HMA's Emergency Room Pain

Hospital chains that rely heavily on their emergency rooms for business, like rural operator Health Management Associates (HMA Quote), could encounter a new crisis.

Now, those companies face mounting competition from not only physician-owned outpatient facilities, but also from in-store health clinics operated by giant retailers like CVS (CVS Quote) and Wal-Mart (WMT Quote).

The new mini clinics offer cheap and rapid treatment for patients who, seeking after-hours care, might have chosen expensive E.R. services in the past. As a result, the clinics could start attracting some of the very customers that hospitals like the most: E.R. patients who require little treatment and actually pay their bills.

"Emergency care is expensive and high margin for hospitals," says Peter Young, a business consultant at HealthCare Strategic Issues. But "now every drugstore and large grocery will have retail clinics with prices that are less than 30% of an E.R. visit."

Young predicts that hospitals will lose millions of dollars worth of lucrative E.R. business to retail clinics every year. But he feels that "the HMAs of the world" -- which have monopolized after-hours healthcare business in rural communities for years -- will suffer most of all.

The clinics have started springing up during a tough time for the hospital industry as a whole. In addition to HMA, hospital giants like HCA (HCA Quote) were struggling to attract more paying patients even before the retail clinics moved in.