July 11, 2014

For hospitals and insurers, urgent care has become a lucrative investment

Daily Briefing

Private equity firms, commercial insurance companies, and health systems around the United States are increasingly investing in urgent care clinics and related entities, Julie Creswell writes for the New York Times.

Urgent-care clinics fill the void—without interrupting coordination

Since 2008, private equity companies have invested nearly $2.3 billion in urgent care. For example, private equity firm General Atlantic and venture capital firm Sequoia Capital in 2010 invested in MedExpress Urgent Care, which operates 130 clinics in 10 states.

Insurance companies, national health systems, and local hospitals also are jumping at the opportunity to invest in urgent care. For instance, Humana in 2010 purchased Concentra—the largest group of urgent care clinics in the United States—for $800 million. Two years later, Dignity Health acquired the 176-center U.S. HealthWorks. Meanwhile, Orlando-based Florida Hospital has opened 24 Centra Care clinics.

Why hospitals are starting their own urgent care networks

Why the centers are profitable

According to the Times, urgent care is a popular market because of its profitable business model: treating as many patients as quickly as possible. An average bill for a visit to a clinic is about $155 for a 30-minute visit.

In addition, such clinics are able to "cherry-pick" the type of patients they accept, unlike hospital EDs which are legally required to treat everyone. As a result, most urgent care facilities do not accept Medicaid or patients without insurance, unless they pay upfront.

Meanwhile, consumers are turning to urgent care clinics more than ever to avoid waits in the ED and because they are open outside of regular business hours. Ateev Mehrotra, an associate professor at Harvard Medical School, says, "We expect our banking 24 hours a day, seven days a week, and to shop 24/7, so now we want our health care to be 24/7."

In addition, urgent care centers tend to charge less than EDs for the same procedures. According to data from CareFirst Blue Cross Blue Shield, the price of treating a middle-ear infection in an urgent care clinic is about $100 versus about $500 in an ED. Similarly, acute bronchitis costs $122 to treat via an urgent care center, compared with $814 in an ED. The cost differences can be especially pronounced for consumers with high-deductible health plans.

However, some say the urgent care model is trading quality care for convenience. Robert Wergin, president-elect of the American Academy of Family Physicians, says, "The relationship I have with my patients and the comprehensiveness of care I provide to them is important" and "[w]hile there is a role for these centers, if I were sick I'd rather see my regular doctor, and I hope my patients feel that way" (Creswell, New York Times, 7/9).

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