An $85 Billion Industry Convinces Former Starbucks President To Move Into Healthcare
John Richards, the former president of North American Operations for the Starbucks Coffee Company, is enjoying his new role in healthcare as CEO of The Joint Corp. With a background in people-oriented and branding services—he was the executive vice president of Four Seasons Hotels during its international expansion and CEO of the Elizabeth Arden Red Door Spas when it doubled its national growth— Mr. Richards specializes in “scalable concepts that define the experience.”
When diagnosis and management of neck and back pain exceeds $85 billion a year, and both types of pain contribute to more disability in Americans than diabetes, chronic pulmonary disease and ischemic heart attack, the health market is prime for creating a service-oriented model. And thus, in mid-2014 Richards made his move into the health market. According to Mr. Richards, presently there is too much variation for patients in processing, assessment, treatment and payment. Therefore, using a retail-based model, like those he has employed before, he believes he can double clinic volume each year. While this sounds incredibly aggressive, in 2013 The Joint tripled its clinics’ growth and in 2014 doubled the growth. This task is nothing new for Mr. Richards, who oversaw Starbucks’ national rollout that took the company from 500 to 3,000 retail stores in just three years. He also gets credit for the Four Seasons Hotels expanding from eight to 40 locations in 20 countries. So he says he is ready and excited for the challenge.
John Richards. Photo Credit: The Joint Corp.
Chiropractic Care Predicts Unlimited Growth
In 2012, it was estimated that more than 52 million patients visited a physician with a complaint of back pain—compared to 44 million in 2004. This number has continued to grow as outpatient services have become more easily accessible throughout the U.S. Additionally, according to the Global Burden of Disease 2010, lower back pain has become the single leading cause of disability worldwide, with billions lost in productivity, as well as personal pain.
According to JAMA as far back as 2008 (after adjustment for inflation), “total estimated medical costs associated with back and neck pain increased by 65% between 1997 and 2005.” This resulted at that time in expenditures of about $86 billion a year. With estimates like that it is no wonder Mr. Richards feels confident about making chiropractic a more easily accessible, chain business with exponential growth.
In fact, by The Joint’s own valuations, their clinics already generate about three times the volume of a traditional national chiropractic clinic—or at least 1,600 patient visits a month. This was done by growing from eight to 330 clinics in roughly 30 states, within a short five-year window. Yet, Mr. Richards contends, “This is slower than Starbucks, but easier. It’s less expensive and there are fewer people to orchestrate,” indicating he believes this is only the tip of the iceberg despite the impressive numbers.
No Insurance Necessary
When it comes to chiropractic care, the insurance process generally creates long waits and high expenses relative to the simple services needed. This becomes costly to providers paying overhead expenses for routine services and headaches for getting reimbursed. In turn, high provider costs eventually transfer to patients. Add in regulation and certification that comes at the state level—and chiropractic services that are mostly one to three encounters— and costs to practice mount quickly.
In fact, insurance is not meant for everything big and small. When the average insurance deductible has more than doubled in the last eight years ($584 to $1,217 for individual coverage), high out-of-pocket expenses (plus co-pays, drugs and procedure costs not covered by plans) leave many feeling they must skip doctor visits and put off medical procedures. And thus, a private pay alternative is very appealing to most Americans. Not only is it convenient, but it’s accessible to everyone through multi-visit discounts and membership package options—just like a gym membership.
Shahram “Shah” Soleimani, D.C. Photo Credit: The Joint Corp.
At The Joint, membership plans and service offerings have led to an 80-85% recurring client visit rate that outperforms many weekly and monthly gym visits. Richards notes that traditional marketing and highly visible locations—unlike most chiropractic competitors, which are small and independent mom-and-pop-type facilities—contribute to walk-in visits as well as strong word-of-mouth referrals.
Next on the horizon is the digital footprint for chiropractic care. While the storefronts bring in foot traffic like Richards is used to at Starbucks, the retail space is one in which competitors do not have much influence, certainly not online. The “guest experience” from entry (including online check-in for mature, busy clinics) to exit that has previously been non-existent in the health setting is a new motivation for The Joint’s standard of care.
While The Joint has proven its concept and market appeal, the ultimate test will be the next few years of utilization. There is a well-defined environment in the health sector that needs to be met colliding with a customer experience-based change in demand. Add in changes to payment and provider reimbursement, and we will soon know whether Mr. Richards and his people-focused branding expertise can actually change how many Americans access basic care.