Sg2 Analytics: Assessing the Retail Clinic Opportunity

Over the next three years, Sg2 predicts double-digit increases in retail clinic sites. Provider systems face a limited time frame in which to decide how to play in this arena. However, any moves to offer retail care require a careful analysis of market demand, volumes and sustainability.

Sg2 recently helped a client to make an informed decision about opening retail care clinics, weaving in data from Sg2 Analytics with its own knowledge and experience of local market realities.

Use Data to Drive Your Retail Care Strategy
A health care system on the East Coast has experienced explosive population growth over the past decade. To capture its share of this growth, it plans to open three retail care clinics in the next few years. However, several competing retail offerings are available in its primary market. The organization needed to determine whether its proposed new clinics could attract enough volume to be financially viable or if they could be justified based on the overall value proposition to the health system and potential downstream revenue. Sg2 employed a four-step approach to help it reach a decision.

  1. Identify your market.
    Key Sg2 Analytics: Market Demographics
    Determine current and projected population by zip code throughout your service area. For this system, clusters of high growth, high-volume zip codes were discovered and segmented using characteristics like age, ethnicity and income level to better understand the demographic profile and potential consumer base of each cluster. Demographic data can help pinpoint retail clinic opportunity—for example, 43% of US retail clinic customers are in the age 18–44 cohort.
  2. Determine community need.
    Key Sg2 Analytics: Market Demand Forecast and State Data Analysis
    Establish the community health needs and utilization trends of each area related to retail care. This includes understanding current and projecting future retail volumes. Also, consider reductions in potentially avoidable admissions (PAAs) that could be converted into retail volumes.
  3. Consider potential volumes diverted from other care sites.
    Key Sg2 Analytics: Market Demand Forecast and Market Demographics
    Calculate potential diversion rates and volumes from other outpatient care sites in your market to retail clinics. Collaborative efforts for this client involved Sg2’s national and market data, our expertise on national trends, and the client’s invaluable knowledge of its local market. The Sg2 outpatient forecast was used to determine current and projected volumes by care site using local zip codes. Next, Sg2 worked with the client to model diverted volumes from each type of care site, using Sg2’s suggested diversion rates as a starting point.
    For example, national data reveal that retail clinics can address 18% of primary care physician visits and 12% of ED visits. The client easily adjusted these rates based on local market conditions and knowledge. As a result, the health system obtained current, three-year and five-year projections of local volumes that could be diverted to retail care clinics. Going forward, if market conditions or assumptions about diversion rates change, these factors can easily be modified.
  4. Evaluate sustainability/profitability.
    One important question remained: what daily volume or number of patient visits was needed to make the retail clinic sustainable financially? To determine this, retail clinic profitability benchmarks were compared with current and projected volumes. These benchmarks were based on national data/leading practices and could be adjusted based on different assumptions such as hours/days of operation and local market conditions. For example, Sg2 found that several organizations cite daily retail care clinic volumes ranging from 16 to 40 patients to achieve profitability. By modeling potential retail clinic volumes within a prospective service area and comparing them to results from the profitability benchmarks, the organization created a simple supply vs demand equation and constructed a directional strategy regarding how and where to proceed with further investigation.

So What Did This Client Decide to Do?
Based on the process outlined above, our client confirmed its original decision to open the first retail clinic. Going forward, it will use the same analytical approach combined with its local market knowledge to determine the best strategic locations for the other two retail clinics it plans to open.

Need help collecting, analyzing and/or understanding data as you assess your own retail care opportunities? Sg2’s service model and analytics can help you take the sometimes incomplete data available and make the most of them, enabling you to make the best strategic decisions for your organization and the community you serve.

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As of February 11, 2016, Vizient, Inc. has completed its purchase of MedAssets Sg2 and spend and clinical resource management segments from Pamplona Capital Management, LLC. MedAssets revenue cycle business will continue to operate as a wholly-owned subsidiary of Pamplona Capital Management LLP.

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