The Future of Retail Health: From Space Leases to Strategic Partnerships
Nashville Health Care Council's Fellows Alumni Dinner
The retail health landscape has undergone a dramatic transformation over the past two decades. What began as a simple "space lease arrangement" model has evolved into something far more sophisticated—and far more challenging. At a recent Council Fellows alumni dinner, Creagh Milford, President of Oak Street Health and former leader of CVS MinuteClinic, provided candid insights into why most retail health ventures failed and what it takes to succeed in this complex intersection of healthcare delivery and consumer convenience.
The Great Retail Health Experiment
The story of retail health is littered with well-intentioned failures. Walmart, Walgreens, Kroger, and Dollar General all entered the space with grand ambitions, only to retreat after struggling with unsustainable business models. The pattern was remarkably consistent across competitors.
The fundamental flaw, according to Milford, was treating healthcare like any other retail service. These retailers approached healthcare delivery as a "space lease arrangement"—essentially renting square footage to healthcare providers without integrating the service into a cohesive customer experience. The calculation was simple: generate more margin per square foot than traditional shelving while driving additional foot traffic.
But healthcare isn't chips and soda. The model broke down on multiple fronts:
Disconnected Experiences: Patients encountered healthcare services that felt bolted onto retail operations rather than thoughtfully integrated. The clinical teams operated independently from the broader retail ecosystem, creating friction rather than synergy.
Unsustainable Economics: Most retailers adopted a loss-leader pricing strategy, offering deeply discounted healthcare services (some as low as $49 visits) with the expectation that customers would purchase higher-margin retail goods to compensate. This created a death spiral where healthcare operations lost money while failing to meaningfully drive retail sales.
Expensive Overhead: Unlike CVS's nurse practitioner model, many competitors hired expensive physicians and specialists, creating heavy operational expenses that required massive patient volumes to justify—volumes that took years to develop.
Case Study: The Exception That Proves the Rule
CVS MinuteClinic survived when others failed, but not without significant evolution. Originally launched with the tagline "If you're sick, we are quick," MinuteClinic has transformed from a limited urgent care model into a comprehensive primary care platform serving 5 million patients annually.
The keys to CVS's relative success illuminate what separated survivors from casualties:
True Integration: MinuteClinic prescriptions are ready at the pharmacy. Scheduling integrates across virtual and physical care options. The workforce connects through shared backend operations. This creates a seamless experience rather than disconnected touchpoints.
Sustainable Margins: Operating on 3-5% margins, MinuteClinic doesn't try to be profitable in isolation. Instead, it drives customer lifetime value across CVS's broader ecosystem. Customers who interact with multiple CVS businesses show 10-point higher Net Promoter Scores and 5x greater service utilization.
Strategic Partnerships: Rather than viewing health systems as competitors, CVS pivoted to partnership. MinuteClinic now operates within health system networks like Emory, Rush, and Fairview, providing same-day access while health systems offer 9-month wait times for primary care appointments.
The Partnership Revolution: From Competition to Collaboration
The shift from competition to partnership represents the most significant strategic evolution in retail health, according to Milford. When Milford joined CVS, hospital executives warned him: "You're going to be our enemy." His response: "We want to be a partner with you in the communities."
This partnership model addresses a critical healthcare access crisis. Over 50% of MinuteClinic patients lack proper primary care access. At least 20% overlap with patients using emergency rooms at partner health systems for non-emergency care. By converting MinuteClinic locations to full primary care services, CVS created a natural collaboration opportunity.
The partnerships involve sharing quality data, coordinating specialist referrals through dedicated hotlines, and aligning on HEDIS quality measures. Most importantly, they address the fundamental access problem facing American healthcare: patients want convenient care, but traditional systems can't deliver it.
Serving the Underserved: Lessons from Oak Street Health
While MinuteClinic serves primarily commercial populations in suburban settings, Oak Street Health operates in a different universe entirely. These 10,000-square-foot clinics serve predominantly dual-eligible Medicare patients in challenging urban environments.
The Oak Street model demonstrates how retail health must adapt to serve vulnerable populations:
Comprehensive Social Support: Welcome visits spend an hour addressing food insecurity, transportation needs, and employment status before focusing on medical care. The clinics serve as warming centers in winter and cooling centers in summer.
Human Touch Over Technology: With 30% of patients lacking cell phones and limited internet access, the emphasis remains on personal connection rather than digital solutions. Security guards ensure safety, community rooms provide gathering spaces, and care teams build trust through consistent presence.
Mission-Driven Culture: The mission is the most important thing, Milford tells new Oak Street employees. This mission orientation drives employee engagement despite challenging working conditions and complex patient populations.
Consumer Expectations: The Amazon Effect on Healthcare
Healthcare operates in a world where consumers expect same-day delivery and instant access across all services. This creates fundamental tension with traditional healthcare delivery models built around provider convenience rather than patient needs.
CVS's integration of virtual care (500,000 visits annually) and physical MinuteClinic services (5 million visits annually) illustrates how meeting consumer expectations drives growth. Initially, there were concerns that virtual options would cannibalize in-person visits. Instead, both channels saw 15% growth when scheduling became integrated, and patients could choose their preferred modality.
The lesson extends beyond healthcare:
"consumer choice isn't a zero-sum game when the underlying need is access and convenience."
Patients don't choose between convenient care and delayed care—they choose between convenient care and no care until it becomes an emergency.
The Three Pillars of Sustainable Retail Health
Milford’s framework for evaluating retail health success centers on three critical elements:
- Consumer Engagement: Do patients trust the service? Do they return? Do they recommend it to others? Engagement drives utilization, which drives outcomes and sustainability.
- Clinical and Operational Model: Can the service delivery model provide quality care efficiently? The single nurse practitioner model that handles everything from insurance verification to clinical care represents operational efficiency, but requires careful support to avoid burnout.
- Business Model: Can the operation generate sustainable margins while providing value to patients and the broader healthcare system? This doesn't require healthcare services to be profitable in isolation, but they must contribute to overall enterprise value.
Organizations that successfully align these three elements while maintaining focus on their communities' needs position themselves for long-term success.
The Technology Integration Challenge
Artificial intelligence and digital health tools offer significant opportunities to improve efficiency and reduce provider burden. CVS uses AI for coding assistance, prescription support, and patient navigation. The goal is reducing administrative tasks that pull providers away from patient care.
However, technology adoption must account for population-specific needs. While middle-class suburban patients readily adopt digital scheduling and virtual care options, underserved populations may lack the devices, internet access, or digital literacy to benefit from these innovations.
The most successful retail health operations will likely employ a tiered approach: comprehensive digital integration for populations that can benefit, combined with high-touch human services for populations that need them most.
Looking Forward: Sustainable Healthcare Delivery
The future of retail health depends on learning from the failures of the past while building sustainable models for the future. The key insights from successful operations point toward several critical success factors:
Partnership Over Competition: Health systems need convenient access points; retail providers need clinical integration and referral networks. Collaboration creates value for both sides while improving patient access.
Mission-Driven Operations: Healthcare workers need purpose to thrive in challenging environments. Whether serving suburban families or urban vulnerable populations, connecting work to meaningful impact drives engagement and retention.
Integrated Experiences: Retail health succeeds when healthcare services integrate seamlessly with other customer touchpoints rather than operating as isolated add-ons.
Sustainable Economics: Business models must account for the full customer relationship rather than expecting healthcare services to generate high margins independently.
The retailers that exited healthcare delivery weren't wrong to see opportunity in serving underserved patients and improving access. They were wrong about how to execute successfully. The space lease mentality that works for FedEx locations and photo services fails when applied to healthcare delivery. The future belongs to organizations that understand healthcare as a relationship business requiring trust, convenience, and integration, not just another way to generate revenue per square foot.
The question isn't whether retail health will succeed, but which organizations will learn from past failures to build models that truly serve patients while creating sustainable value. The answer lies not in treating healthcare like retail, but in bringing retail excellence to healthcare delivery.
About the Nashville Health Care Council
The Nashville Health Care Council strengthens and elevates Nashville as The Healthcare City. With a $68 billion economic impact and 333,000 jobs locally, Nashville’s healthcare ecosystem is a world-class healthcare hub. Founded in 1995, the Council serves as the common ground for the city’s vibrant healthcare cluster. The Council offers engagement opportunities where the industry’s most influential executives come together to exchange ideas, share solutions, build businesses and grow leaders.
