medically integrated health and fitness center or can be located at another location within the domain of the hospital. Complimentary and alternative services include acupuncture, biofeedback, chiropractic, diet-based therapies, massage, relaxation, Qi gong, tai chi, yoga, meditation, Pilates, hypnosis, and vitamin or herb therapy.

In the past 12 months, 36% of Americans have selected and paid for alternative medicine services. In the past 10 years, the U.S. public spent $36 to 47 billion dollars on alternative services. These fees represented more than the public paid out-of-pocket for all hospitalizations and approximately 50% of what it paid for all out-of-pocket physician services in any 1 year. These revenues should have been captured by hospitals.

As for day spas, according to International Spa Association, the average medical day spa enjoys approximately 15,000 visits per year with an average revenue of approximately $1 million, yielding a 14.3% profit margin before taxes. The medical day spa also can be housed in a medically integrated health and fitness center that offers both conventional day spa services and complimentary therapies and treatment that augment traditional medical care. For both alternative health care and medical day spa services, the patient/client refer themselves and are prepared to pay cash for services received.

Another trend of retail medicine is the proliferation of retail express medical clinics, such as the minute clinic. Target, Rite Aid, Wal-Mart, and HEB Supermarkets, to name a few, have incorporated these convenient neighborhood clinics staffed by nurse practitioners to evaluate and treat common illnesses, minor injuries, and provide inoculations. These are quick stops for health care that mostly take only payment. It is obvious why big box stores want these clinics to support their pharmacies, but it is more obvious and beneficial for local hospitals to initiate these clinics because they can serve as a higher level of care for diagnosed patients when needed.

Hospitals' primary care physicians have traditionally not wanted these express clinics to develop in their community because it could compete directly with their practices, but the tsunami of public demand is driving the development and implementation of these centers regardless of the opinions of local physicians. A local hospital and its medical staff have an opportunity to take a leadership role in this effort, as opposed to letting it siphon business away from their physicians.

The retail medicine movement is not about displacing the traditional hospital. It is about supporting and offsetting losses the hospital realizes in the delivery of its traditional care and can help ensure that the hospital remains a viable community asset supporting the sick and injured in its service area. If payers are not going to assume this responsibility for the continuance of hospitals, then, it is incumbent on the hospital to assume this responsibility itself. Retail medicine and hospital creativity can easily amend this problem.

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Photo courtesy of Li...
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Because medical fitness centers can serve as a core business to this coming trend on retail medicine, it provides an opportunity for MFA and its members to offer this direction to their hospital institutions. This is an opportunity to broaden the importance of the medically integrated health and fitness center within its hospital and that of its director to the role of contributing, designing, and or managing the hospital retail movement. It is our opportunity to broaden our vision of our role in our hospitals.

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PERSPECTIVE OF INDUSTRY LEADER

Daniel J. Lynch, Principal, DJL Enterprises, LLC

"Dr. Sol's vision of retail medicine is consistent with his vision of hospital integrated health and fitness centers, which he predicted in the 1980s. Retail medicine is the next growth opportunity for hospitals, physicians, and any other medical practitioner that faces reimbursement by federal or private insurance payment. Dr. Sol lays out a very good strategy for increased hospital revenues through medically integrated health and fitness centers, retail medical day spas, and other logical strategies that can assist the hospital. But how does this type of thinking help the physician who is often faced with the same declining revenue streams due to federal and commercial reimbursement policies?

One of the benefits to a physician, who is affiliated with a medically integrated health and fitness center, is that, according to Standard no. 2 of the MFA's Facility Guidelines and Standards published in May of 2006, 'A Medical Fitness Center must offer each member an appropriate preactivity screening process and refer moderate to high-risk individuals to their respective physician for medical clearance prior to participation.' What this often means is that for an individual 'to become a member,' they must visit with their primary care or specialty physician before starting an exercise program, or the medical fitness center should not consider allowing this person to begin an exercise program. An entrepreneurial physician could schedule these 'clearance visits' on a cash basis which would allow the individual member, who is motivated to start exercising, the opportunity to schedule a next day appointment for a reduced cash payment. If the physician's initial physical exam requires other tests to rule out other diseases, they can refer them to the hospital that is sponsoring the medically integrated health and fitness center to perform any additional tests required and to rule out further risk of disease. This is what Dr. Sol refers to as "patient mining" in his article. Using this approach now benefits the physician, the hospital, and the medical fitness center."

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CONDENSED VERSION AND BOTTOM LINE

Retail medicine is a new phenomenon in health care and offers hospitals the ability to both generate revenues and profits unencumbered by insurance reimbursement. It also is a means for hospitals to identify new patients that could obtain traditional care in the hospital. Medical fitness is a core program in the retail medicine movement and offers both MFA and its membership an opportunity to play a critical role in the future financial viability of the hospital.

Keywords:

Retail Health Care; Patient Mining; Unencumbered by Insurance Reimbursement; Medical Fitness Core Retail Business; Cash Sales

© 2007 American College of Sports Medicine

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