The Impact of Retail Clinics on Cost & Utilization Are They Substitutes or Complements to Physician Services? Stephen T. Parente University of Minnesota

The Impact of Retail Clinics on Cost & Utilization Are They Substitutes or Complements to Physician Services?

Stephen T. ParenteUniversity of Minnesota

Robert TownUniversity of Minnesota and NBER

Presentation at International Health Economics Association MeetingJuly 15, 2009

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Rationale for Investigation Retail Clinics emerged as a health market innovation in

2000. In general, innovation is welfare enhancing whether it is

through new products or through reorganization of products and services.

A concern is that these organizations can exploit administrative pricing irregularities and knowledge gaps of consumers leading to reductions in consumer welfare.

Advocates of retail clinics argue they improve the efficiency of a highly inefficient health care delivery system.

Critics of retail clinics complain that the new service only adds to the inefficiency in the system and could greatly reduce consumer well being from a clinical perspectives.

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Summary of Investigation Objective: Examine the impact of retail clinics on cost and use. Data: Administrative data from a large health insurer across

multiple US markets to examine the evidence of the effects of retail clinics.

Study design: Pre and post retail clinic launch differences in utilization between a treatment population of retail clinic users and retail clinic non-users.

Econometrics: OLS and IV estimation on cost and utilization measures.

Results: We find evidence that retail clinics are lower cost substitutes for physician office visits and their subsequent use does not appear to adversely affect measurable proxy metrics for quality of care.

Implications: The introduction of retail clinics appears to be welfare enhancing.

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Prior Commentary & Literature Rosenblatt, et al, 2006: Concerns of retail clinics taking away

business from Community Health Centers.

Kamerow, 2007: Title says it all: “Retail Health Clinics – Threat or Promise?” British Medical Journal

Mehrotra et al, 2008: Used ambulatory care survey information to show the most common conditions seen be those going to retail clinics. Provided a descriptive analysis of differences in physician service use and cost between retail and non-retail clinic users.

No previous direct empirical analysis of total cost, use or welfare impact of retail clinics.

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Data Administrative insurance claims data

Date of service, zip code of provider of care and insured, allowed charge Diagnosis and procedure code (CPT) Medical, institutional and pharmacy claims Used claims available for calendar year 2004 through 2006

Provider contract data Retail clinics operating by site of actual clinic (as opposed to corporate

headquarters). Address of actual clinic served Start date of clinic contract

Unit of Analysis Cost & Use measures within 180 day intervals indexed on start

date of retail clinic opening and they get a retail clinic CPT. One pre-interval and four-post intervals.

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Study Population Retail Clinic Users (Treatment Population)

Need to use at least one retail clinic service Starting N = 31,392 Enrolled for one year and had pre clinic launch health

care use 6 month prior to launch N = 23,227

Non-Retail Clinic Users (Control Population) Population who lived in area when clinic was operating Population who lives in area when clinic was about to open Need to use at least one CPT that was used in by a retail clinic Random sampled from a large N to get at starting N = 39,111 Enrolled for one year and had pre clinic launch health care

use 6 month prior to launch N = 27,008

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Patient Case-mix measured using ADGs

Adjusted Diagnostic Groups (ACGs) were developed by Johns Hopkins University

Based on combination of diagnosis, age, gender information during a period of time

Can explain variation in cost as well as risk-adjustment for premium calculation

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Top 10 Conditions Seen at Retail Clinics

8Very similar results to Mehrotra et al, 2008

Utilization comparison of any service in first six month after clinic opens

Sample Sample T-testVariable Description Mean Mean

Common retail clinic disease categories

Upper respiratory 1.27 0.67 ***Immunizations 0.40 0.18 ***Otitis Media 0.21 0.12 ***Broncitis 0.10 0.06 ***Urinary Tract Infection 0.16 0.12 ***

Eye Infections 0.06 0.04 ***

Allergies 0.08 0.07

Multiple Symptoms 0.03 0.01 ***Viral infections 0.08 0.06 ***Tonsilitis 0.03 0.03

Statistical Significance

*** p<=.001, ** p<=.01, *P<=.05

Retail Clinic Users Non- Retail Clinic Users

N=23,227 N=27,008

Demographics of Retail Clinic and Non-Retail Clinic User Populations – 1 of 3

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Variable Names and Descriptive Statistics - Retail Clinic Users vs. Non-UsersBase population period is the last 6 months of 2004

Sample Standard Sample Standard T-testVariable Description Mean Deviation Mean Deviation

Insured Chararacteristics

Insured age in 2004 33.61 17.99 36.39 19.01 ***Insured is female=1, male=0 65% 0.476 56% 0.496 ***Insured income 16,846.93$ 9709.540 30,341.37$ 14975.670 ***Insured has a chronic condition 24% 0.43 29% 0.45 ***Number of unique medical conditions 2.32 1.83 2.16 1.79 ***Travel distance to nearest clinic (miles) 6.57 4.81 20.45 11.30 ***

N=27,008N=23,227



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Insured Costs

Total allowed cost 2,828.76$ 9,986.15 3,088.90$ 17,396.06 *

Estimated full year costs 5,657.52$ 6,177.80$

Emergency room costs 18.71$ 136.90 21.76$ 186.56 *Inpatient costs 445.18$ 3,852.39 529.53$ 7,630.80 Physician office costs 620.54$ 1,729.91 616.95$ 1,884.91 Total physician costs 1,934.76$ 6,309.57 2,096.10$ 10,153.58 *Outpatient hospital costs 640.18$ 2,725.61 683.33$ 3,833.52

Pharmacy costs 450.82$ 1,411.05 466.53$ 1,460.74



Variable Names and Descriptive Statistics - Retail Clinic Users vs. Non-UsersBase population period is the last 6 months of 2004


Insured Utilization

Emergency room services 0.43 3.17 0.48 3.93 *

Hospital inpatient admissions 0.09 0.79 0.12 1.16 **

Physician office services 8.00 12.49 7.56 12.40 ***

Hospital outpatient services 1.41 3.72 1.50 3.85 **

Prescriptions received 4.71 8.48 4.74 8.92

Statistical Significance

*** p<=.001, ** p<=.01, *P<=.05


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Empirical Framework To assess the impact of retail clinic utilization on the

expenditures and the patterns of care for enrollee i in market m in period t we estimate parameters from the following model:

yimt = m + x’it ritimt

• where yimt is one of several different measures of expenditures or utilization.

• m is a market fixed effect, xit is a vector of individual demographic, condition and severity controls.

• rit is an indicator for whether the enrollee visited a retail clinic and

• imt is a mean zero residual. • The parameter of primary interest is which captures the

impact of retail clinic utilization on the outcome of interest.12

Endogeneity issue Endogeneity of the decision to use a retail clinic. We address this concern using an instrumental

variable approach. Instrument is the distance from the patient’s home

zip code to the nearest retail clinic in operation. If there is no clinic open within 50-miles the distance variable is set to 50 miles. Use instrument^2 as well.

Gowrisankaran and Town (1999), Geweke, Gowrisankaran and Town (2003), and McNeil, McClellan & Newhouse (1994) use a similar identification strategy to measure hospital quality.

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First Stage Estimates of Retail Clinic Use

Variable Description Coefficient T-Statistic

Intercept 1.05 187.24 ***

Distance from retail clinic (miles) -0.02 -142.18 ***

Age of insured 0.00 -14.95 ***

Insured is Female 0.04 12.30 ***

Insured income -0.01 -84.32 ***

Insured has a chronic condition -0.03 -5.73 ***

Number of medical conditions 0.01 14.72 ***

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Overall Population Results

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Marginal Effect on Cost and Use of Retail Clinics Compared to Non-Users

Variable Description

Insured Costs - Logged

Total allowed cost -10% -8.270 -14% -5.060

Emergency room costs -32% -5.500 -17% -1.120

Inpatient costs 2% 0.230 19% 0.850

Physician office costs -6% -6.640 -4% -1.980

Total physician costs -15% -13.050 -20% -7.790

Outpatient hospital costs -17% -6.240 -21% -3.390

Pharmacy costs 4% 1.810 3% 0.770

Insured Utilization

Physician office services -0.591 -4.990 -0.248 -0.930

Hospital outpatient services -0.461 -13.580 -0.732 -9.580

Prescriptions received -0.100 -1.090 -0.163 -0.790

Emergency room services -0.145 -3.660 -0.222 -2.490

Hospital inpatient admissions -0.068 -6.120 -0.105 -4.200

Measures bases on regressions holding constant age, gender, income (based on zip code),

market indicators and and health status, instrumenting for distance from clinic.

Instrumented Retail Clinic Coeff. T-Statistic

OLS Retail Clinic Coef. T-Statistic

Chronic Sub-Sample Results

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Emergency room costs -29% -2.600 13% 0.460

Inpatient costs -8% -0.560 -6% -0.200

Physician office costs -4% -1.840 3% 0.780



Pharmacy costs 5% 1.280 2% 0.200

Insured Utilization

Physician office services -1.236 -3.470 -1.953 0.015




Hospital inpatient admissions -0.182 -4.390 -0.320 -3.430




Instrumented Retail Clinic Coeff. T-Statistic

Pediatric Sub-Sample Results

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Emergency room costs -37% -3.230 -17% -2.290

Inpatient costs -49% -1.560 15% 0.230

Physician office costs -3% -2.200 0% -0.130



Pharmacy costs 0% 0.110 -9% -1.110

Insured Utilization

Physician office services 0.151 1.350 0.769 3.080




Hospital inpatient admissions-0.020 -3.140 -0.020 -1.420




Instrumented Retail Clinic

Coeff. T-Statistic

Core findings

Costs are less in general for retail clinics

Most of the cost savings is due to reduced physician allowed claim cost

Substantial reductions in admissions and outpatient hosts for chronically ill.

Substantial reduction in ER use and cost for pediatric population.

Results hold in IV estimation.18Priviledged & Confidential,

HSI Network LLC

Limitations & Extensions

One insurer’s data. But data is internally consistent by person.

Additional instruments. But distance is not a bad way to go for now.

Retail clinic population needs to be weighted to correct for over-sampling general population. Question is, what is the right weight?

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Next Potential Steps Beyond Scope

Use clinical metrics for evidence-based medicine as dependent variables.

Drug compliance requires a refill and days supplied variable and also requires a lot of caveats. But, we don’t find pharma is really in play, but it could

change with more precise measures. At the very least, if no pharma change – the cost

reductions for the chronically ill do not pose a quality concern.

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Conclusions

Patients who visit retail clinics have fewer costs without any reduction in our admittedly crude measures of quality

Results suggest retail clinics are serving as substitutes for medical care with no obvious quality concerns

More investigation is needed as this market evolves

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Documents

The Impact of Retail Clinics on Cost & Utilization Are They Substitutes or Complements to Physician Services? Stephen T. Parente University of Minnesota