Why Walgreens Is Building Its Own Universal Health-Care System

Walgreens, the $59 billion drugstore giant, is building its own universal health-care system, with more than 700 retail and corporate clinics.

Everyone knows Gary Gustin. When he walks through the halls of L-3 Communications' Camden, New Jersey, office, he gets smiles and hellos from everyone he meets. Gustin isn't the CEO or the guy who developed the defense contractor's secure BlackBerry substitute for President Obama. He's a Walgreens employee.

Not that any of L-3's 1,100 workers in Camden know, or care. When they see Gustin, they see the nurse manager who has attended to them for nine years. "They see us as a friendly face, and they trust us," he says. "And we have to work very closely with them, so we need it that way."

L-3's employees have what all Americans, particularly the almost 46 million uninsured, want from the health-care system: convenience, ease of access, transparent pricing (in L-3's case, free), and widespread availability. As government health policy lurches from a debate to something resembling a plan, Walgreens has assembled the country's most ambitious network of corporate and retail clinics and pharmacies, creating a microcosm of what health care could eventually become in America.

"Whatever does or doesn't happen is good for us," says Hal Rosenbluth, president of Walgreens Health and Wellness, about the Obama administration's reform initiative. If reforms are adopted, says his colleague Peter Miller, as the duo sit together in Rosenbluth's large, well-appointed office in suburban Philadelphia, "they're going to need providers. We're a provider." And if a new health-care law doesn't pass? "There will be more people in need," Rosenbluth says, "and we're affordable, even when paying cash."

Rosenbluth, 57, is an unlikely savior for the American health-care system. A veteran entrepreneur who affects the manner of an urban cowboy in boots and jeans, he made his fortune when he sold his $5 billion (revenue) travel-management company to American Express in 2003. Bored ambling around his North Dakota ranch after the sale, he started batting around business ideas with his friend Miller, then a Johnson & Johnson executive. "What's the biggest problem out there?" Rosenbluth asked. "High-quality, affordable health care."

The duo formed Take Care Health Systems in 2005, setting up convenient-care clinics inside drugstores. Two years later, when they had about 50 clinics, they sold Take Care to Walgreens. Since then, they've expanded to more than 350 retail clinics in 35 markets. In March 2008, Rosenbluth and Miller also acquired two leading managers of workplace-based health centers, including the one at L-3, giving Walgreens more than 700 clinics.

Walgreens's Health and Wellness division, as the business is now known, does much more than treat scrapes and colds. The work-site centers can feature such amenities as vision and x-ray facilities, a pharmacy, and a fitness center. The clinic within Disney World has five full-time primary-care physicians. Toyota's clinic at the carmaker's San Antonio plant has dental care. Some clinics operate 24/7, in conjunction with a three-shift workforce.

The benefits to employers are immediately clear. "We want to keep our people here for as many hours as we can," says a corporate services director at a major bank in New York. "If an employee can come down to the clinic instead of taking a half-day off, we want them to do that. The clinic pays for itself, maybe even twice over." Toyota's medical director, Ford Brewer, cites similar estimates, noting specifically that the San Antonio facility provides about 60% of all primary-care visits for employees and their families.

At the retail clinics, which are open seven days a week, nurse practitioners attend to walk-in patients, with most visits costing between $59 and $74. If the clinic can't treat you, it will refer you to a physician or specialist. Any prescriptions are transferred electronically to the on-site pharmacy and bumped to the top of the queue so patients don't have to wait. And, of course, basic medications — and that tube of toothpaste and gallon of milk — are easily within reach. "What ends up happening is people become more loyal to Walgreens," CFO Wade Miquelon told the audience at the company's annual shareholder meeting in January. That's exactly the kind of allegiance it's counting on.

Rosenbluth and company are fond of going on about their mission as a noble venture. "In everything we do, we ask, What's right?" Rosenbluth says. "We have to do extraordinary things." For Walgreens corporate, the benefits are more tangible. "What it's really about is, it's an incredible way for us to leverage our existing footprint," says Walgreens CEO Greg Wasson.

The company certainly has a large foot — almost 6,800 retail locations in every U.S. state except Alaska. Some 68% of Americans live within 5 miles of a Walgreens, and 5.3 million people enter one every day. If Rosenbluth achieves his long-term goal of putting a clinic in one-third of Walgreens stores, that's about 2,200 clinics. According to Wasson, the pharmacy makes up two-thirds of Walgreens's overall revenue, and with up to 30% of retail-clinic patients becoming new pharmacy customers, it's clear that the clinics will drive big business for Walgreens stores. But the clinics aren't there solely to bring in foot traffic. "In anything we do, the model has to pay for itself," Wasson says. "The goal is for the clinics to be profitable on a stand-alone basis." Clinics are starting to break even within two to three years, the same rate as the drugstores.

That success has motivated Walgreens to expand. Earlier this year, it announced the Complete Care and Well-Being program, which offers work-site clients' employees, dependents, and retirees access to Walgreens in-store clinics and discount prescription drugs at Walgreens pharmacies, no matter where they are in the country. Rosenbluth also plans to expand coverage in the retail clinics. "It's acute episodic care now, but it's moving to full primary care," he says. "We're mimicking what's in the corporate clinics." His dream is to expand into chronic-disease management. "That's a huge part of the cost of health care," says Rosenbluth, a recently diagnosed diabetic. "We haven't figured it out yet, but we will."

Walgreens's undertaking to provide accessible health care while still making a profit isn't unrealistic. "I think they're probably right," says Elizabeth McGlynn, associate director at policy think tank Rand Health, about Walgreens's win-win. "If there is no reform, retail clinics offer convenience and lower pricing. And they may well be stimulated by policy changes that put more of a share of costs on consumers as well."

Walgreens knows this. The business part may be first and foremost for the company, but Rosenbluth's mission is to do good while doing good busi-ness, as he likes to say. "We'll do this part," he says. Now it's the government's turn.

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6 Comments

  • Shelley Holt

    Why does Walgreens not believe in continuity of care with patients receiving home infusion? Why did I have to use all of my own supplies for my patient because 2 of their intravenous vial bags leaked and I was not about to try a third and chance losing any more Grams of this patient's costly, greatly needed IV medication. This is the worst Cosby I have worked with in the greater than 25 years of nursing that I have been working with Pharmaceutical Companies. This is the worst company and patients need to advocate to their Health Insurance Companies to use a differen Pharmacy To receive their medication and their supplies for home infusion .

  • All Points

    Barnes & Noble should enter this space, too. Walgreens and B&N share the only true competitive advantage: a physical location in convenient places. Even the most ardent public healthcare supporters should be skeptical of what Walgreen's is doing - offering substandard medical care. Not surprising from a company that emphasizes the ability of its pharmacists to opine on the prescriptions of actual medical doctors. Does Walgreens carry appropriate medical malpractice insurance? Does the company conform to appropriate fraud and abuse prevention measures? Wonder why they are able to charge so little?

  • Michael Lewis

    ACCORDING TO THE FEDERAL GOVERNMENT TOO MUCH OF AMERICA’S GDP IS SPENT ON HEALTH CARE.

    BUT THE FEDERAL GOVERNMENT CREATED THE PROBLEM:

    Decades ago the government passed ‘pay or play’ tax incentives that encouraged employers to provide employees with health insurance.

    And America was hooked on health care the way junkies get hooked on smack. The dealer gave free samples until the client was hooked.

    When I was young America was the world’s wealthiest nation. And employer provided health insurance paid 100% of medical costs. Because it was free it was abused. Mom took children to the emergency room for a rash and to the doctor for a small cut. Demand was artificially high.

    Cost shifting provided for the uninsured. Patients with good insurance policies and wealthy patients with no insurance policies received inflated invoices to cover the costs of those who could not pay. Health care providers and hospitals robbed from the rich to provide health care for the poor.

    It is instructive that during the time when America enjoyed great wealth the Federal Government expressed no concern for the plight of the uninsured!

    But over time manufacturing jobs moved overseas and were replaced with lower paying service economy jobs. Consequently, employers offered health insurance with less coverage and higher deductibles and co-pays.

    Were factory jobs lost because America could not compete with manufacturers in countries where government paid for health care? Regardless, American leaders would not raise tariffs to level the playing field and signed GATT and NAFTA into law!

    And America’s leaders permitted millions of ‘illegal’ aliens to cross the border to do work American’s would not do. Our schools educated their children, our State governments gave them drivers licenses, our banks granted them mortgages and our hospitals provided them health care.

    BOGUS SOLUTION

    Now that America is the worlds biggest debtor nation the Federal Government has decided the plight of the uninsured is unconscionable and universal coverage is a moral imperative.

    But this is not about the 46 million uninsured. It is about assuring health insurance companies’ market share and health care professionals expected incomes and lifestyles.

    The health system in America has been based on a larger and more affluent generation of young policy holders offsetting the health cost of middle aged and seniors. This formula is being upset by the WWII baby boomers generation approaching retirement and the global recession.

    President Obama wants every American citizen to be required to buy a health insurance policy. He compares it to the requirement that motorists purchase auto insurance. But while driving is a privilege, life and the pursuit of happiness is a right!

    Where in the Constitution or Bill of Rights is the Federal Governments authority to require the purchase of a health insurance policy as a condition of having been born?
    Where is freedom when government has the power to tell you how to spend after tax dollars? What distinguishes disposable income from taxes?

    As for the proposal that the IRS be charged with fining citizens who do not purchase a health insurance policy, since the federal government just prints more paper money to pay debt why is taxation or the IRS even necessary. Just shutdown the IRS and transfer its budget to indigent care!

    FREE MARKET IS THE SOLUTION

    Is providing health care an enumerated power or responsibility of the Federal Government?

    The Federal Government lacks any authority to preach fiscal responsibility. It has exhibited none in my lifetime and has reduced the wealthiest nation on the planet to world’s biggest debtor nation.

    But Ma and Pa citizen have had to balance a checkbook their entire lives. The solution is to return control of health care spending to them.

    Pass a law making it illegal for an employer to offer health insurance as an employee benefit. End wage stagnation and give employees raises instead.

    Doing away with group health insurance and forcing insurance providers to compete for individual business will permit cost conscious Ma and Pa to shop for the best deal, like they do auto insurance. Then the free market will bring costs under control!

  • Richard Lipscombe

    The fact that Walgreen's can make a profit from its clinics is testimony to just how bad things are in the US healthcare system. People want affordable, convenient, local, and self-service healthcare provisions that help them meet most of their daily needs. This scheme has a limited scope, as it should, but it will help many people and families get precisely what they need when they need it and at a cost they can afford. If they need more than this service can provide then they are referred to the appropriate healthcare professionals. The cost of healthcare in the US is out of control - this simple local clinic system will help to keep cost in check. Sure this is a "for profit service" - as is a lot of the healthcare system in the US - but it is providing a cost efficient solution to many patients. Today the call for healthcare reform comes from those with one model in mind - they favour big government based provisions of healthcare (funded by taxpayers) rather than a business based solution of any kind. What the American people need however is universal coverage of low-cost, high-quality, preventative and curative healthcare and if Walgreens can help them get some of that then it should be encouraged to be more and more successful in the business of healthcare provision.

  • David Osedach

    I hope that they are able to open clinics at most Walgreens. They are conveniently located and the cost is right.

  • Sheena Medina

    1. I wonder how they are able to keep most visits costing between $59 and $74. Those prices seem like an anomaly compared to today’s healthcare costs, and 2. While I think this is a great and noble quest, I begin to question how long it might take before good intentions eventually evolve into something resembling today’s healthcare structure due to keeping "The business part first and foremost for the company." I wonder if there ever will be a way to provide care that truly aims at serving the needs of people, rather than turning a profit first.