Urgent Care - TripleTree

TRIPLE TREE INDUSTRY PERSPECTIVE
Q4’15
Urgent Care
Urgent Care is at the epicenter of transformative changes occurring
in U.S. healthcare, helping solve cost and quality issues while
enabling the shift to a more consumer-centric industry.
TripleTree is a healthcare merchant bank focused on
mergers and acquisitions, growth capital, initial public
offerings and principal investing services. Since 1997,
the firm has advised and invested in some of the most
innovative, high-growth businesses in healthcare.
We are continuously engaged with decision makers
including best-in-class companies balancing competitive
realities with shareholder objectives, global companies
seeking growth platforms, and financial sponsors assessing
innovative investments and first-mover opportunities.
TRIPLE TREE INDUSTRY PERSPECTIVE
CONTENTS
2
EXECUTIVE SUMMARY
4
URGENT CARE 101
8
THE BROAD IMPACT OF URGENT CARE ACROSS THE CARE CONTINUUM
10
THE BUSINESS OF URGENT CARE
13
DRIVING DIFFERENTIATED CARE DELIVERY
16
THE IMPORTANT ROLE OF TECHNOLOGY
18
TRIPLE TREE’S PERSPECTIVE ON THE URGENT CARE REVOLUTION
22
GOING FORWARD: WHAT’S NEXT FOR URGENT CARE?
TRIPLE-TREE.COM
1
EXECUTIVE SUMMARY
Urgent care today is a $16 billion
incremental physicians needed to care for
market that is expected to grow
a larger insured base and the aging U.S.
to nearly $20 billion by 2020,1
population.
making it one of the strongest growing sectors
in healthcare. This rapid growth is being driven
by a convergence of market tailwinds, ranging
from increased demand from more empowered
healthcare consumers to a shortage of primary
care physicians and a healthcare ecosystem that is
undergoing unprecedented transformation. Urgent
care stands at the epicenter of this watershed
movement and has the opportunity to impact
how healthcare is delivered and consumed in the
United States for years to come, specifically by:
Lowering costs and increasing
convenience. Urgent care has recently
garnered significant interest from the
healthcare marketplace as the B2B model of
past years has given way to a renewed focus on
consumers. With the rapid shift in cost burdens
and the rise of retail-oriented healthcare
consumers, patients will look for new ways
to receive lower cost care in more convenient
settings.
Closing coverage gaps and offsetting
increased demand. The Patient Protection
and Affordable Care Act (PPACA) has expanded
healthcare coverage to more than 30 million
Americans. As a consequence, the growth
in government-sponsored healthcare has
amplified the shortage of primary care
physicians, with an estimated 50,000
2
INDUSTRY PERSPECTIVE | Q4’15
Enabling healthcare reform; helping
payers, providers and patients. Urgent care
not only helps lower the overall cost structure
of care delivery, providing tangible benefits to
stakeholders, but also empowers providers to
navigate the transition from fee-for-service to
value-based compensation.
Differentiating service offerings that
help segment care delivery and improve
the patient experience. The definition of
an urgent care provider is still being formed
as urgent care players, big and small, are
marketing a myriad of different service
offerings. As a result, patient populations that
historically sought care in higher-cost settings
now have a more diverse set of options that
appropriately address patient acuity, creating
opportunities to free up emergency room
capacity and to improve patient experiences
and outcomes.
Developing technologies to manage the
business and improve care continuity. The
evolution of clinical technologies designed
specifically for the urgent care setting will help
the industry improve the revenue cycle while
preparing providers for the emerging realities of
a more integrated health system.
With the healthcare system now squarely aligned
around the consumer, TripleTree believes urgent
care will remain central to enhancing the patient
experience as well as the delivery and costeffectiveness of healthcare services. In our view,
the influx of payers and large delivery systems into
the urgent care market will drive the continued
integration of urgent care with the rest of the care
continuum.
This report will provide a comprehensive overview
of the urgent care sector, while highlighting recent
investment activity and secular trends as well as
TripleTree’s perspectives on this large and growing
market.
“With the rapid shift in
healthcare cost burden and
the rise of retail-oriented
healthcare consumers,
patients will be looking
for new ways to receive
lower cost care in more
convenient settings.”
TRIPLE-TREE.COM
3
URGENT CARE 101
Despite arriving on the U.S. healthcare scene in
the 1970s, urgent care has only recently begun
to experience rapid, double-digit annual growth.
FIGURE 1.
URGENT CARE CENTERS GENERATE SIGNIFICANT COST
SAVINGS TO THE HEALTHCARE SYSTEM
Coverage expansion, resulting from healthcare
reform, has driven annual patient visits to
nearly 160 million. This growth has encouraged
investment activity across the board as “momand-pop” providers consolidate and as de novo
growth continues.2 With approximately two new
urgent care facilities opening in the U.S. each
week3 and intensified efforts from stakeholders to
$228-$583
Estimated Savings Range
(Urgent Care vs. ER visit)
deliver cost-effective care, the market is reacting
to anticipated urgent care volume growth in future
years.
Urgent care is a form of ambulatory care that
is performed outside of an emergency room
setting, primarily on a walk-in basis. Often
mischaracterized as another form of primary
32 M
Non-emergency
visits to U.S.
Emergency
Rooms
care, urgent care is filling a growing niche that sits
between hospitals and emergency rooms, serving
a patient population whose need goes beyond
the scope of a primary care physician but may not
be severe enough for an emergency room visit.
Today, modern urgent care providers are well
equipped with expanded capabilities, including
x-rays and diagnostic lab services, to care for this
$7-$18 B
Potential
annual
cost savings
patient population at a fraction of the time and
cost, generating significant savings to the overall
healthcare ecosystem.
4
INDUSTRY PERSPECTIVE | Q4’15
Source: UCAOA, The Case for Urgent Care. © 2015 TripleTree, LLC. All Rights Reserved.
Urgent care providers also operate in a
marketplace that is beginning to segment itself
What is Urgent Care?
based on service offerings within the overall care
continuum. Similar delivery models, such as retail
The marketplace has yet to adopt a standardized
clinics, have emerged in an attempt to capitalize
definition of what constitutes an urgent care
on the continued consumer interest in cost-
clinic. A single physician with limited medical
effective, convenient care alternatives to primary
staff delivering care in a small clinic with no lab or
care; however, several notable characteristics
radiology capabilities may be characterized as urgent
distinguish urgent care providers from retail
care just the same as a large center with multiple
clinics. Although retail clinics provide relatively
board-certified and advanced clinical life support
analogous convenience and care access, the
physicians with x-ray, laboratory, and emergency
primary distinction between the two models is the
room equipment.5 The Journal of Urgent Care
level of care provided.
Medicine (JUCM), in conjunction with the
Retail clinics focus the majority of patient
volume serviced on simple, acute conditions
and preventative care that is typically delivered
in high-traffic retail locations, such as CVS,
Target, or Walgreens. With larger average facility
sizes ranging from 3,600 – 12,000 square feet,
urgent care providers are capable of offering
Urgent Care Association of America (UCAOA)
Benchmarking Committee, has developed a list of
criteria to define urgent care.
An urgent care clinic is one where:
 Care is provided primarily on a walk-in basis

Office hours are Monday through Friday,
a wider array of services to patients in a single
including evening hours and at least one
location, improving the consumer experience and
weekend day
establishing brand loyalty.4

Suturing is provided for minor lacerations
Freestanding emergency room departments

X-rays are provided on-site
have also emerged as an extension of the urgent
care model. Similar to urgent care, freestanding
Based on this narrower definition of urgent care, the
emergency room departments are walk-in medical
JUCM and UCAOA estimate that roughly 8,000 –
facilities that provide convenient and timely access
9,000 urgent care clinics exist in the U.S. today.6
to care. However, these facilities also possess the
capabilities to stabilize, treat, and if necessary,
transfer patients with high-acuity conditions, such
as acute heart attack, stroke and major trauma to
a hospital setting.
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5
URGENT CARE 101
CONTINUED
Additionally, freestanding emergency room
departments are typically 911 receiving and admit
all patients regardless of insurance and ability to
pay.
Adeptus Health
One company that is taking a leading role in the
freestanding emergency room department market
Urgent care also shares several additional
is Adeptus Health Inc. (NYSE: ADPT). Backed
characteristics with emergency rooms in terms
by Sterling Partners since 2011, the Company
of extended access, insurance billing, contracting
operates the largest network of freestanding
rates and staffing models. Once perceived as
emergency rooms in the U.S. under the brand First
calamitous to the urgent care business model,
Choice Emergency Rooms (First Choice), and
freestanding emergency room departments have
delivers both major and minor emergency medical
proven less of a threat to urgent care growth and
services for adult and pediatric patients. Currently,
profitability given the relative costs to both payers
First Choice operates 68 facilities across Arizona,
and patients.7
Colorado and Texas, and employs more than 260
Urgent care providers further differentiate
themselves from retail clinics, primary care, and
board-certified physicians. The Company went
public in June 2014.
freestanding emergency room departments by
offering ancillary services, such as discounted
point-of-care prescription dispensing, to provide
the consumer with the most cost-effective,
convenient experience possible.
6
INDUSTRY PERSPECTIVE | Q4’15
Q4
4’15
FIGURE 2.
SERVICE OFFERINGS ACROSS THE CARE CONTINUUM:
URGENT CARE VERSUS OTHER CARE DELIVERY MODELS
High Acuity
Emergency Room
Hospital-based facility with resources to provide care for the highest-acuity
conditions, from acute heart attack to major trauma and stroke
Freestanding Emergency Room
911 receiving facility that admits patients regardless of ability to pay; capable
of stabilizing, treating or transferring high-acuity conditions
Urgent Care
Provides care for acute conditions while administering other services
generally not available in a primary care setting (X-rays, diagnostic lab
services, etc.) on a walk-in basis
Primary Care
Typically administered by a generalist physician, serving as a point of first
contact into the healthcare system operating within normal business
Retail Clinic
Generally limited to addressing simple, acute conditions (bronchitis and
vaccinations) or preventive care (flu shots) within high-traffic settings
Low Acuity
Note: Illustrative graphic to highlight the primary differentiators between care settings. © 2015 TripleTree, LLC. All Rights Reserved.
TRIPLE-TREE.COM
7
THE BROAD IMPACT OF URGENT CARE
ACROSS THE CARE CONTINUUM
Urgent care providers find themselves in a unique
for providers to shift low-risk patients to levels
position along the care continuum to solve the
of care with lower overhead costs. Managed care
needs of multiple stakeholders. By improving
contracting and capitated rates have also led
care coordination and the end-to-end patient
some multispecialty group practices to open their
experience, urgent care provides welcome relief
own urgent care clinics. Ultimately, for health
to payers, providers and consumers seeking
systems and large provider organizations seeking
opportunities to increase access to care, improve
to function as integrated networks, urgent care
quality and reduce overall costs.
represents a cost-effective delivery method that
PAYERS
With the continued transition towards value-based
care delivery, payers are judiciously selecting
department utilization but also improves care
coordination and eliminates network leakage.
care delivery partners and refining contracting
Additionally, with patient experience driving
models to reward outcomes, quality and efficiency.
nearly one-third of value-based purchasing today,
The integration and interoperability of urgent
providers have an incentive to deliver consumers
care electronic health records are expected to
the best experience possible.
reduce costs by helping payers identify at-risk
populations and individuals with early-stage
chronic conditions. With this, urgent care providers
should expect to become active participants in
payer networks, accountable care organizations
and other risk-sharing models.8 Payers will also
assess whether urgent care provides timely
and convenient access to quality care for their
members.
CONSUMERS
The growth in high-deductible health plans and
migration away from defined benefits has left
consumers increasingly liable for their healthcare
costs. This has resulted in the emergence of the
empowered healthcare consumer who pursues
lower costs and greater convenience, demands
price transparency and wants decision-support
tools and a high level of engagement. Urgent
PROVIDERS
care is well positioned to meet these demands.
As the Centers for Medicare and Medicaid
Further, these additional patient touchpoints
Services (CMS) increases penalties for hospital
afford providers the ability to anticipate consumer
readmissions and the market shifts toward value-
demand for adjacent service offerings such as
based purchasing, providers of all sizes are looking
sports medicine, commercial driver’s license
for new revenue streams and ways to offset
physicals and international travel preparation.
increasing costs. Urgent care and hospital joint
ventures have proven to be attractive avenues
8
not only reduces unnecessary emergency room
INDUSTRY PERSPECTIVE | Q4’15
PhysicianOne Urgent Care
PhysicianOne Urgent Care, which has 10 locations in Connecticut, is one example of an urgent
care model evolving to address the increasing consumer demand for “on-the-go” healthcare by
offering services beyond the scope of traditional, episodic-based urgent care. The Company offers
$15 prescriptions and medications for common ailments, as well as physicals for school, sports camp
and commercial driver’s license at attractive, clear price points. Additionally, PhysicanOne offers
international travelers individual healthcare assessments and preventive treatments specific to travel
location needs. PhysicanOne Urgent Care is a portfolio investment of Pulse Equity and PineBridge
Investments.
“By improving care
coordination and the endto-end patient experience,
urgent care provides
welcome relief to payers,
providers and consumers
seeking opportunities to
increase access to care,
improve quality and reduce
overall costs.”
TRIPLE-TREE.COM
9
THE BUSINESS OF URGENT CARE
Over the past 50 years, urgent care has
By one estimate, the baby boomer generation of
evolved into a model defined by attractive unit
65+ year olds in the U.S. is expected to double,
economics, favorable reimbursement trends and
while the 85+ year old population is expected to
a differentiated service offering focused on the
triple by 2050.9 Studies based on estimates of
consumer. With modest initial capital expenditure
population growth, aging and increased coverage
requirements, a flexible cost structure and multiple
further indicate an approximate 2% growth rate
revenue and expense levers to drive profitability,
per year in the number of visits to primary care
urgent care allows for a relatively short path to a
physicians, which translates to 51% more visits
positive return on investment.
over the next 20 years.10 Increasing demand for
care has been confronted by the secular trend of
Growth also stems from healthcare reform
ushering more than 30 million Americans into the
healthcare system, many for the first time. The
a diminishing number of graduating physicians
entering primary care residencies.
influx of newly insured exacerbates pressure to
With the supply of primary care physicians,
a system that is already reeling from a physician
adjusted for age and gender, projected to grow
shortage due to an aging population.
only about 2%,11 team-based approaches to care
delivery, such as the patient-centered medical
FIGURE 3. URGENT CARE MARKET DISTRIBUTION
10,000
9,000
Other
2.3%
Individual
(Non-Physician)
8,000
4.4%
Other
Government
5%
Workers’
Other
3%
Compensation
5%
6-10
8.3%
Hospital
25.2%
7,000
10+
14.8%
FIGURE 4. PAYER MIX
3-5
11.4%
6,000
Out-of-Pocket
10%
1-2
65.6%
5,000
Physician
Owned 35.4%
4,000
3,000
Medicaid
5%
Private
Insurance
55%
Franchise
2.2%
2,000
Corporation
30.5%
1,000
0
Number of
Clinics
Ownership
Distribution
Medicare
17%
Market Distribution
(Number of Clinics)
Source: UCAOA, TripleTree Estimates. © 2015 TripleTree, LLC. All Rights Reserved.
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INDUSTRY PERSPECTIVE | Q4’15
home, have emerged and may help alleviate
or dialysis facilities, due to relatively favorable,
capacity constraints over the short-to-medium
primarily commercial payer mix. Further cost
term. However, with lackluster support for
savings generated by urgent care, relative to
residency training and anticipated retirement of
primary care or emergency departments, deliver
nearly one-third of all physicians in the near future,
welcome protection in the wake of recent and
urgent care is poised to address a critical shortfall
ongoing reimbursement scrutiny.
in the healthcare delivery system.12 This supply
and demand imbalance, coupled with focused
efforts to deliver cost-effective care, will drive a
significant increase in patient volumes towards
urgent care as the market demands “just-in-time”
care delivery services that lie in the void between
primary care and the emergency department.
Understanding the interplay between these
revenue and expense levers is mission critical
for urgent care operators. Successful urgent care
providers tend to focus on one or two distinct
areas, while intensely centering their strategy
around the dimensions of service offerings
and levels, convenience, experience and price.
Reimbursement for urgent care services can
Key levers also include site selection, patient
be considered more stable compared to other
acquisition and retention, staffing models and
segments such as ambulatory surgical centers
back-office management.
FIGURE 5. ESTIMATED PHYSICIAN SHORTAGE: 2008 - 2025
950,000
130,600
Physician Shortage
Projected
850,000
750,000
650,000
2008
2010
Physician Demand
2015 (E)
2020 (E)
2025 (E)
Physician Supply
Source: AAMC center for Workforce Studies. © 2015 TripleTree, LLC. All Rights Reserved.
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FIGURE 6. DRIVERS OF URGENT CARE PROFITABILITY
URGENT
CARE
Revenue Levers
POTENTIAL OPPORTUNITIES
Offer a differentiated experience
versus other providers
Expense Levers
LEVER
LEVER
POTENTIAL OPPORTUNITIES
Visits
Wages / Benefits
~60%
of expenses
Drive loyalty to increase repeat
volume
Occupancy
EXAMPLES OF DIFFERENTIATORS
~15%
of expenses
Breadth of
adjacent services
“Concierge”- like
services
Flexible patient
scheduling
“Spa”- like patient
experience
~10%
Marketing
~5%
of expenses
EXAMPLES OF FLEXIBLE REIMBURSEMENT OPTIONS
Additional
services
Volume discounts
of expenses
Re-negotiate with payers to increase
reimbursement rates
Pay-for-performance
Assess real estate quality / cost
trade-offs to optimize footprint
Supplies
Revenue Per Visit
Increase self-pay pricing
Bundling/
unbundling
services
Rely more heavily on physician
extenders
Lower reliance on traditional media
to drive awareness
Other
~10%
Volume
discounts
Ancillary business expenses
of expenses
PROFIT
Source: TripleTree Analysis. © 2015 TripleTree, LLC. All Rights Reserved.
12
INDUSTRY PERSPECTIVE | Q4’15
DRIVING DIFFERENTIATED CARE DELIVERY
The key to long-term sustainability of urgent
choosing a hybrid model with physician extenders
care providers amidst a volume-centric model
playing a more active role in the delivery of care
is how well they differentiate themselves and
due to patient load and utilization fluctuations.
develop brand equity, which has a direct impact
on patient loyalty and retention. Consumer
attraction is far more complicated than simply
delivering immediate care over extended hours.
The consensus among established urgent care
providers is that long-term success has as much to
do with patient experience and satisfaction as care
and treatment.
Staffing – Evaluating the Use of Physician
Extenders: Physicians are typically the
primary medical administrators in urgent care
settings, with roughly 70% of practitioners
holding a board certification in family practice
or emergency medicine, and a smaller subset
electing a fellowship in urgent care medicine.13
Recently, however, physician extenders have
Below is an analysis of key components of the
been increasingly tapped as nurse practitioners
urgent care model that not only differentiates
and physician assistants practice at the “top of
providers from one another, but also contrasts
their license” to alleviate capacity constraints
other delivery models.
and further reduce costs. Slightly less than
SERVICE OFFERING
Urgent care can define offerings by both
breadth of services as well as staffing models.
For example, many providers have chosen to
provide ancillary services alongside traditional
half of urgent care providers reported using
mid-level practitioners either “frequently”
or “almost always,” as this staffing trade-off
is an important consideration in managing
profitability.14
occupational medicine. Tangential services from
In some cases, staffing models may serve as
x-rays and diagnostic lab services to point-of-
a point of differentiation for providers that
care dispensing not only serve as additional
are committed to physician-led care delivery.
sources of revenue, but also enable providers to
For example, MedExpress, an urgent care
address a greater cross-section of patient needs.
provider recently acquired by Optum with
Urgent care providers have increasingly utilized
locations across 12 states, relies on a physician-
telemedicine as a means to establish frequent
led approach with a full medical team to
patient interactions, resulting in more touch points
support care delivery, follow-up and care
through follow-up visits that often address higher-
coordination. States individually regulate the
acuity conditions. Aside from the diversity of
use of extenders, which contributes to the wide
service offerings, variability exists among staffing
variation in staffing models deployed across the
models across urgent care, with some providers
space. In all cases, however, physicians serve
utilizing a physician-only approach, and others
an important role in supervising and managing
care delivery.
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13
DRIVING DIFFERENTIATED CARE DELIVERY CONTINUED
Occupational Health – the Concentra
Approach to Market Leadership:
CUSTOMER EXPERIENCE
Occupational health is another growth channel
healthcare decisions and more care options than
and differentiator for urgent care providers.
ever before, patients are rapidly transitioning
Corporate and government clients negotiate
into healthcare consumers with many of the
these services prior to delivery for a reduced
same expectations they have for the retail
price or under a cost-plus arrangement in
industry and other consumer-centric industries.
which the provider is compensated for service
Convenience, price and loyalty have emerged as
delivery while receiving a fixed price to cover
essential components in establishing a meaningful
operational expenses. Although occupational
relationship with patients.
Faced with increasing ownership over their
health may prove an additional source of
Convenience: In urgent care, convenience
revenue growth, the margin varies across
no longer solely pertains to flexible hours
providers. Providers must consider several
and reduced wait times. Today, convenience
factors in determining the attractiveness of
also concerns location and regional density.
delivering occupational health, such as patient
Location serves as a major differentiator in
volume and service mix as well as costs specific
driving patient loyalty and retention as seen
to the geographic area. Concentra has found
with Target’s or Walmart’s retail strategy.
occupational health advantageous, as the
As with other consumer-focused verticals,
Company has established a strong footprint
the ability to influence consumer perception
for both worksite facilities and offsite clinical
toward believing “it is always there when you
locations.
need it” delivers a key advantage to urgent care
networks and chains.
FIGURE 7. AVERAGE WAIT TIME TO RECEIVE CARE
PRIMARY CARE
EMERGENCY ROOM
URGENT CARE
3+ Hours
6 Day Wait
vs.
247 Minute Wait
Saved using Urgent Care
over an Emergency Room
vs.
14-27%
45
Minute Wait
ER visits that could have
been handled by
Urgent Care
Source: UCAOA, The Case for Urgent Care. © 2015 TripleTree, LLC. All Rights Reserved.
14
INDUSTRY PERSPECTIVE | Q4’15
Price: Price transparency is one of the most
experience through messaging, delivery,
influential factors for consumers when
transparency and ambiance, which may
considering an urgent care provider and is
incorporate a consistent layout, workflow or
especially prevalent for patients responsible
service features. In almost all cases, providers
for their own healthcare and covered under
curate a personal experience that is prevalent
high-deductible health plans. Consequently,
across consumer-oriented verticals. Acute care
urgent care providers are acutely aware of their
providers often tailor this approach to meet
price levels in comparison to other competing
the specific needs of the geographic area or
options, and actively leverage potential savings
patient population in focus. An example of
as part of their marketing efforts. FastMed, for
this is Urgent Care for Kids, which has carved
example, notes the average bill at its clinics is
out a niche within several major metropolitan
one-seventh the cost of an average visit to the
markets in Texas by delivering an approach
emergency department.
exclusively focused on the “21-years-and
under” demographic.
Loyalty: A happy, loyal patient translates
into long-term recurring revenue for urgent
care providers. Providers can enhance patient
FIGURE 8. ESTIMATED TREATMENT COST COMPARISONS AND POTENTIAL SAVINGS
EMERGENCY ROOM
URGENT CARE
Urinary Tract Infection
$108
Urinary Tract Infection
$940
Acute Bronchitis
$123
Acute Bronchitis
$795
Influenza
$128
Influenza
$804
Acute Sinusitis
$105
Acute Sinusitis
$589
Middle Ear Infection
$94
Middle Ear Infection
$467
Conjunctivitis
$101
Conjunctivitis
$390
vs.
POTENTIAL SAVINGS
Urinary Tract
Infection
89%
Acute Bronchitis
85%
Influenza
84%
Acute Sinusitis
82%
Middle Ear
Infection
80%
Conjunctivitis
74%
Source: CareFirst Blue Cross Blue Shield. © 2015 TripleTree, LLC. All Rights Reserved.
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15
THE IMPORTANT ROLE OF TECHNOLOGY
In addition to a differentiated service offering
and outcomes-oriented approach, urgent care
FastMed & MD Now
providers are focusing on transparent billing and
technology support for patients seeking care
An ABRY Partners portfolio company, FastMed
continuity.
has achieved rapid growth across Arizona and North
BILLING
As patients now have the option to choose
amongst multiple urgent care providers, the
market has grown increasingly cognizant of the
importance of billing and collections to sustain
margins and earn patient satisfaction. As a result,
consumer-friendly approaches to the billing
process have emerged. As described with FastMed,
mentioned on the right, some of the most
effective innovations have occurred by developing
consumer-friendly payment portals designed to
improve cost transparency and convenience. In
addition, many providers have also focused on
calculating the patient-responsible portion of
the bill upon check-in to improve the revenue
Carolina. Driven by an impressive track record of de
novo growth in their core markets, the Company has
emerged as a leading example of the new-age urgent
care delivery model. In addition to location density,
FastMed has invested in an array of consumer-facing
technologies to improve the patient experience.
For example, ZipPass is a unique scheduling tool
developed by FastMed to reduce patient wait times
by providing visibility into the earliest available
appointment times. To support this application, the
Company has developed an online registration tool
to streamline check-in and care delivery. FastMed
has also developed similar consumer-friendly
technologies that allow for online bill presentment
and payment.
cycle through upfront or onsite payment services
Similarly, MD Now, a South Florida-based
with discounts for paying cash. Revenue cycle
provider, has achieved growth following a private
management continues to be a crucial area of
equity investment in early 2012. Today, MD Now
investment for urgent care providers.
operates more than 22 chains across Broward,
Miami-Dade, and Palm Beach counties in South
Florida. The Company’s growing footprint has
provided it with separation from other providers
across these highly competitive markets by
delivering an easily accessible resource for
consumers seeking access to care options.
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INDUSTRY PERSPECTIVE | Q4’15
TECHNOLOGY
Opponents of the urgent care model argue that
Urgent Care Accreditation
the transactional nature of care delivery may
contribute to fragmentation, citing the fact that
Urgent care facilities, unlike hospital emergency
providers have little incentive to manage patient
rooms, are not authorized by insurance companies
care beyond resolution to immediate health
to receive a facility fee, which is typically a payment
problems. This is an increasingly timely concern
made to cover supplementary resource use that
as the traditional delivery system evolves with
occurs in addition to the services and procedures
payers and providers seeking greater management
provided by physicians.15 With most urgent care
of patient conditions at all stages across the
facilities reimbursed at primary care rates or flat
care continuum. Large health systems such
rates with negotiated carve-out payments for x-rays
as Northwell Health (f/k/a North Shore-LIJ)
and other procedures, the financial viability of many
have already begun to form partnerships and
facilities is questioned when administering complex
acquire urgent care providers to deliver care
levels of care.
and increase interoperability. The evolution of
clinical technologies designed specifically for the
urgent care setting have further helped prepare
providers for emerging realities associated with
a more integrated delivery system. Specifically,
the development of electronic medical record
technologies eases the transfer and sharing of
patient information with clinics, hospitals and
other entities. New technologies developed
specifically for the urgent care sector, such as
those delivered by CodoniX, DocuTAP or Practice
Velocity, create an effective medium for the
efficient communication of patient records across
an integrated network.
Today, the Joint Commission, an independent
not-for-profit organization that accredits and
certifies more than 20,500 healthcare organizations
and programs in the U.S., accredits urgent care in
its ambulatory care accreditation program. The
accreditation of urgent care facilities may be the
key to insurers’ willingness to pay a facility fee
in addition to the professional fees for services
rendered in a clinic.16 Before accreditation criteria
can be tailored for urgent care, there must first be
a clear definition that is universally accepted by all
stakeholders. Within urgent care, separate voluntary
accreditation processes are overseen by the Urgent
Care Association of America and the American
Academy of Urgent Care Medicine.17
TRIPLE-TREE.COM
17
TRIPLE TREE’S PERSPECTIVE ON THE
URGENT CARE REVOLUTION
TripleTree believes that the urgent care revolution
In addition to private equity, large healthcare
is still in its early innings, as the market remains
organizations such as payers and large delivery
highly fragmented. As one estimate suggests, the
systems have emerged as a growing presence in
top 10 urgent care providers operate only 20% of
urgent care, primarily driven by efforts to stymie
the clinics, while another notes that the largest
rising healthcare costs and establish new revenue
four urgent care players account for only 1% of the
opportunities following healthcare reform. Payers
industry’s revenue.18 Under either estimate, only
are intrigued as urgent care supports the effort to
a handful of providers have achieved regional,
reduce medical cost and better manage member
let alone national, scale and profitability. Much
health. Early partnerships and acquisitions made
of the recent growth has been driven by private
by payers in the urgent care market provide a
equity activity as the unit economics create
glimpse into what the future may hold, as payers
a strong case for investment, and the private
have leveraged urgent care as a tool to manage
equity model provides a vehicle for established
emergency department overutilization and shift
urgent care chains to fund rapid expansion that
members to lower-cost settings.
allows providers to bypass the typical cash flow
constraints created by new clinic development and
the ramp time required to reach profitability.
THE PARTNERSHIP PLAYBOOK FOR
URGENT CARE
MinuteClinic, a retail clinic operator owned by
TripleTree believes that private equity will
CVS Health, has launched a series of innovative
continue to play a leading role in future market
partnerships with 40+ leading health systems
maturation as financial sponsors have the ability
across the country in which health system-
to provide the necessary capital to fund rapid
affiliated physicians serve as medical directors to
clinic and geographic expansion. Given the current
manage the provision of care delivery in clinics
pace of growth among many leading urgent care
across a geographic area. Medical directors also
providers, it will not be long before more urgent
collaborate on patient education and disease
care chains achieve greater scale and brand
management initiatives delivered through the
recognition. However, the current number of
clinic network. The clinical affiliation encourages
opportunities to acquire urgent care platforms
collaboration among affiliated physicians and
with scale and profitability is somewhat limited,
MinuteClinic clinical staff to improve coordination
making the case for de novo market entry and
of care for patients seen at these locations. As part
further consolidation of smaller players.
of the partnership, MinuteClinic is working with
partners to electronically share medical histories
and visit summaries to improve care coordination
and delivery. This partnership model, with the
18
INDUSTRY PERSPECTIVE | Q4’15
FIGURE 9. SELECT PRIVATE EQUITY INVESTMENTS IN URGENT CARE
COMPANY
FIRM(S)
CURRENT SIZE
MARKET(S)
WCAS, Ferrer Freeman, Others (1999)
Humana (2010)
Cressey, WCAS, Select Medical (2015)
330
National
Altaris (2010)
Dignity Health (2012)
171
National
Excellere Partners (2007)
General Atlantic, Sequoia (2010)
Optum (2015)
141
National
Enhanced Equity (2008)
107
AZ
CO
KS
MO
NC
OH
OK
TX
VA
WV
NM
Comvest Partners (2010)
ABRY (2015)
87
WCAS (2007, 2011)
58
Summit Partners (2011)
Fresenius Medical (2014)
34
TX
IL
MA
LLR Partners (2012)
34
IL
IN
NE
Shore Capital Partners (2012)
29
Ridgemont Partners (2012)
Co-Founder (2014)
26
OH
MI
TPG (2014)
26
NY
OR
Brockway Moran (2012)
22
SV Life Sciences (2012)
20
Source Capital, LLC (2012)
MSouth Equity Partners (2015)
18
Pulse Equity,
PineBridge Investments (2011)
10
CT
Friedman, Fleischer and Lowe
(2011)
9
GA
AZ
FL
KS
NC
MO
TN
TX
TN
FL
AR
MS
GA
TN
AL
Source: TripleTree Analysis. © 2015 TripleTree, LLC. All Rights Reserved.
TRIPLE-TREE.COM
19
TRIPLE TREE’S PERSPECTIVE ON THE URGENT CARE
REVOLUTION CONTINUED
ability to drive routine care towards retail settings
Providing a broader, but more integrated level
that physicians monitor, is well suited for future
of care within the community will enable HCA’s
accountable care collaboration efforts.
emergency departments to get back to the
MinuteClinic’s reach has further expanded
with CVS Health’s acquisition of 1,600 Target
pharmacies and the rebranding of 80 Target clinics.
The Company has publicly announced plans to
operate 1,500 MinuteClinics nationwide by 2017.
opposed to the wrong venue of choice for primary
care. Dialysis provider Fresenius Medical Care has
also entered into the urgent care space through
its acquisition of MedSpring Urgent Care. This
transaction, coupled with the acquisition of Sound
Dignity Health, one of the nation’s largest
Inpatient Physicians, a hospitalist and post-
health systems, entered the market through
acute staffing provider, signals the drive to offer
the acquisition of U.S. HealthWorks and has
adjacent, but complementary services to the core
continued to build on this platform inorganically.
dialysis business.
Dignity Health has been at the forefront of efforts
made by large health systems to function as
integrated delivery networks by entering new
ancillary care settings beyond the hospital. U.S.
HealthWorks provides Dignity with a platform
to drive primary care services, while recent
partnerships with United Surgical Partners
International (USPI) and SimonMed Imaging
create avenues to deliver ancillary care services as
part of an integrated network.
20
provision of care for truly emergent needs as
Another recent market entrant, Optum, initially
elected to pursue a more targeted expansion
strategy, launching de novo clinics and
opportunistically acquiring urgent care providers
in markets where high emergency room utilization
and primary care physician shortages exist.
The Company has since emerged as a national
player in the urgent care market following the
2015 acquisition of MedExpress. These expansion
efforts serve as an extension of Optum’s current
Hospital systems HCA Holding, Inc. and
consumer-centric healthcare initiatives, which
Tenet Healthcare, alongside other provider
have included efforts to improve transparency
organizations such as Fresenius Medical Care,
and navigation for consumers. In select markets,
have increased their presence in the urgent care
Optum’s approach appeals to those who have
space through acquisitions and de novo market
elected to shop for affordable care services, as
entry. HCA’s 2014 acquisition of CareNow and
well as those in need of immediate attention
recent acquisition of Urgent Care Extra’s Nevada
or care outside of traditional primary care
operations provide the Company with nearly 40
physician hours. The strategy also supports care
facilities in the Dallas-Fort Worth and Las Vegas
coordination efforts as clinical staff can connect
markets, complementing its growing network
patients with the appropriate downstream medical
of hospital, emergency and outpatient services.
services to ensure proper follow-up care.
INDUSTRY PERSPECTIVE | Q4’15
FIGURE 10. STRATEGIC INFLUENCE IN THE URGENT CARE MARKETPLACE
COMPANY
INVESTMENT
STRATEGIC RATIONALE
Entered into strategic partnership in 2012 that included a
minority investment to support growth in North Carolina
Entered market through 2012 acquisition; plans to expand
nationally and enhance surgical and imaging services via
partnerships with USPI and SimonMed Imaging
Entered market through 2014 acquisition of CareNow;
recently acquired Las Vegas operations of Urgent Care Extra.
Complements growing network of hospital, emergency and
outpatient services in Dallas-Fort Worth and Las Vegas areas
Entered market in 2014 with acquisition of MedSpring Urgent
Care; footprint in Illinois, Massachusetts and Texas
2014 strategic partnership with TPG-backed Access Clinical
Partners reflects the health system’s desire to offer an
additional portal of entry to other services
Targeted market strategy focused on markets where high
emergency room utilization and primary care physician
shortages exist
2014 de novo market entry with national network of clinics
to expand into faster-growing, less capital intensive, higher
margin businesses
Source: TripleTree Analysis. © 2015 TripleTree, LLC. All Rights Reserved.
TRIPLE-TREE.COM
21
GOING FORWARD: WHAT’S NEXT FOR
URGENT CARE?
As consumers continue to learn to
urgent care when seeking preventive care services
shop and navigate the healthcare
will create awareness regarding the effectiveness
system similar to how they behave
of the urgent care model.
with other industries, the proliferation of urgent
care clinic volumes will continue to accelerate.
In addition, the expected shift of employers to
defined-contribution benefit programs will provide
consumers with more control over their coverage
and care decisions. This will create millions of
new care purchasing decisions each day and drive
increasing demand for urgent care in the coming
years.
Furthermore, the expansion of healthcare coverage
sending more lives into a disjointed care delivery
system will shed light on a healthcare system
that is woefully underprepared to handle the
massive influx of the newly insured. Urgent care
Finally, cost continues to be top of mind for all
industry stakeholders, including consumers. The
continued quest amongst healthcare stakeholders
to solve cost and quality issues will drive new
opportunities in urgent care. These opportunities
will be created because of the effectiveness of the
model both in terms of delivering preventive care
and in addressing immediate attention to common
medical needs.
In future years, TripleTree fully expects that
healthcare access will be delivered through the
most convenient and cost-effective channels,
which will include urgent care.
providers will be essential to keep pace with the
increased demand for care, and furthermore,
to appropriately address resulting physician
shortages.
The influx of payers and large delivery systems
into the urgent care market will drive continued
integration with the rest of the care continuum.
As this occurs, urgent care chains will play a larger
role in managing patient transitions and directing
follow-up care. Similar to Optum’s approach,
communication with clinic staff will become
integral to the traditional urgent care experience.
In addition, the overall impact of efforts made
by these organizations to drive patients towards
22
INDUSTRY PERSPECTIVE | Q4’15
“Urgent care stands at the
epicenter of this watershed
movement and has the
opportunity to impact how
healthcare is delivered and
consumed in the United
States for years to come.”
TRIPLE-TREE.COM
23
ENDNOTES
1. Turk, Sarah. Urgent Care Centers in the U.S. IBISWorld. 2015.
2. Urgent Care Association of America. White Paper: The Case for Urgent Care.
3. Stern, David. Status of Urgent Care in the U.S. – 2005. Business Briefing: Emergency Medicine Review.
4. Kaissi, Amer. Flipping Health Care through Retail Clinics and Convenient Care Models. IGI Global, 2015.
5. Weinick, Robin; Bristol, Steffanie; Marder, Jessica; DesRoches, Catherine. The Search for the Urgent Care
Center. The Journal of Urgent Care Medicine. 2009.
6. Weinick, Robin; Bristol, Steffanie; Marder, Jessica; DesRoches, Catherine. The Search for the Urgent Care
Center. The Journal of Urgent Care Medicine. 2009.
7. McGuireWoods. 2019 and Beyond: Perspectives of 15 Urgent Care Leaders.
8. McGuireWoods. 2019 and Beyond: Perspectives of 15 Urgent Care Leaders.
9. U.S. Census Bureau, National Projections 2012.
10. Green, Linda. The Primary Care Physician Shortage. Uris Hall Auditorium, New York. 2014. Lecture.
11. Green, Linda. The Primary Care Physician Shortage. Uris Hall Auditorium, New York. 2014. Lecture.
12. Association of American Medical Colleges (AAMC). Physician Shortages to Worsen Without Increases in
Residency Training. 2015.
13. National Association for Ambulatory Care. 2012.
14. Key, Dale. Benchmarking Your Urgent Care. Urgent Care Association of America Conference.
15. Weinick, Robin; Betancourt, Renee. No Appointment Needed - The Resurgence of Urgent Care Centers in
the United States. California Healthcare Foundation. 2007.
16. Weinick, Robin; Betancourt, Renee. No Appointment Needed - The Resurgence of Urgent Care Centers in
the United States. California Healthcare Foundation. 2007.
17. Weinick, Robin; Betancourt, Renee. No Appointment Needed - The Resurgence of Urgent Care Centers in
the United States. California Healthcare Foundation. 2007.
18. Merchant Medicine. 2013.
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INDUSTRY PERSPECTIVE | Q4’15
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