18 Oct Urgent Care; A Strategic Imperative in Emerging Systems of Health
A Strategic Imperative in Emerging Systems of Health; Urgent Care
System of Health: The Destination
In every community, hospitals are transitioning the scale and scope of their services in response to four major trends:
- Payments (incentives) are shifting from fee for service to value.
- The scope of services required from hospitals is expanding from inpatient and outpatient services to population health and care coordination for which the hospital bears financial risk.
- The scale of operations is expanding from local programs and services to regional collaborations, joint ventures and strategic relationships.
- The customers being served are transitioning from patients who are primarily users of services with limited financial accountability to consumers who play active roles in the delivery and costs associated with the services they choose
These trends mean hospitals must adapt to survive, or risk extinction. And that means the facilities and services must be focused on optimal efficiency, accessibility and user experiences. Urgent care centers are a key element in a hospital’s transition to become a system of health.
Background: Urgent Care Centers (UCCs)
An urgent care center is a medical center with expanded hours that is specially equipped to diagnose and treat a broad spectrum of non-life and limb threatening illnesses and injuries. Urgent care centers are enhanced by on-site radiology and laboratory services and operate in a location distinct from a freestanding or hospital-based emergency departments. Care is rendered under the medical direction of an allopathic or osteopathic physician. Urgent care centers accept unscheduled, walk-in patients seeking medical attention during all posted hours of operation.
Urgent Care Centers are an appealing option to patients and independent investors alike. Hospitals and health systems offering urgent care options will be better positioned to keep patients “in the family”, ensuring they remain within their coordinated network of care. As the prevalence of chronic conditions continues to rise, the need to control all aspects of patient care intensifies. Affiliated UCCs, in this coordinated model, are uniquely positioned to not only offer care for an immediate need but to actually enhance the wellness of the populations they serve.
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- % of UCCs said patient visits increased in 2014.
- 89% of UCCs said patient visits increased in 2014.
- 87% of UCCs acquired or built a new location in 2014, and 91% anticipated growth in 2015.
- The most common UCC locations include: shopping centers/strip malls (34.1%); freestanding buildings (33.2%); mixed-use buildings (13.6%); and medical offices (19.1%).
- On average, current UCCs have been in operation seven years
- UCCs average seven exam/treatment rooms.
- At most UCCs (90%) the wait time to see a provider is 30 minutes or less, and total patient throughput is 60 minutes or less at 84%.
- Nearly all UCCs (96%) operate seven days a week and are open at least 4 hours per day.
- 87% of UCCs provide urgent or episodic care exclusively, whereas 13% provide urgent and ongoing primary or specialty urgent care.
- More than half (66%) of urgent care patients have an outside primary care physician.
Source: UCAOA 2015 Benchmark Survey
UCCs are an attractive response to industry trends for lenders and investors.
Capital investments that position hospitals to transition to a value-based payment system are increasing. Urgent care centers meet this requirement. It is a niche well-positioned to take advantage of trends impacting the delivery system: declining margins, increased utilization, widely accessible data about safety and quality, and growing price sensitivity from employers, insurers and consumers. It is not a sector without risks, but seems ideally poised to address growing demand profitably.
There are over 8,000 UCCs operating today with sector growth anticipated to reach $18.8 billion by next year.
Investors have funneled $3 billion into the urgent care sector since 2008 and there’s room for growth, especially in large metropolitan areas. (McGuireWoods and Urgent Care Association of America “2019 and Beyond: Perspectives of 15 Urgent Care Leaders” March 20, 2014).
Interest in urgent care clinic capital flows is driven by these factors:
- Opportunity: between 300 to 600 urgent care centers are added each year; some sponsored by hospitals or medical groups, others sponsored by independent investors.
- Consumer acceptance: consumers are responding favorably to the UCC value proposition–convenience (proximity, hours of operation), scope of service and costs vs. more expensive alternatives.
- Clinical capabilities: Advances in clinical technologies enable UCCs to provide a widening set of diagnostic and therapeutic services at a lower overhead.
- Payer preference: UCCs play an important role in payer value-based and shared risk programs. Care provided in UCCs can keep individuals out of hospital emergency rooms that reduces costs for payers and individuals.
- Hospital emergency room diversion: hospital investment in an UCC facilitates diversion away from crowded EDs. A RAND study found that almost one in five visits to hospital emergency rooms could be treated at an urgent care center, potentially saving $4.4 billion annually in healthcare costs.
- Return on capital: The capital and operating costs needed for an appropriately designed and located UCC provides an attractive ROC.
Looking Ahead: What to Watch in the UCC Sector:
Two immediate trends are noteworthy:
- Consolidation: The urgent care sector is highly fragmented. Investors see a consolidation trend ahead that will lead to immense growth and sizable economies of scale. Private equity groups (PEGs) are acquiring “well-positioned” centers and enhancing their investment through consolidation of back office functions and increased utilization through payer and direct to consumer marketing.
- Physician sponsorship: Physicians are looking to expand their capabilities, frequently partnering with financial investors to sponsor UCCs that compete with hospital-sponsored UCCs.
Strategic Imperative for Hospitals: The Bottom Line
Development of UCCs requires a thoughtful analysis of market demand that considers changes in demand, utilization, payment and clinical innovation that change how care is delivered. It is not likely a hospital can survive and compete unless a solid UCC plan is integrated in its competitive strategy.
Sponsors must determine when a UCC is necessary, which services it should provide and how to optimize utilization and financial success.
Failure to act, and lack of planning in the context of a hospital’s transition to become a system of health, expose a hospital to enormous risk.
Recent Urgent Care Deals
In 2014, Tenet Healthcare launched a new national brand of urgent care centers called MedPost Urgent Care, which has expanded into eight states. In addition, Tenet entered into a joint venture with investment firm Welsch Carson Anderson and Stowe and acquired 35 CareSpot urgent care clinics in Tennessee and Florida and will fuse their operations with those of its 46-store MedPost brand. (Becker’s Hospital Review, April11, 2016). See ERDMAN’s Strategic approach in developing Tenet’s new national brand of Medpost Urgent Care Centers.
Physicians Realty Trust purchased 18 medical office facilities located in eight states for about $735 million. The company not only purchased prime property invested in medical office buildings (MOBs), which has become increasingly competitive. The pending purchase includes Baylor Cancer Center in Dallas, Texas. PhysiciansRealty described it as an “on-campus medical office building” consisting of about 458,396 net leasable sq. ft. At a purchase price of $290 million and after closing, the unlevered cash yield is expected to be 4.7 percent (National Real Estate Inevst, July 10, 2017).
American Development Partners, a private equity and real estate firm, agreed to invest $1 billion alongside American Family Care, the largest operator of urgent care centers in the U.S. The agreement will fund the growth of an additional 300 American Family Care urgent care franchises throughout the United States, more than doubling its existing footprint of more than 170 centers (Reuters, July 14, 2017).
The private-equity backed urgent care developer GoHealth Urgent Care will enter California in a joint venture with Dignity Health. Together they will develop a dozen urgent care centers. GoHealth, backed by global investment firm TPG, has struck similar deals with Portland, OR based Legacy Health and Northwell Health (NY) (Modern Healthcare, February 9, 2016).