FORTUNE — On Wednesday, CVS announced that it will stop selling cigarettes and other tobacco products by October. The explanation: CVS is a health care provider, and cigarettes contradict its wellness mission.
That’s right. The store where you pick up an antibiotic and buy a box of Altoids now wants to test you for diabetes and identify that pesky rash.
The drugstore chain is already off to a good start. According to a December analyst report from J.P. Morgan, there are 800 CVS MinuteClinics in the U.S., and the company estimates that it will open at least 700 more by 2017.
“CVS Caremark is playing an expanded role in providing care through our pharmacists and nurse practitioners,” Larry Merlo, president and CEO of CVS (CVS), said in a statement.
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Why? It’s fairly simple. There’s huge demand for convenient, timely primary health care.
Retail clinics started to pop up all over about a decade ago as standalone storefronts that offered a fast, easy, no-appointment-needed alternative to lengthy doctor’s office waits. Since then, retail clinics’ immediacy has only grown in value. As Obamacare prompts more Americans to sign up for insurance programs — 14 million new enrollees are expected this year – and those people gain access to affordable primary care, demand for primary care physicians is set to surge. That’s a problem since there’s already a huge shortage. The Association of American Medical Colleges projects that the shortage of doctors will grow to more than 91,500 by 2020. Primary care physicians, with their lower salaries and higher workloads, account for half of that figure.
The scarcity of primary care doctors could become even more acute as hospitals — which are under pressure from the Affordable Care Act’s tight limits on fees — abandon primary care in favor of what’s often a cheaper alternative: specialized services.
Hospitals are currently facing a fork in the road, says Mark Pauly, professor of health care management at the Wharton School of the University of Pennsylvania. “Some will become outpatient clinics with a few beds in the back, while others will focus much more on extraordinarily sick patients,” he says. Because specializing in just a few types of care allows hospitals to perfect their processes, that option often presents itself as the most economical.
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As some hospitals consider tiptoeing away from primary care, drug stores are embracing it head-on, not just because they want to fulfill the needs of customers-turned-patients, but because it makes good business sense. In-store clinics sync well with CVS’s large pharmacy benefit business, which brings in fees in exchange for managing insurers’ drug benefit programs, says Vishnu Lekaj, an analyst at Morningstar. Clinics, in driving foot traffic, also could increase CVS’s front-of-store retail sales, which were down in the third quarter of last year.
Despite the high demand for primary care, the profitability of the retail clinics isn’t certain. “In primary care, the key to making money is to keep overhead really low, and for multibillion companies, that’s really hard to do,” says health care consultant Jeff Goldsmith.
But for now, you can shop for a greeting card while you wait for those cholesterol level test results, and who doesn’t love a one-stop shop?
