The growing investment opportunity in urgent care

Traditionally, primary care physicians (PCPs) have played an integral role in patient health, with many families maintaining long-lasting relationships with the same PCP throughout their lifetime.

This primary physician served as the main point of contact for preventive health advice, administering treatment, and making specialist referrals as needed.

Fast forward to today.

While PCPs continue to play a significant role, the number of PCPs is steadily decreasing due, in part, to medical students pursuing specialties instead of general practices/family medicine. Additionally, more junior medical professionals are choosing to pursue urgent care opportunities that offer a healthier work-life balance as opposed to long, overnight shifts in the emergency room or the burden of constantly being on call. As a result, urgent care is attracting some of the most talented medical professionals and, in turn, offering patients access to higher quality care. Poised for tremendous growth, urgent care is currently an $18 billion industry that is expected to grow by 5.8% in 2018, according to the Urgent Care Association of America.

At NewSpring, we are witnessing this growth firsthand through our recent investment in Philadelphia-based vybe urgent care. Prior to partnering with vybe, we thoroughly explored the market and the urgent care model, and we believe there are many reasons the sector will continue to expand. Here are a few:

Evolution and Sophistication
Historically, urgent care facilities were not a desired option for treatment and were typically only considered as a last resort with sub-par facilities. However, increasing competition and demand from both patients and payors fueled the industry’s expansion. As the growth continued and competition grew, facilities evolved to become more sophisticated in order to attract and retain patients. This ultimately led to the consumerization of urgent care and, in turn, improved facilities and created more options for patients, which contributed to competitive offerings and better overall service.

Another aspect of the evolution of urgent care is their commitment to the continuum of care. The most sophisticated urgent care facilities work cohesively with PCPs, hospitals and other healthcare specialists to provide patients with an optimal care experience. For example, the sharing of medical records at each point of care helps to ensure that patients are receiving the exact care and follow up they need, when they need it. With urgent care facilities fully equipped to manage a patient’s basic health needs, hospitals and PCPs can better focus their time and efforts on patients with serious or chronic illnesses. This also helps divert patients from emergency rooms that currently see patients for non-emergencies which, in turn, helps to manage healthcare costs and over-crowding. In fact, some health insurance companies have even stopped covering costs for patients who visit the ER with non-life-threatening issues, while at the same time expanding their coverage for urgent care services. As a result, urgent care facilities are now helping to fill the cost/care gap by providing patients with a more cost-effective and timely treatment option.

On-Demand Access and Convenience
One of the most attractive traits of urgent care facilities is that they enable patients to be seen in a prompt and coordinated manner. The ability to receive immediate, quality treatment without having to make an appointment has transcended the traditional care model. For example, patients with common ailments such as the flu or a sore throat, no longer need to wait days before seeing their PCP. They can simply walk into the urgent care for an examination and walk out with a prescription and, in some cases, medication to treat their condition. Additionally, most urgent care facilities have longer hours of operation than primary care practices – some are even open 24 hours a day – making them more attractive to people with demanding schedules.

Millennials and Baby Boomers
The on-demand access makes urgent care facilities popular among the Millennial generation, which makes up about a 25 percent of the U.S. population. According to a recent annual Benchmarking Report from the Urgent Care Association and Merchant Medicine, Millennial consumers were identified as a driving force behind on-demand healthcare growth. Unlike previous generations, many Millennials do not form strong relationships with a specific PCP, largely due to longer wait times and the increasing options for on-demand care. For them, healthcare is transactional. In this world of on-demand technologies, urgent care is an effective way for Millennials to receive efficient and effective care with no strings attached. The most sophisticated urgent care facilities understand this and are putting significant emphasis on patient engagement and user experience to remain competitive and attract Millennials. For example, digital health tools are becoming increasingly popular in urgent care settings. These positive experiences will likely continue to influence aging Millennials’ decision to seek urgent care treatment for the foreseeable future.

However, it’s not just Millennials driving the growth of urgent care. Baby Boomers are also playing a significant role. As an aging population with increasing medical needs, Boomers are continuing to put more pressure on health systems across the board, including urgent cares. As their longtime PCPs become increasingly busy and less readily available, Boomers are turning to urgent care facilities for same-day appointments and the quality care needed to manage their day-to-day medical requirements. At more than 70 million strong, this population is sure to continue fueling urgent care demand.

Moving Forward
When it comes to evaluating urgent care facilities as a potential investment, there are a few different business models to consider, including standalone locations typically owned by a physician; sophisticated and recognizable brands or established chains; and facilities owned by health systems. Additionally, it’s important to understand that, compared to other healthcare facilities and practices, urgent care facilities follow a more retail-model due to the amount of competing convenient care options. Healthcare has always been the focus of doctors and insurance, as the patient has never had leverage or power in the system. However, now with urgent care, the patient has the power to choose which urgent care to visit. This sector is a timely representation of a trend where healthcare has truly become end-user focused. For this reason, facilities must remain competitive to attract patients – making accessibility, patient experience, and efficiency crucial elements across the urgent care spectrum. Prospective patients are carefully weighing their options when deciding on which urgent care practice is right for them, so it’s vital that potential investors partner with an urgent care company that can most effectively cater to patients’ needs.

In the coming years, we anticipate urgent care facilities will continue to reshape how people receive their care, and are optimistic about the exciting new investment opportunities on the horizon.
Kapila Ratnam is Partner at NewSpring and NewSpring Healthcare, which partners with management teams to accelerate the growth of differentiated healthcare companies across the technology-enabled healthcare services, niche clinical providers, and specialty pharmaceutical sectors, delivering capital for growth, recapitalizations, and mergers and acquisitions. Kapila can be reached at kratnam@newspringcapital.com.

© Copyright ASC COMMUNICATIONS 2019. Interested in LINKING to or REPRINTING this content? View our policies by clicking here.

 

Top 40 Articles from the Past 6 Months