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Is Obamacare Shutting Down Free Clinics?

The doors have been closed and the windows shuttered at some free medical clinics across the U.S. thanks to Obamacare. Bad news? Not necessarily. Actually, some proponents of the Affordable Care Act say this is a promising trend. On the other hand, others say there really isn't much of a trend to be found. What's the real story -- and can investors benefit one way or the other? 

Shutting the doors
Theoretically, the operation of free medical clinics should be disrupted by the impact of health reform. Obamacare called for the expansion of Medicaid to allow more people with higher income levels to be covered by the hybrid federal-state program. For those not covered by Medicaid, many are eligible for federal subsidies to help pay for health insurance. As individuals gain health insurance, they shouldn't need access to free clinics.

That's exactly what happened in at least two states. RotaCare Tacoma free clinic in Tacoma, Washington closed in January. Volunteers had actively pushed for the patients the clinic served to sign up for health insurance with Obamacare taking effect. And the patients complied -- to the extent that the clinic wasn't needed anymore.

A similar story took place in Mena, Arkansas. The free clinic in the small town shut its doors last month. Stacey Bowser, director of the 9th Street Ministries Clinic in Mena said that the number of patients served steadily dropped in the early months of this year as more and more people gained coverage through Obamacare. 

The phenomena isn't exactly sweeping the nation yet, though. For example, The Miami Herald reported earlier this year that free clinics in south Florida had not seen noticeable drops in patient loads. One clinic in Fort Lauderdale even experienced a big increase in patients.

Part of the reason behind this counterintuitive trend stems from Florida's decision to not expand Medicaid. Some patients fall into a coverage gap where they make too much to receive Medicaid but make too little to receive subsidies for helath insurance.

Some free clinics could be closing in the future due to Obamacare -- but not because their patients have gained coverage through the health reform's impact. Directors of these clinics express concern that their donors will quit contributing because of the expectation that patients will pick up coverage under Obamacare and won't need free services any longer. At one clinic in Tavernier, Florida, this scenario appears to be already playing out.  

Opening doors
What we have is the classic "good news, bad news" situation. Obamacare is helping many individuals obtain coverage. But many will also remain uncovered for one reason or another. The Congressional Budget Office pegs that number of uninsured at 30 million. Free medical clinics aren't likely to go the way of the dinosaur anytime soon.

More clinics will likely close, though, particularly if additional states opt to expand Medicaid in the future. While these closures don't present investing opportunities, the impetus behind them could.

Source: FoolEditorial on Flickr 

Pharmacy retailers appear especially poised to benefit as previously uninsured individuals gain coverage. CVS Caremark (NYSE: CVS  ) is rapidly growing its MinuteClinics. The company operates 828 clinics in 28 states plus the District of Columbia and plans to add at least another 150 clinics by the end of the year. Walgreen (NASDAQ: WBA  ) runs 400 medical clinics in its stores, with around 100 new locations planned for 2014.

Both CVS and Walgreen are also busy lining up affiliation agreements with health systems. These agreements support close clinical collaboration between the pharmacy chains' clinics and hospitals. CVS has signed deals with 36 major health systems, while Walgreen has forged relationships with at least 20 health systems.

Eyeing its larger rivals' success in this arena, Rite Aid (NYSE: RAD  ) bought RediClinic in April. RediClinic operates 30 clinics in Texas. Rite Aid plans to ramp that number up quite a bit, with a goal to add 70 new clinics over the next couple of years. 

CVS, Walgreen, and Rite Aid seem to be making smart moves. A report from consulting firm Accenture suggests that retail clinics could help alleviate issues related to the growing shortage of primary care physicians. Accenture projects the number of these clinics will double in the next three years and save $800 million annually in overall health-care costs. 

Obamacare probably won't cause the doors to be closed for huge numbers of free clinics in the near future. However, the health reform act looks to be part of several factors that should help drive demand for retail clinics -- the kind people pay for -- good news for the big pharmacy chains. This is the type of trend that opens the door for investors to profit.   

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Read/Post Comments (11) | Recommend This Article (7)

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 May 24, 2014, at 11:41 AM, t4 wrote:

    The logic and economics of Obamacare shuts down the rational centers of the brain until normal humans become malleable to all forms of inane logic like taxpayers should pay bonuses to megabankers who wrecked the country as a reward for their performance. We call this condition PD or Pelosibot Disorder.

  • Report this Comment On May 24, 2014, at 2:53 PM, gl2238 wrote:

    Article is somewhat biased. The local free clinic closes and now patients now have to, in some cases, travel significant distance to get medical help? Unless there is a catastrophic incident with an individual the ACA is not worthwhile medical insurance. The copays and deductible make sure the insurance companies don't go broke, but then again, the Gov't will reimburse these companies for any loses with our tax dollars. A rip off like pharmacy. Most drugs that seniors need are not on the list making the premium to the Feds useless.

  • Report this Comment On May 25, 2014, at 8:58 AM, Bluetick1000 wrote:

    ". Accenture projects the number of these clinics will double in the next three years and save $800 million annually in overall health-care costs. " At a cost of over 1 trillion dollars for Obamacare you do the math as to how long it will take to pay off I will help over a 1000 yrs...then add an estimated 80 to 100 billion to the cost to bail out insurance companies each year as part of Obama's plan to keep rates down over the next few years and this just get worse ever day not better.

  • Report this Comment On May 25, 2014, at 9:04 AM, GuitarJim wrote:

    The author isn't looking past the numbers at the top of the stack. Whether free clinics or Medicaid, the health care services these patients are receiving are being paid for by somebody else. Free clinics are funded primarily by private donations given voluntarily. Medicaid is funded by the taxpayers, whether they like it or not. One of these models is fundamentally capitalist, while the other is fundamentally socialist. Which would a successful investor support?

  • Report this Comment On May 25, 2014, at 9:10 AM, Jack1967 wrote:

    This debacle was sold to the USA as a method to help the 30+ million uninsured. Problem is there are still 30+ million uninsured. The true effects of this poorly thought out and implemented mess have not begun to be felt yet.

  • Report this Comment On May 25, 2014, at 9:27 AM, Bluetick1000 wrote:

    As a investor would Motley Fool invest in the federal government doing business like they are doomed to financial failure. As an investor they look at money to be made off this farce that will bankrupt the American people, other wise advice move your riches out of country so when this country and the American dollar collapses you can still have your riches. Of course this also feeds the loss of jobs and income for the rest but who cares if you make out big.

  • Report this Comment On May 25, 2014, at 11:48 AM, rwmcmillan wrote:

    "....and can investors benefit one way or the other? "

    This is the question that has brought healthcare to where it is today. At one time physicians and hospitals operated with the intention of treating patients. Today the question is, 'Can we make a profit off of our patients ailments'? What a shame.

  • Report this Comment On May 25, 2014, at 4:58 PM, vet212 wrote:

    Obamacare the ACA what ever you want to call it is shutting down not only Free clinics but for profit ones as well

  • Report this Comment On May 25, 2014, at 10:24 PM, LaryB wrote:

    One thing the "Drug Store Clinic's" will have in common is that they will be staffed by nurses not MD's. I don't know of any state that will allow a nurse to diagnose so other than giving flu shots or sending patients on to emergency rooms there won't be a whole lot they can do.

  • Report this Comment On May 25, 2014, at 11:44 PM, drjcm wrote:

    As medical director of a mostly-volunteer free clinic, I believe that we will still be needed, but for a different clientele. Instead of the working poor without insurance, I believe we will be seeing their employers, those with incomes of $30-75,000 who can't afford the $8000 in premiums to cover a policy with a $6000 expectation of copay or deductible, and other insureds who can't afford the out of pocket expense which is unaffordable for many of the newly insured. Unfortunately for them, the work we do for them will not get them closer to the amount needed for insurance to begin to pay, because we don't charge anything. My concern is that the donors of time and money who allow us to function will read stories like this and think that everything is fixed for the poor.

  • Report this Comment On May 26, 2014, at 9:50 AM, rightislight wrote:

    The author should widen his net in analyzing the fate of "free clinics". There have been at least a few articles here in California highlighting that free clinics here are seeing MORE patients….not less. The reason is people are signing up for Bronze plans but no doctors will accept that insurance. These folks are showing up at the free clinic instead.

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Keith Speights

Keith began writing for the Fool in 2012 and focuses primarily on healthcare investing topics. His background includes serving in management and consulting for the healthcare technology, health insurance, medical device, and pharmacy benefits management industries.

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