Investors Taking Note Of Urgent Care Center Boom

Urgent care centers are becoming a hot investment with the nation’s largest health insurer, UnitedHealth Group (UNH) poised to expand its newly acquired chain and smaller operators attracting a variety of financial backers including several Blue Cross and Blue Shield plans.
Urgent care, also known as immediate care, is similar to retail health clinics operated by Walgreens Boots Alliance (WBA), CVS Health (CVS) and Wal-Mart (WMT) in that they are open daily, evenings and on weekends to treat routine health needs. But urgent care centers also generally offer more in the form of a board certified physician plus additional services such as X-rays for potential broken bones.
“Urgent care shows steady growth, predictable margins and private investment from all sectors: private equity, angel investors, health insurers and health systems,”  Tom Charland, long-time consultant to the outpatient care industry who follows the urgent care market through his company, Merchant Medicine, wrote in his July report out this week.
The number of urgent care centers grew 4.4 percent in the first half of the year to 1,562 from 1,496 among independent operators with five or more centers that are tracked by Merchant Medicine, which follows the urgent care and retail health market.

Ann and Robert Lurie Hospital of Chicago’s urgent care center is part of a nationwide boom to open low cost outpatient care centers as private and government health insurers look to control costs and provide more convenient medical care service. (Lurie Children’s photo)

The industry is so fragmented, it’s difficult to keep track of given there are many companies that operate a single clinic and are often independent and even storefront operations. Growth among hospital and health system-owned centers is also taking off with such facilities growing well into the thousands.
The timing is right for more expansion, analysts say. Executives are banking on the shift away from fee-for-service medicine to value-based care that emphasizes lower cost, higher quality medicine rather than volume. Urgent care offers quick convenient treatment that keeps people out of a hospital where care costs more.
Last week, UnitedHealth Group updated investors on its urgent care business in the second quarter, which was the first period new revenues from its acquisition of MedExpress, a large chain of centers that will operate under the insurer’s Optum portfolio of health care delivery businesses.

“This past quarter, MedExpress joined OptumCare with nearly 150 freestanding neighborhood care centers in 16 local markets,” Larry Renfro, vice chairman of UnitedHealth Group and CEO of Optum told analysts during the company’s earnings call. “MedExpress can offer as much as 90% of the care typically delivered in a hospital emergency room at about 90% lower cost.”
Urgent care centers helped boost United’s Optum Health revenues 33 percent to $3.4 billion in the second quarter.
Renfro hinted that UnitedHealth would be expanding though he didn’t specifically say how. “We are committed to growing as a leading provider of ambulatory care services, recognizing this capability will be increasingly valuable to the consumer and health care system overall,” he told analysts.
Additional health insurance companies are also investing in urgent care. Several Blue Cross and Blue Shield plans have purchased stakes in local urgent care operators and some national chains. For example, Anthem (ANTM) has a stake in Physicians Immediate Care, which has more than 30 centers in three states.
“When run correctly, not only can urgent care clinics show strong returns, but they can be highly strategic in the broader competitive dynamics of a health system’s service area,” Charland said in his report. “Future growth of urgent care centers could come in a variety of ways.”