As the battle for market share intensifies among retailers, in-store health clinics are increasingly popping up in grocery stores, pharmacies and even department stores. Within the past three years, this still tiny niche within the health care industry has gone from a few small players testing the waters to investor-backed companies with plans to open hundreds, and even thousands, of urban locations in the next few years.

Located at the front of stores such as Target, CVS/pharmacy and Kroger, the self-contained clinics treat patients with minor ailments, not chronic or emergency conditions. “The industry right now is in its infancy,” says Greg Moerschel, a partner with Beecken Petty O'Keefe & Co., a private equity firm based in Chicago. “You may see this become a billion-dollar industry rather quickly.”

In March, Beecken Petty O'Keefe invested $77 million in Conshohocken, Pa.-based Take Care Health Systems, which currently operates 16 clinics in Portland, Ore. and Kansas City's metro area. That infusion of capital, believed to be the largest to date in the fledgling industry, will be used to add nearly 200 clinics in the next year and more than 1,400 clinics by the close of 2008.

Meanwhile, CVS says it plans to acquire Minneapolis-based MinuteClinic, which currently operates 83 clinics in 10 states, 66 of which are in CVS stores. The drugstore giant made the deal because executives believe the retail clinics are “the right concept” for consumers, insurance companies and providers, according to Thomas M. Ryan, CEO of CVS. The transaction is expected to close this summer.

As a wholly owned subsidiary of CVS, MinuteClinic plans to continue opening clinics inside CVS stores and other retailers, including 150 to 200 this year alone.

“CVS looks forward to supporting MinuteClinic's national expansion at an appropriate pace,” says Mike DeAngelis, manager of corporate communications for CVS. “We see MinuteClinic's model of convenient health care delivery as a complement to CVS' goal to be the easiest pharmacy for customers to use.”

The industry standard for the clinics calls for a one-person staff consisting of a nurse practitioner or physician's assistant, with a licensed doctor available for consultations and oversight. As a general rule, each clinic costs about $50,000 to open. Industry insiders expect that within nine months each clinic should become profitable and quickly generate revenues in excess of $500,000 a year.

The emerging trend is the latest attempt by retailers over the past decade to boost sales by adding ancillary services such as banks, salons and gas stations.

“It's the same concept of driving more traffic to your store for repeat needs,” says Peter Goffstein, senior vice president of real estate for National Retail Properties Inc., a publicly traded REIT based in Orlando.

From Goffstein's perspective, whether that traffic helps the store's bottom line directly remains to be seen. “Even if you see a positive sales trend, can you attribute it to that specific change?” If nothing else, Goffstein says, the convenience of medical clinics is one more selling point for retailers.