The New Urgent Care Wave

Finance leaders need to consider a variety of metrics as health systems increasingly adopt strategies for urgent care.

This article first appeared in the November 2015 issue of HealthLeaders magazine.

As the healthcare industry shifts from service volume to service value, operating urgent care centers is emerging as a strategic imperative for health systems across the country.

"In the late 1970s and early '80s, urgent care was a cottage industry that bloomed then faded. Urgent care is once again peaking," says Sean McNeeley, MD, network medical director for Cleveland-based University Hospitals Urgent Care.

The University Hospitals health system operates 16 hospitals and more than 30 urgent care centers throughout northeast Ohio and reported total operating revenues of $3.5 billion in 2014.

Over the past three decades, UH has taken a do-it-yourself approach to developing urgent care centers, as opposed to building and operating the facilities with an urgent care organization partner, McNeeley says. "We have essentially followed urgent care as an industry."

UH started riding the latest urgent care wave in 2000, when Lee Resnick, MD, a cofounder of the Naperville, Illinois–based Urgent Care Association of America, led an effort at UH to open new urgent care centers, McNeeley says, adding those efforts accelerated in 2008. "University Hospitals as a whole looked at access as part of its Vision 2010 initiative. … We started to expand urgent care to create greater access."

Although the scope of services at UH urgent care centers has increased over the past 30 years to include services such as x-ray imaging and blood work, improving patient access remains a key goal in the health system's strategic planning, he says. "We plan urgent care centers on access as the main criteria, making sure that we have our market share and that our footprint is where we want it."

The emphasis on patient access at UH urgent care centers is reflected in the facilities' open scheduling and business hours—from 9 a.m. to 9 p.m. on weekdays and 9 a.m. to 5 p.m. on weekends.

Beyond the bottom line
Assessing the financial impact of urgent care centers is as much art as it is science, McNeeley says. "It isn't an easy mark."

With low margins and high competition relative to emergency rooms, urgent care is rarely a major source of revenue for health systems. "In and of itself, you can't expect an urgent care center to be a profit center, but it can produce sufficient downstream revenue. The goal is to be revenue neutral or net positive," he says, noting that UH urgent care centers as a whole have been able to break even financially in recent years. "We have to see a significant number of people. You can't do one patient an hour and survive in urgent care."

There are financial-dashboard metrics that can be monitored at urgent care centers. In addition to patients transferred from urgent care to a UH emergency room, McNeeley says other urgent care metrics with a financial impact on the health system include imaging services such as ultrasound exams and lab work that is sent out to UH facilities.

Some of the most important financial impacts of UH's urgent care centers are difficult to quantify, he says. "Access and patient experience is the main value of our urgent care centers. … Putting a dollar figure on that is really hard."

UH is gauging the financial impact of the health system's urgent care centers with multiple factors, McNeeley says. "First, you look at the bottom line. Second, you look at the number of urgent care patients, which generates exposure for our brand in the community. Then you look at transfers to the ED, labs, imaging, and referrals to other UH providers. This all generates money for the system. … When you look at the finances, just looking at the bottom line is short-sighted."

Urgent care centers can play a key role in boosting a health system's brand, he says. "You need to be efficient, friendly, and provide high-quality service. You're part of a health system, and you represent them at the front door. It may not show clearly financially, but it makes a big difference to your health system."

Developing partnerships
For health systems with less storied histories in urgent care, finding an experienced partner to help build and operate urgent care centers is an attractive alternative to the do-it-yourself approach.

Last year, Indianapolis-based Indiana University Health established an urgent care partnership with Premier Health, which is headquartered in Baton Rouge, Louisiana, and offers management, consulting, and joint venture services. The partners are opening three urgent care centers this year and plan to jointly operate at least 10 of the facilities in Indiana by 2017, according to Ron Stiver, MBA, president of system clinical services at IU Health, which reported net patient service revenue of $5.3 billion in 2014.

"This is a direct outgrowth of the five-year strategy we set last year … to expand and grow primary care," he says, noting other elements of the IU Health strategy include developing patient-centered medical homes to improve case management for patients with comorbidities, as well as on-site and near-site clinics to serve workers at several large Indiana-based employers. "We really wanted to put a focus on our primary care base, and the urgent care centers are part of that strategy."

Although IU Health is not expecting the new urgent care centers to generate significant net-positive revenue for the health system, several gains are anticipated, Stiver says. "We expect our urgent care centers to pay for themselves, and to provide access and convenience."

"We really wanted to put a focus on our primary care base, and the urgent care centers are part of that strategy."

The urgent care centers will open several opportunities for the health system's physicians. "New primary care physicians could start at the urgent care centers and move up," he says, adding that IU Health also plans to offer physicians the opportunity to "moonlight" at urgent care centers. "In part, we want to be a place where physicians want to work. We're in a service industry. There are recruiting battles out there in the urgent care and emergency department areas, and in primary care."

The main metrics IU Health will be monitoring at the urgent care centers are the financial viability of the clinics, service quality, and patient and physician satisfaction, Stiver says, adding that site selection is the first step in helping to ensure a clinic's success. In particular, IU Health is seeking to locate its new urgent care centers in communities with concentrations of patients who have insurance coverage linked to the health system. IU Health offers several health plans, including Medicare Advantage coverage and commercial coverage for health system employees. "It is a factor that we definitely looked at when siting our urgent care centers," he says.

Steve Sellars, CEO of Premier Health and president-elect of the Urgent Care Association of America board of directors, says the partnership between IU Health and Premier Health is based on a model that his company has perfected over the past 16 years.

"First," he says, "we focus on efficient operations—putting processes and procedures in place to operate an efficient model that ultimately results in lower patient wait times and higher patient throughput. Second is building customer loyalty. Third is setting the right financial projections." Sellars notes that several factors impact whether an urgent care center can generate sufficient revenue to sustain operations, including "payer strategy," patient volume, and costs such as staff, supplies, and equipment.

Patient volume looms large over the financial viability of urgent care centers, Sellars says. "At the end of the day, we have to have enough people walking through the door. … The average reimbursement is in the $120–$125 per visit range, which is significantly lower than reimbursement in the emergency room, which is in the $700–$800 range. Urgent care is high-volume, low-margin."

Premier Health's urgent care model features joint ventures with health systems and hospitals that have strong brand recognition, he says. "Most of our urgent care partners are hospitals with established brands in the communities we want to serve. We try to utilize the hospital brand; that is definitely part of our strategy."

In addition to capitalizing on the patient volume that urgent care centers can generate when the facilities operate under the banner of a strong health system or hospital brand, joint ventures have helped Premier Health to expand its footprint. "Each time we open an urgent care center requires a significant financial investment," Sellars says, noting the start-up costs include equipment, supplies, and the "build-out" of the clinic space. "Our partnerships involve sharing of capital expenses and other costs, which is beneficial to us versus going it alone."

The cost to open an urgent care center ranges from $500,000 to $800,000, he says, with the cost level depending mainly on whether a facility is sited at an existing retail property or requires construction from the ground up. "If you're including the construction cost for a new building, the number is going to be on the high end."

Premier Health assesses the financial standing of potential health system and hospital partners before entering any joint venture, Sellars says. "We partner with health systems that demonstrate a financial position of strength. If you are building a network of centers, you want to make sure that each of the partners has the wherewithal to follow through."

Most of Premier Health's joint ventures are 50-50 deals based on a "partnership agreement" that establishes a governance board with equal representation, he says. "In 16 years of operating partnerships with health systems, we never have had an issue that had to go to a tie-breaking vote, knock on wood. That goes to the front end, and making sure there is alignment with the partners to begin with."

Like McNeeley at University Hospitals, Sellars says there are financial metrics for urgent care centers that are relatively easy to monitor, such as patient volume and expenses, and financial impacts that are much harder to quantify.

"More generally, we look at the impact on the health system beyond the bottom line. How are we improving access to care? How are we improving our partner's brand name recognition? Are we alleviating emergency room overcrowding? Are we helping prevent readmissions at the hospital? Is there better coordination of care to help keep patients out of the ER? Then, because most health systems are self-insured, you start getting into things like cost savings for health system employees."

Reprint HLR1115-6