The Three-Stage Competitive Model and an Assault on Healthcare Costs - Essay Example

Running Header: TEDLOW AND THE MCPHARMACY Tedlow and the McPharmacy: The Three-Stage Competitive Model and an Assault on Healthcare Costs Your University Date of Submission It was a sore neck that introduced Janine Charles to the world of Wal-medicine. Her search for a local doctor’s office gave her an address that turned out to be a Super Wal-Mart in Orlando, Florida. She thought about giving up and trying another address, but she instead went inside the store and wandered around. Inside, she found that space formerly used to house a small video arcade had been transformed into a medical clinic. She ended up paying $90 for an examination and a shot of muscle relaxants. Had she gone to a traditional doctor’s office, the same treatment would have cost her $200. In most emergency rooms, the treatment would have cost over $500. Even better, this clinic accepted Ms. Charles’ insurance. If you also factor in the fact that Ms. Charles could do her grocery shopping in that store while she waited for the pharmacy to fill a prescription for her, you suddenly have a very convenient trip (Rowland). While Ms. Charles visited a clinic that was staffed by a doctor, most of the clinics inside Wal-Mart, Target, and other big-box retailers feature nurse practitioners, who can write prescriptions in most states. The retailers do not enter the world of medical care as part of their own corporate activities, but simply lease the space to clinics. It’s not just the big-box retailers who are looking into clinics, either. Because of the losses due to mail-order pharmacies and big-box retail sales, drugstore chains are also opening clinics. Rite Aid Corp., Brooks Eckerd Pharmacy, and Osco Drugs are all entering partnerships to open clinics, and Walgreen Co., the pharmacy chain with the most sales volume in the United States, is also negotiating a deal to have Take Care Health Systems LLC operate clinics in some of their retail locations. The retailers who are leasing space to these clinics hope to make profit not just from the leases themselves, but from the ancillary shopping that will go on while people wait for their prescriptions to be filled, or wait for their appointment to be called. It is similar logic to those grocery stores and big-box retailers who have leased space to banks, hair salons, postal service kiosks, and fast-food restaurants (Moewe). Doctors’ associations, as one might expect, have raised objections about the possible problems with this type of medical care. While nurse practitioners can treat a number of simple illnesses, the American Medical Association notes that simple symptoms can be indicative of any number of serious illnesses. The primary concern of many customers, however, is a combination of convenience and cost. Doctors’ offices are often seen as insensitive when it comes to a patient’s time, often making customers wait significant amounts of time past their scheduled appointments. Also, the simple cost, especially for the uninsured, of an ordinary visit to the doctor’s office can easily exceed $200 – and since these clinics charge rates starting at $25, depending on what the customer needs, it is easy to see that these clinics will draw many customers away from their physicians (Spencer). What factors should companies use when considering whether or not to enter the doc-in-a-box game? Tedlow’s three-stage model of marketing, whereby marketers move from fragmentation to mass marketing to segmentation, can be instructive here (Ellickson). Market fragmentation can be defined as “the emergence of new market segments with distinct needs and requirements out of previously homogenous segments. These new segments limit the usefulness of mass marketing and erode brand loyalty” (Dictionary of Marketing Terms). The doc-in-a-box concept still seems to be either in the latter stages of this fragmentation stage or the initial stages of the mass marketing stage. Traditionally, the relationship between patient and doctor has given the doctor a considerable amount of power. All of the medical information rested in the hands of the professionals, and so patients were basically conditioned to rely on the information that their doctors gave them as true. This expectation is one of the factors that has led to the size of the medical malpractice sector of the legal industry. However, since so much medical information is now available on the Internet, and since so many pharmaceutical companies are marketing directly to their customers, patients are no longer as uninformed when they arrive at their doctors’ offices. The whole idea of “managed care” is predicated on the idea that patients will take a greater responsibility in their wellness. Because patients have this greater sense of their own participation in their health care decisions, opportunities for fragmentation will result (The Changing Needs of Medical Consumers). And so when a patient has a choice between making an appointment at a doctor’s office, taking time off from work, being asked to sit in the waiting room long past the scheduled appointment time, only to be given a prescription, and running by Wal Mart or Target after work, stopping in at the clinic, doing some shopping, then picking up a prescription or two on the way out, who would not take the more convenient opportunity? If these clinics prove to be reliable sites for handling the simpler illnesses and conditions, what started as a fragment of the health care market will move into a segment demanding mass marketing. Other trends are just as disturbing: a 1999 report by the Institute asserted that between 44,000 and 98,000 people die in the United States die each year as a result of hospital errors that could have easily been avoided (New Study). Additional perceptions that the American public has about the health care industry do not show positive signs for the traditional structure: 55% of the American public reported a dissatisfaction with health care in the United States – up from 44% in 2000. 40% of the American public say that the quality of health care has “gotten worse” in the past five years, while only 17% say it has improved. 48% of the adults in the survey say they are at least somewhat worried about the quality of health care provided to them and their families, while 22% say they are “very worried.” (“New Study”) Bauer and Haglund note that “(e)mployers, the purchasers of health insurance for most working Americans, are rapidly moving toward these mechanisms to give workers and their families more choices (something consumers have been demanding for a long time) and to rein in spending by transferring the up-front costs and more overall financial responsibility to their employees” (Bauer and Haglund). This is simply another way in which Americans are having to undertake more of their personal medical decisions. As time goes by, the in-store clinics may decide to move to the mass-market approach to developing client bases. Given the resistance that doctors’ groups are giving to the clinic as a concept even in the fragmentation stage, this resistance could easily grow as the clinics develop a clientele and begin to chip away at the earnings of doctors’ offices. After all, a doctor who gets to bill $200 for a client who has sat in one of his treatment rooms for at most half an hour, and with whom the doctor has spent maybe fifteen minutes, before treating a simple case with a prescription or simple advice to wait and let a virus pass through the body. These approaches could include television and radio advertising, as well as direct mail. Once the clinics reached a threshold of security, they could then move to the segmentation process. If a general health clinic is successful, there may be niches for medical clinics targeting particular groups of the population. One area in which this would make a lot of sense would be elderly health care. As the American population continues to age, more and more patients will enter waiting rooms and clinics for treatment of chronic conditions. While some of these concerns require the careful attention of a specialist, many of them require only routine maintenance that could be provided by practitioners operating with the significantly lower overhead that this sort of health care clinic could provide. Additionally, just as some medical practices specialize in pediatric care, so could some clinics focus just on children as patients, creating child-friendly treatment areas and focusing on the particular lower-level conditions and illnesses that are common to children. These clinics could also handle the glut of athletic physical examinations that students need at the beginning of just about every school year. Tedlow’s three-stage model for marketing is applicable to just about every part of the product market. However, this clinic concept is just one of many ideas that are emerging as American consumers, and the companies wanting to serve them, are searching for ways to make medical costs manageable. Works Cited Bauer, J.C. and Hagland, M. (2006). “Consumer-directed health care: What to expect and what to do.” Healthcare Financial Management July 2006. Accessed 20 November 2006 online at http://www.findarticles.com/p/articles/mi_m3257/is_7_60/ai_n16609019 Dictionary of Marketing Terms. Accessed 20 November 2006 online at http://www.marketingpower.com/mg-dictionary-view1833.php Ellickson, P.B. (2003). “Quality competition in retailing: a structural analysis.” Accessed 20 November 2006 online at http://www.econ.duke.edu/~paule/Structural.pdf Moewe, M.C. (2005). “Urgent care clinic gets Wal-Mart spots.” Business Journal of Jacksonville 11 November 2005. Accessed 20 November 2006 online at http://www.bizjournals.com/jacksonville/stories/2005/11/14/story3.html “New Study shows growing consumer dissatisfaction with medical care.” Dynamic Chiropractic 29 January 2005. Accessed 20 November 2006 at http://www.findarticles.com/p/articles/mi_qa3987/is_200501/ai_n9474891 Rowland, C. (2005). “I’ll have a loaf of bread, milk, and a flu shot.” Boston Globe 11 December 2005. Accessed 20 November 2006 online at http://www.boston.com/business/articles/2005/12/11/ill_have_a_loaf_of_bread_milk_and_a_flu_shot/ Spencer, J. (2005). “Getting your health care at Wal-Mart.” Wall Street Journal 5 October 2005. Accessed 20 November 2006 online at http://www.post-gazette.com/pg/05278/583075.stm The Changing Needs of Medical Consumers. (2005). Accessed 20 November 2006 online at http://www2.acnielsen.com/pubs/2003_q2_ci_medical.shtml Read More