It’s Monday morning and you wake up with a throbbing headache, stuffy and dizzy, recognizing that the next thing you absolutely positively need to hear is, “The doctor will see you now.” You roll over in bed, pick up your tablet, open your accountable care organization’s (ACO’s) telemedicine app, and in a few minutes you hear those six magical words.

From the comfort of your bed, you describe your symptoms and where the pain is located. The doctor asks you a few questions, has you press on your sinuses and then asks to see your throat. You point your tablet’s camera into your mouth to provide the doctor a full high-definition view. The diagnosis is sinus infection (which you have had in the past) and the doctor writes a prescription from your pharmacy benefits manager’s (PBM’s) formulary. Since you used the telemedicine app, your co-pay is waived.

You are asked for your preferred pharmacy in your PBM’s network, and you choose the closest one that will deliver. The script is routed to the pharmacy, and the target delivery window is confirmed with a text message.

Your PBM’s pharmacy services provider is Amazon. The platform links with Amazon and recommends over-the-counter items and several prescriptions that are ready to be refilled, along with some basic food items. Delivery will be later this morning along with your prescription — all with free shipping.

You lie back in bed, close your eyes and fall back to sleep, already on the road to recovery.

Far-fetched? In this fourth article of A.T. Kearney’s yearlong series on potential retail pharmacy industry disrupters, we examine the potential future implications from the emerging telemedicine innovation.

In a health system facing an estimated shortage of more than 91,500 physicians by 2020, millions of additional patients, and the Affordable Care Act’s mandate of lower health care costs, low-cost, technology-enabled alternatives to traditional health care are required. Telemedicine may be the greatest opportunity to accomplish both reach and cost goals.

As nimble startups partner with major medical groups to bring credibility and capable capacity to their business models, large pharmacy chains such as CVS are piloting their own telemedicine offerings.

Telemedicine is not without its critics and comes at a price — to what extent could these offerings reduce the market for in-store retail health clinics and all the retail benefits the additional foot traffic brings? Certainly these types of telemedicine solutions are not intended to cover or even triage every potential symptom a patient may have, but an increase in utilization does show that patients are becoming more comfortable with telemedicine.

So, what are the implications for retail health clinics? Are these clinics the Blu-ray of health care — a short-term transition solution that bridges the gap between a past channel (traditional office visits) and a future (telemedicine)? And what about pharmacies?

The virtual doctor

Today, the majority of telemedicine “visits” are for non-urgent and consumer-directed needs — the same type treated by many retail clinics. A study by Health Affairs recently cited in The Wall Street Journal identified the top reasons for “e-health visits.” Over 80% of visits are for such maladies as respiratory illness (31.1%), urinary tract infections (11.9%), skin problems (9.1%) and other generally minor health issues. It is these patients who also frequent retail clinics for both the convenience and the cost-savings opportunity as a result of consumer-directed health care.

Emerging telemedicine providers such as Doctor on Demand and Teledoc provide these services today to patients through computers, tablets and smartphones for a nominal (usually $30 to $50 per visit) fee. A recent report from IHS, an information and analytics firm, estimates that U.S. telehealth providers will see rapid growth over the next three years — from roughly 250,000 patients in 2013 to over 3.2 million by 2018, a compound annual growth rate of 67%.

Given that retail clinics fielded over 10 million unique patient visits in 2013, telemedicine may not be a totally disruptive threat in the next three to four years, but the potential beyond warrants attention, especially since retail clinics have yet to reach profitability and many remain in “investment mode,” as MinuteClinic president Andrew Sussman remarked in October 2013.

The growth of telemedicine visits illustrates that consumers are openly accepting the technology, a consumer-centric approach where someone is actually listening to consumers and providing what they want — convenient, low-cost care.

Today’s telemedicine pioneers are not burdened with expensive brick-and-mortar infrastructure as are retail clinics and can leverage scalable, cloud-based systems to rapidly grow. Furthermore, linkages with such online retailers as Amazon provide telemedicine providers with access to one of the largest retail inventories in the world — without any worry about supply chains, inventory costs or other expenses.

With Amazon already offering same-day service in a number of major cities, our opening scenario no longer feels so far-fetched — patients may soon be able to see a health care provider (HCP), be diagnosed, secure a prescription and purchase O-T-C items, all without leaving home. The retail clinic and pharmacy didn’t listen to their customers and have been removed from the process — they’re Hollywood Video to telemedicine’s NetFlix.

Death of the retail clinic?

Not yet. While telemedicine certainly provides a threat, the next three to four years will not dramatically change things. That doesn’t mean pharmacies and clinics can sit and wait — they must be proactive and responsive to consumers.

Opportunities exist for an alternative scenario to the one outlined above. In the alternative scenario retail clinics and telemedicine integrate to create a seamless offering to patients:
Retail clinics and pharmacies build partnerships with telemedicine organizations or develop capabilities internally.

After the patient meets virtually with an HCP, the prescription is immediately sent to the retail pharmacy location closest to the patient. The pharmacy fills the script and contacts the patient to let her know it’s ready — will she pick it up or would she like it delivered? If she wants it delivered, the pharmacist leverages the same telemedicine platform to conduct a virtual consult. The patient may also need O-T-C items that were recommended. These are ordered online or through a mobile app immediately following the consult and are delivered with the prescription later that day.

Sales have been captured in both the pharmacy and front store, and deeper loyalty has been established with the patient, who experienced a convenient, seamless, cost-effective process. Both the retail clinic and the pharmacy have also remained key players in the health care system, avoiding disintermediation.

Acknowledging the real possibility of both scenarios above, A.T. Kearney has identified three opportunities for retail pharmacies and clinics to leverage telemedicine today while establishing a foundation for the future:

• Manage capacity and demand across clinics and pharmacies: As retail clinics expand, telemedicine provides a channel to drive increased utilization of clinic and pharmacy resources. When there are no patients in a clinic, HCPs can log on and perform virtual consults with telemedicine patients. CVS undertook a big push in telemedicine earlier this year, piloting at 28 sites in Los Angeles, San Diego and Orange County, Calif. These programs help drive the efficient use of existing resources, while enabling the clinic and the pharmacy to remain integrated with the overall healthcare system.

• Create local “health hubs” as an extension of existing hospitals and specialists’ offices: As clinics develop partnerships with health systems and ACOs, telemedicine provides a channel for them to act as local “health hubs” — extensions of hospitals and specialists’ offices for post-op and chronic illness exams. Trained clinic resources operate diagnostic tools for virtual providers, enabling them to extend their reach while supporting payers’ goals of increasing chronic disease management. Eventually, in-home telemedicine platforms will allow a patient to attach a stethoscope or upload all necessary vitals — today, that is not possible. Building these capabilities now will enable retail clinics to establish themselves as credible alternatives before in-home devices become ubiquitous, as well as support providers’ desire to extend their practices outside their offices.

• Expand current omnichannel presence across the digital ecosystem: Organizations today leverage websites, mobile apps, brick-and-mortar stores and more to create a seamless customer experience. Patients can manage prescriptions, buy O-T-C items, check symptoms and schedule chats with pharmacists or visits to retail clinics with the major retail pharmacy websites and apps. Telemedicine represents a natural extension of this seamless experience, and pharmacies and clinics cannot risk being disintermediated. Utilizing their existing digital infrastructure and convenient, neighborhood footprint (something Amazon lacks) to integrate telemedicine capabilities, they will create a seamless experience — from prescreening and diagnosis to prescribing and treatment — that patients are increasingly expecting.

The future

Things won’t change overnight, and telemedicine is far from the immediate barbarian at the gate of retail clinics in community pharmacies. But, assuming that telemedicine achieves an estimated 3.2 million patient visits by 2018 and the growth rate is cut in half to 30% a year, telemedicine patient visits would hit 20 million by 2025 — double the number of patients clinics see today and a very credible threat.

As we continue moving toward a more integrated health care delivery system, the threats and opportunities telemedicine poses for today’s retail health clinics and pharmacies are clear. Pharmacies cannot sit and wait, and should be considering how to integrate telemedicine into future operations, examining it from an overall strategy and differentiation standpoint. Small bets now — whether through partnerships, test pilots or other means — will provide valuable insight for future strategies and help today’s pharmacies and retail clinics avoid becoming tomorrow’s Hollywood Video.

BOB O’MEARA, a partner with A.T. Kearney, focuses on the retail drug sector and is based in Chicago. He can be reached at [email protected]. TODD HUSEBY, also a partner with A.T. Kearney and based in Chicago, is a member of the firm’s health care and strategic IT practices. He can be reached at [email protected]. JASON DOMBI, a consultant with A.T. Kearney, works with the firm’s health care practice and is based in New York City.