On the Rise: The Urgent Care Center Market is Expanding, and Key Players Want In
Unless you have been living off the grid, you are aware that there has been an explosion in the growth of urgent care centers across the United States over the past 5 years. That growth is being driven by many factors such as: the push to reduce the ER utilization rates by creating alternative sites of service for episodic medical treatment, the need to shorten the wait time for primary care and the overall consumer-focused demand. According to the Urgent Care Association of America, the number of Urgent Care Centers (UCCs) in the US has spiked to over 9,000. Blayne Rush, a healthcare investment banker and publisher of the Ambulatory M&A Advisor, says that almost one new center is opening up every day.
“Urgent Care is here to stay and is a winner on many fronts, regardless of what eventually happens with the payor system,” Rush says. “It is a better patient experience, quicker treatment times and many times a one-stop-shop for many issues.” However, the market is very fragmented and has many operational inefficiencies. With such a big expansion in the urgent healthcare market, it begs the question: who’s buying and investing in them, and what are they looking for in an Urgent Care Center business?
Hospital Health Systems
As we all know, there has been an ongoing battle for access to patients in most markets. Hospital health systems are in the middle of that battle. They are looking to expand their markets and get to the patient first, as well as a patient entry point. With UCCs, hospitals can expand their reach to patients who normally don’t think about their system by investing in, or buying, urgent care centers in extraterritorial areas of their markets. By buying UCCs, smaller hospitals can expand their size and services, and larger ones can continue to make their presence and brand known. If multiple centers are owned and operated by very respectable and influential physicians, hospitals will be interested. A hospital can buy a busy urgent care center that has a very solid management system and replicable model, and use that model to grow their business. Additionally hospital health systems have invested in the urgent care business in a combination of reasons such as the intellectual capital, the patient flow, the return on investment, etc.
There are currently no true national urgent care management companies. There are mostly regional players or have a presence in about half of the states. They are interested in single UCCs or clusters of centers in strategic locations to increase its revenue by growing patients and profit margins. The larger companies are typically backed by a financial sponsor that they need to satisfy though financial growth. They can accomplish this by investing in businesses that they can grow the patient volume, decrease the inefficiencies and grow the profits, as well as by buying a UCC that has a great cash flow. As the industry develops, more ownership and management models will form. Buying and co-managing a UCC with physicians and/or hospitals may become a more attractive and more profitable option in the future.
Private Equity Groups (PEGs) are interested in buying UCCs because of the consolidation opportunities, inefficiencies and the industry’s growth, as well as the fact that urgent care fits the “increase access, increase quality and decrease cost” model. Typically, PEGs are paid on a two-and-20 basis. They get paid 2% of the amount under management and 20% of the growth. The life span of an investment is 10 years, with the average investment lasting six years. So PEGs have four years to invest their money for the remaining six years. After that time is up, they will flip the business to another fund under management, sell it to another financial sponsor or go public with it. There are many businesses included in each fund, so they take a portfolio view of the investments. That view shows the entire performance of the fund, not just the performance of one company. The urgent care business presents growth opportunities that can prove very lucrative for the PEG financial growth plan.
Private equity firms love the UCC market. However, there are not enough platform targets. Private equity groups want businesses with high EBITDAs. You and your business can pique the interest of many PEGs by having between $2 million and $5 million in EBITDA. If you’re bringing in more than $5 million, PEGs will start to compete for you so long as your have other desirable attributes like a strong management team and ideal location. Many PEGs want to acquire a strategically-placed cluster of centers and then consolidate smaller regional or specialized players by de novo development. PEGs prioritize a high EBITDA, but there are exceptions. As mentioned above, PEGs will also invest in a UCC if there is already a strong management team in place and the location is ideal, even if the operational cash flow is low. Vice versa, if the EBITDA is high but there isn’t a strong management team, PEGs will hire a CEO and have executives in waiting.
Physicians, as buyers, are typically looking to buy a business that they can expand upon. Urgent care Centers that are generating little to no profits can be bought by physicians looking to extend their practices. Another good target for a physician buyer would be a current center owner/operator that needs to relocate and make a fast sale. There is also interest in UCCs from larger groups that span an entire state or multiple states. Traditionally, sellers of niche platforms don’t look at physician practices as potential buyers, but think about the large, national or regional physician practices that own and manage practices across multiple states or across the US. For example, if there was a large medical practice that was made up of pediatricians, they’re more than likely backed by a financial sponsor that they have to show financial growth to. One way to do that is to buy a pediatric-focused urgent care platform, which is a cluster of pediatric-focused urgent care centers that has a management team in place that understands how to grow and expand pediatric urgent care centers. They would buy that platform then roll it out to other geographic areas that they currently have practices in and grow it alongside their physician practice as their growth strategy.
Everyone has probably heard of insurance companies wanting to invest in the urgent care platform. The concept of payors buying and owning UCCs is not new, but they are becoming more active. This is because payors can use UCCs to secure the lowest cost possible for services. Operational efficiencies and cost savings are the goals of payors. Other potential buyers include ambulatory surgery centers, outpatient healthcare networks and even colleges/universities. In the future, we could even start to see employers or groups of employers owning urgent care centers. Self-insured businesses would also be interested in a UCC for the same reasons as payors – operational efficiencies and cost savings, as well as workforce efficiencies.
As the UCC market expands, the competition for ownership of UCCs will heat up between physicians, businesses and other companies. However, this competition will have a positive impact on all players involved. Physicians can expand their practices and reach, caring for more patients and a wider variety of patients. Private equity groups and management companies can improve the quality of UCCs through their growth strategies, and hospital health systems can catch the attention of patients that normally wouldn’t consider their market. Patient costs can also be reduced due to the increase in the number of payors buying UCCs. Overall, both the buyers of UCCs and the patients win – operational costs and service costs for the buyers and patients decrease, while workforce efficiencies increase due to effective growth strategies and expansion.
It is not quite easy to receive funds through other external resources, generally to deal with soundness care needs. Very popular penicillin antibiotics that fights bacteria. These drugs does not treat a viral infection like a common cold. Kamagra is a cost efficient remedy for helping men to sustain an erection. What about online cialis and cialis online? When you order medications like Kamagra you have to know about how to buy cialis safely. Other question we are going to is undefined. Like many other medicines, Kamagra is also secret according of it’s active element. Keep reading for a list of medicines that may cause soundness problems and what you can do to prevent probable side effects. The most common potentially serious side effects of such medications like Kamagra is back pain. This is not a complete list of feasible side effects and others may occur. Internet is a ideal way to find a physician in your area who treats this kind of malfunction.