You can’t watch CNBC for any period of time without seeing a piece on how America’s Malls are failing. According to Green Street Advisors about 15% of U.S. malls will fail or be converted into non-retail space within the next 10 years and that number is growing every year. If you ask retail consultant Howard Davidowitz, the Chairman of Davidowitz & Associates, Inc., a retail consulting and investment banking firm, he will tell you that about as many as half of America’s shopping malls are going to fail. So, what will happen to all of that retail space?
One example comes from Austin, Texas, the home of Wellsmith. The Highland Mall was named one of “America’s Most Endangered Malls” by U.S. News & World Report in 2009. The administrative offices of Austin Community College (ACC) were located on the edge of the mall and the college decided to step in and purchase the mall, with a plan to make the buildings a centerpiece of a planned, mixed-use community. ACC took a former JC Penney building and made it what they call “the galaxy’s largest learning emporium,” which has 604 computer stations, 200,000 square feet of instructional space, a library, and offices.
Another use might be medical.
Is Access the Answer?
One of the major issues in healthcare, according to healthcare, is patients’ access to services. The Agency for Healthcare Research and Quality, a government body states: ‘Access to health care means having the timely use of personal health services to achieve the best health outcomes.’
In response to this we can see Healthcare Systems like Cedars-Sinai Health System in Los Angeles, Prime Healthcare in Philadelphia, UCLA Health in Woodland Hills, CA and Vanderbilt University Medical Group in Nashville all becoming tenants in major malls. They are doing this because they believe consumers want better access to their services and better access means more convenient.
To justify this, they point to research from 2013 by Oliver Wyman Consulting, who reported that consumers are interested in receiving care for minor health interactions outside a hospital environment. The research indicates that 61% said they’d go to a walk-in clinic or urgent care center. In addition, 36% said they would go to a pharmacy-based clinic, 24% would go to a discount retailer-based clinic, and 20% would go to a grocery store-based clinic.
It should not be a surprise that people want easier access rather than a traditional healthcare environment to get their healthcare services. Some people even believe this is an example of consumerization of healthcare. Why not, they argue, follow the optician into the Mall or as Bloomberg put it: “The mall of the future will offer Dinner, Movies and a Colonoscopy”?
But just moving clinics into empty shop fronts does not create consumerization. If we think about what consumerization means, then we see how far most medical establishments would need to go to get even close to being designed for consumers.
What the consumer wants
According to Wikipedia, “Consumerization is the reorientation of product and service designs to focus on (and market to) the end user as an individual consumer, in contrast with an earlier era of only organization-oriented offerings (designed solely for business-to-business or business-to-government sales).”
For a moment let’s think about the most consumer unfriendly places we can. Here are two of my favorites: US airports that are designed around the needs of airlines (not passengers) and the Department of Motor Vehicles which are designed around employees (not citizens).
What’s missing from this list? Almost every medical establishment you have ever been into.
From the receptionist who has to slide the glass back before they deign to talk to you, to the cold boring rooms where you sit for 25 minutes even though the doctor “will be right with you.” While we all understand why they are this way – HIPPA, privacy, emergencies, etc. – in a consumer centric world you would find different ways to solve these problems.
When you go into a store and the assistants are unavailable or unhelpful, you move on. Can you even imagine putting up with them sitting behind glass walls? What about them showing you in a fitting you, telling you they will get the size you want and then not coming back for 25 minutes. Would you wait for that? I would not. That level of service would be unacceptable.
Consumers also have rights, or at least we believe we do. While they may not all be legally enforceable, they have become expectations. We expect to be ‘served’, we expect some level of transparency on pricing, we expect to be able to return products and services for a full refund and we expect to be at the center of the transaction.
With all of this is mind, you can see why a medical provider should think twice about treating a patient (it is all the same!) as a consumer.
Patients are becoming consumers
The problem for healthcare providers is that they have no choice than to start treating patients like consumers. The reason that they have no choice is the convergence of two major trends: co-pays and competitors.
Unless the US moves to a single payer-system, and even if it does, healthcare providers have been shifting cost to consumers in terms of larger deductibles and co-pays. For many people, the monthly health insurance premium is viewed as insurance for a catastrophic healthcare event. In addition, co-pays have become a significant additional expense. It is not unusual for someone to have a co-pay of $275 for an urgent care center visit or $700 for an emergency room service. Clearly if you have an emergency you need to go to an emergency room, but what about a non-emergency?
At a $50 co-pay for a visit to your primary care doctor or an $80+ co-pay for a specialist, many of us look for alternative services. When consumers spend this amount of money, they expect and look for choices. They expect value for money and they expect a level of price transparency. While the services from a healthcare provider may cost much more than the co-pays, these charges are now an issue for anyone who needs non-emergency medical care. Consumers also do not wish to wait 6 weeks to access these services for which they believe they are now paying for. So, other businesses have emerged to fill the gap.
According to Accenture, a global management consulting firm, the number of retail health clinics will exceed 2,800 by 2017, rising 47 percent since 2014. CVS had 800 clinics nationwide in 2014 and is expected to grow this number to 1,500 clinics by the end of 2017. Costs per visit are in the $79 to $89 range, with additional charges for lab tests. A quick strep throat test, for instance, is $30 at a CVS clinic.
While these numbers may sound small, they are fast-growing profit centers for these retail chains. Plus, every dollar a consumer spends at a retail clinic is a dollar a patient is not spending at a traditional healthcare facility.
The challenge for traditional healthcare however, is more than just opening retail space. They need to break the model more than that. In my next blog, I will review some of the ways they could do that.