Changing Market for Urgent Care Centers

Our recent client experience shows that Urgent Care Centers (UCCs) are evolving in terms of their underlying business value proposition. UCCs typically offer extended hours from early morning to after-work evening hours, as well as weekends. Compared to Emergency Rooms (ERs), urgent care offers shorter wait times and far lower costs. For example, co-pays for a UCC visit may be $40-$50, while ER visits may range from $150 to $500 or more. In the NY-NJ-CT metropolitan area, we are seeing UCCs, hospitals/networks and private venture funds playing different roles with different objectives. 

Changing Roles 

Historically in our area, most UCCs were small-scale private enterprises which sought profits by providing a superior service (access and speed) at lower costs. They were often linked to primary care practices. Over the past several years, however, we see a more complex array of divergent potential business roles: 

• Free-standing profit generator, as it has been in the past.
• Front-door for practices or systems, as an element of a comprehensive primary care network. This may involve de novo development or acquisition of existing players.
• Cost-reducer vs. ER for risk contracts. With the rise of “value based purchasing” and Accountable Care Organizations (ACOs), the importance of managing costs has grown dramatically—both direct expenses of ER vs. UCC visits, but also risk of admission and need for follow up.
• ER decanter, to reduce pressure on hospitals’ ERs, because many ERs operate well above planned capacity, with adverse impact on patient service.  

Changing Market

These potential shifts in the role of UCCs are occurring within a context of a changing market. Overall, as noted above, ever more patients are enrolled in some form of value-based purchasing, driving concerns about ER utilization and costs. Further, payors are seeking to move more patients to UCCs, rather than ER, as a cost savings measure; the payors use increasing ER co-pays vs. UCC co-pays as incentive. Furthermore, the UCC market itself is becoming more mature. For example, in a 10-square mile section of Queens, there are now 10 UCCs; where there were few only 5 years ago. In Manhattan, competition has stepped up, to the extent of competing UCCS located on the same block. Similar explosions in number of centers have occurred in NJ and CT. As a result, the market is more challenging. To cite a few notable examples, 3 years ago, CityMD received capital funding of some $90mm for expansion. As a result of such exemplar growth, some of the smaller chains have been sold themselves; for example, the formerly independent Urgent Care Manhattan enterprise (with 3 sites) is now operating under the umbrella of Northwell. 

Conclusion

These shifts in market penetration and roles indicate the importance and changing business realties of UCCs in the region. All health care stakeholders will be impacted: 

• Investors will need to become more selective about new start-ups and value of established mini-chains.
• Payors will further consider means to shift patients from ERs.
• Hospitals/networks will become increasingly involved in the operations of UCCs, including finding effective means of communicating clinical information and managing utilization patterns.
• Patients will see opportunities to avoid ERs and, over time, greater integration between UCCs and their overall care management.

Competitive dynamics are changing in local markets; we’re advising all clients to pay attention.