May 8, 2006

Walk-in Health Clinics Catch Eye of Wal-Mart, Case

By Kim Dixon

CHICAGO (Reuters) - America Online founder Steve Case is putting his entrepreneurial might behind a concept also embraced by Wal-Mart Stores -- in store health clinics shoppers can use for ailments like sore throats, cholesterol screening and routine physicals.

Case's Revolution LLC is investing "tens of millions of dollars" in RediClinic, making him the largest investor of the walk-in medical clinic company, which already operates out of Wal-Mart and other retail outlets.

Houston-based RediClinic operates 11 clinics in Texas, Arkansas and Oklahoma staffed by nurse practitioners.

"It's a concept in its early stages now, like AOL was 20 years ago when most people didn't have PCs, but I think there should be thousands of these clinics," akin to Starbucks coffee chains, Case told Reuters in an interview.

RediClinic also just signed on to partner with Walgreen Co., the biggest U.S. drugstore chain, to be announced shortly. RediClinic plans to expand to more than 70 clinics within a year and to 500 clinics within three years.

Healthcare spending comprises about 16 percent of the U.S. economy, and costs are expected to skyrocket further, according to the non-partisan, Washington, D.C.-based National Coalition on Health Care. Americans are looking for less expensive alternatives.

Case is the architect of AOL's merger with Time Warner Inc.. The 2002 merger eventually wiped out more than $200 billion in shareholder value and gave media consolidation a bad name.

This time, Case is turning to healthcare and is using Revolution and its $500 million in assets for start-up ventures in health, resorts, spas and media.

The idea of locating a health clinic within a retailer got a boost when Wal-Mart, facing political pressure to offer medical benefits for its 1.3 million U.S. employees, in February said it would expand its 11 pilot in-store clinics to 50 this year.

"A meaningful percentage" of the 75 new clinics to be open within 12 months will be within Wal-Mart, according to RediClinic chief executive Web Golinkin.

"Obviously Wal-Mart is a very strategic relationship," Case said, though he said the company does not want to be tied to one retail partner.

Wal-Mart, the largest U.S. private sector employer, now operates 11 clinics, run by RediClinic or rivals Quick Quality Care, MedPoint Express and Solantic.

The Bentonville, Arkansas behemoth has become a focal point for criticism from unions and others over corporate responsibility for healthcare.

According to the union-backed Wal-Mart Watch, the retailer is the No. 1 employer on state Medicaid rolls in 16 states, because their workers either don't qualify for or can't afford the health plans the retail giant offers.

Wal-Mart vice president Amee Chande acknowledges Wal-Mart did not enter the business to generate cash flow.

"Our business relationship with the clinic is just a landlord-tenant relationship... our interest is really more about enhancing the customer experience and helping affordability," Chande said.

On when and whether Wal-Mart will move beyond the 50 clinics, Chande would only say: "You and everyone wants to know that. We'll be watching it very closely."

There are bigger players than RediClinic. MinuteClinic already runs 82 clinics in retail space including CVS Corp. drug stores and is seeking to expand to up to 200 by the end of the year, according to a spokesman.

"We think convenience care will be a multi-billion market within five to 10 years," Case said. "The question is who does the best job of executing it."


The business model -- 7-day-a-week medical care for easy-to-treat illnesses for $50 or less -- is a sensible alternative to emergency room visits, where many patients wind up when they can't get a doctor's appointment immediately, Case said.

All prices for services are posted. A typical trip to the emergency room costs nearly $400, according to the insurer BlueCross Blue Shield. RediClinic charges a set $45 for many so-called 'get well' services including treatments ranging from sinus infections to irritable bowel syndrome.

RediClinic's parent company Interfit has been in retail, including 3,800 Wal-Mart stores, for several years already, offering services like flu shots and glucose screening, CEO Golinkin said.

He is now negotiating with health insurers, who like the idea of cheaper care. The clinics were first launched as a cash-only business as, "We don't want to have to build an expensive infrastructure that would cause us to raise our cash prices."