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Health Insurers and Retail Pharmacies Head to Mini-Clinics

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Health insurers like Humana (NYSE: HUM  ) and leading retail pharmacies CVS Caremark (NYSE: CVS  ) and Walgreen (NASDAQ: WBA  ) are enhancing revenue streams with mini-clinics that are becoming increasingly popular in the U.S.

A snap-shot of mini-clinics
According to the Urgent Care Association of America, the number of urgent-care facilities, or mini-clinics, has climbed by about 20% to 9,400 in the last four years.

These clinics offer walk-in service to adults and children. Some common conditions treated are fevers, upper respiratory infections, sprains, and contusions. Mini-clinics also offer treatment for fractures, can provide IV fluids, and often have onsite x-ray and lab processing.

Urgent-care facilities are typically staffed with physicians, physician assistants, nurses, nurse practitioners, medical assistants, and radiology technicians. The association notes that costs for urgent care are comparable to a primary-care visit but less than an emergency room. While insurance plans are accepted at mini-clinics, health insurance is not required.

Why health insurers are investing in mini-clinics
The Affordable Care Act is designed to bring health-care coverage to millions of previously uninsured Americans. But to make health care affordable, health insurance companies are limiting coverage to certain hospitals and doctors, depending on a particular plan. So, urgent-care clinics are an affordable alternative that will meet growing consumer demand.

Humana got into the mini-clinic sector in 2010 with the outfits' acquisition of walk-in chain Concentra. Prior to the deal, Concentra provided occupational medicine, urgent care, physical therapy, and wellness services in 300 medical centers in 42 states.

Humana was also looking to diversify because of potential market share losses by way of the Affordable Care Act health-care exchanges. The company may also see slower growth in its Medicare Advantage offerings because of funding cuts that will finance the reform measure.

Currently, the Concentra unit has grown to about 340 clinics and has been a needed revenue stream in Humana's medical-services unit. Humana reported revenue of $10.3 billion for the third quarter of 2013 -- an increase of about 6.9% year over year.

Humana's share price grew by more than 50% in 2103 and is currently hovering at $101 per share -- about $5 off the 52-week high of $105.89. Investors should mark Feb. 5 on their calendars when Humana will announce its fourth-quarter results. Any forward-looking guidance will be helpful in determining if other side effects of the ACA are to be expected.

CVS Caremark's "Minute Clinic"
MinuteClinic is the retail medical-clinic division of CVS Caremark. MinuteClinic is aimed at making access to high-quality medical treatment easier for more consumers. The company's website proudly notes MinuteClinic "has generated more than 18 million patient visits, with a 95% customer satisfaction rating."

CVS Caremark's MinuteClinic reported 18% revenue growth in the third-quarter of 2013. The growth was attributed in part to increased foot traffic as health plans and government-sponsored programs support mini-clinics. During the quarter, the company opened 42 net new clinics, bringing the total number of clinics to 726 in 27 states and the District of Columbia.

"Our long-term goal is to create a platform that supports primary care by providing integrated, high-quality care that is convenient, accessible[,] and affordable," said CVS Caremark president and CEO Larry Merlo.

In short, the retail pharmacy's plan to open more clinics and other strategic steps taken late in 2013 will boost revenue and earnings going forward. And this is healthy news for CVS Caremark investors with a long-term view.

Walgreen re-brands its urgent-care clinics
There are approximately 370 mini-clinic locations at select Walgreen locations across the country. Services range from treatment for illnesses, aches and pains, and minor injuries to prevention and wellness services.

In July 2013, the chain announced its Take Care Clinics business was being rebranded as "Healthcare Clinic" after expanding the range of services to include assessment, treatment and management for chronic conditions such as hypertension, diabetes, high cholesterol, asthma, and other preventive-health services.

Walgreen has a history of solid share-price performance and continued growth in earnings per share. In its last quarterly announcement in 2013, the company said sales were up by about 3.8% to slightly less than $6 billion.

Final Foolish thoughts
In sum, the broader health-care sector is in the midst of transition as the ACA reforms kick-in. Humana primarily remains a health insurance company with a niche in Medicare gap coverage and Medicare Advantage plans. But the company is proactively responding to the health-care reform measure's affects by diversifying into the urgent-care clinic sector.

Meanwhile CVS Caremark and Walgreen are primarily driven by retail pharmaceutical sales. As lead providers of generic prescriptions, these outfits are already well positioned to capitalize on the ACA's cost-cutting efforts aimed at prescription drugs. And expanding their services in urgent-care clinics bodes well for future growth.

Regardless of the merits of the ACA, and any reforms that may be necessary in time, Humana, CVS Caremark, and Walgreen are in a good position for continued long-term revenue and earnings growth.

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Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On July 28, 2014, at 3:02 PM, hickoryposcery wrote:

    I think mini-clinics or urgent care clinics help so much. They offer quick care without the cost of emergency rooms or hospitals. I recently had a sever allergic reaction to poison ivy and I found the care I needed at an urgent care. They prescribed me a steroid pack that helped with the inflammation. I luckily didn't have to go into the emergency room and didn't have to pay too much for the care that I needed. Do you think these clinics are good or bad for the healthcare? Will they cause hospitals and emergency rooms problems? Thanks for the post!

    Hickory Poscery | <a href='' ></a>

  • Report this Comment On August 08, 2014, at 4:40 PM, jessievera wrote:

    I agree with you, Hickory. I don't know what life would be like without the walk in clinic in my hometown. They do help so much and give care to those who need it in a hurry. A severe allergic reaction is nothing to mess around with that's for sure. I am glad you were able to get urgent care right away and be prescribed a steroid pack.

    Jessie |

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Kyle Colona

Kyle is a Long Island based writer and a Motley Fool contributor since January 2013. He has a broad background in the financial sector. His business and political writing is widely available on the web.

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