The Future of Urgent Care
Those of us in the on-demand medicine space all face a daunting challenge. Our industry attracts a mass market of consumers who have much higher expectations from their experience, the same expectations they have of retailers like Starbucks, Amazon or Target. We also face a crowded market of large and small players and much greater saturation, especially in urban and suburban markets.
But at the same time, on-demand medicine represents a starting point to change the culture and ultimate patient experience for the entire healthcare industry. And that is an exhilarating opportunity!
When I lead on-demand medicine strategic alignment sessions, I am often asked if investment dollars were available for only one option, what’s the best choice: retail clinics, urgent care or telemedicine? And between the lines I’m sensing that there is growing unease around the future of urgent care medicine, most likely caused by fear of disruption by other modes.
RETAIL CLINICS IN A SLIDE
During the Walgreens Boots Alliance fourth quarter 2019 earnings conference call in October, Alex Gourley, president of Walgreens and co-chief operating officer of Boots Alliance, announced the company was exiting the management of its own retail clinics. The result will be the closure of 157 clinics that had not yet been transferred into health system partnerships. There are now around 220 clinics operated by health systems inside Walgreens stores.
At the same time CVS Health has virtually stopped opening any new MinuteClinic locations and they are in the middle of piloting a whole new concept called HealthHUBs. This new concept is a major pivot away from limited-scope retail clinics toward primary care and chronic disease management. Aetna, CVS Health’s health insurance acquisition, will likely supply the bulk of HealthHUB’s early patient populations.
This news about retail clinics should not be a surprise, as evidence had been building for years that it is virtually impossible for these limited-scope clinics to achieve an operating profit. And the notion that health systems can operate these at a profit when highly competitive and sophisticated companies like Walgreens and CVS Health cannot, is a complete head-scratcher. There aren’t many health systems doing this, but there are enough to pose the question: Are they doing this to lose money intentionally, somehow making it up through creating access, achieving higher visibility, and being more consumer friendly? We are heading to a healthcare economy where no health system can afford to lose money on any service line.
What is it about these clinics that make them so difficult to operate profitably? Here is some context and fair warning for those who might have an interest in getting into this business.
LIMITED SCOPE
When you hear the term limited-scope clinic, it means the footprint, equipment and expertise of the provider limit the scope of care you can provide to patients who walk through the door. That may sound simple enough, but the implications are significant, not just for the retail clinic model, but for the telehealth model as well.
First, the limited scope means you are reducing the available market of visits per 1,000 people per year. In other words, there are only so many strep throats, coughs, ear infections and UTIs to go around. And it turns out the vast majority of visits that fit this scope are upper respiratory in nature, so they occur during the months of December, January, February and March. The rest of the year is a struggle. For telehealth platforms aimed at simple illnesses, the available market is even less since there are a number of these illnesses that require an in-person lab test such as a urine dip or throat swab.
NOT LONG FOR THIS WORLD
If it’s not obvious by now, when our health system clients approach us for an option, we at Merchant Medicine are not big advocates of the retail clinic service line. At first it seems like the progressive thing to do. It’s retail; it’s consumer friendly; it’s focused. But when you peel back the available market for these specific visits, it doesn’t translate into a viable business model. You can achieve the same or even greater level of service through an urgent care platform, and provide a positive operating contribution to your health system.
GO WITH URGENT CARE
So my answer to the investment dollars question is that I would choose urgent care hands down.
The question is critical to strategic planning because with inpatient revenue declining over the next 10 years, health systems will no longer be able to afford many “loss leaders” with their ambulatory side of the house. Many practice management leaders now believe that if a service line can’t have a positive operating contribution to the mission, either it needs an overhaul in its management and operations, or it should be dropped from the portfolio.
My logic around choosing urgent care falls into two general areas. First, the hard data, such as the positive operating contribution, potential for higher patient volume, and the clinical requirements for an in-person visit. And second, the soft data, such as control over your leased space, avoidance of cannibalizing your own service lines, avoidance of patient confusion and a patient’s need for predictability.
PROFITABILITY
Have you noticed that there are no private equity investors in the retail clinic market (and never have been)? Have you noticed private equity money continues to flow into the urgent care market? Private equity firms are the primary driver of growth in this market. And private equity dollars do not chase business models that lose money.
The urgent care model has a wider scope of service, including x-ray, suturing and labs. Some are connected to medical office buildings where there is the capability to go higher on the acuity scale, with CT, MRI and a host of specialties and subspecialties. That means less seasonality. And that means more patients on an annual basis. The urgent care market has averaged at least 10 percent annual growth for the last 20 years.
If you are losing money with your urgent care platform, you likely have some fundamental operating issues, such as down coding, overstaffing, poor workflow, unpredictable hours, lack of mobile access to wait times and queue management, and overall poor financial and operating tactics.
BRICK AND MORTAR
As mentioned earlier, there are certain patient ailments that, at least for now, require an in-person visit. A sore throat requires a throat swab. (If you argue that’s not the case, you are probably violating current literature around overuse of antibiotics.) Lacerations require suturing. Muscular/skeletal injuries require imaging, as do severe coughs with fever. The list is longer than what I’ve included above, but the bottom line is an in-person visit means brick and mortar (versus a virtual visit). I don’t see this going away anytime soon. Urgent care is the sweet spot for all of these visits.
PREDICTABILITY OF A WIDER SCOPE OF SERVICE
As I mentioned, a wider scope of service means more patients on an annual basis, and less seasonality. But it also means fewer patients being referred out because their chief complaint doesn’t fit within the scope of services. And that translates into predictability for your customers.
When retail clinics first emerged, the urgent care community felt threatened. But it wasn’t long before urgent care operators started opening centers across the street from retail clinics because there were so many referrals from providers who felt the patient presented out of scope. When a patient goes through the trouble of driving to a clinic, registering and waiting to be seen, only to be told their chief complaint is out of scope, they won’t return. The next time they need to choose a clinic, they typically choose an urgent care center. It’s simply more predictable.
Add to this scope of service problem the fact that inside a grocery store, some customers find this to be a non-sequitur. In other words, they feel a little uncomfortable with sick patients walking into a store that sells food. They picture children who are running a fever running into the store and touching fruits and vegetables as they make their way to the retail clinic. It’s one reason we see grocery store retail clinics fail at an even higher rate than those inside drug stores.
CONTROL OF YOUR SPACE
Probably one of the most visible signs of increasing sophistication around urgent care is in the commercial retail space you now see these centers popping up in. Some are part of in-line retail developments. But more and more are stand-alone buildings on pad sites alongside other well-established retail brands. These urgent care operators have control over their leased space. In contrast, retail clinic operators are at the mercy of the retailer who hosts the retail clinic space. Where they put you in the store, how much signage they give you inside and outside, rack cards at checkout, lease rates, hours of services, scope of services are all a part of your negotiation with a large retailer. Exterior signage is the biggest issue because municipalities limit the amount of signage that can go on the outside facing of a retail store. The retailer will take most or all of that signage space. Furthermore, the store manager in a retail store, particularly a big box or grocery retailer, has a wide array of competing merchandise categories. A retail clinic is not strategic among those categories. So when it comes to getting more space, cooperative marketing, or even cleaning floors or fixing damaged walls, the retail clinic falls to the bottom of the list. When you lease your own space, you have a lot more control over all of these issues.
COMPETING WITH YOURSELF
Ultimately, many health systems have exited the retail clinic business in favor of urgent care for three reasons, all of which relate to cannibalization. First, if you operate urgent care and primary care offices, your retail clinics are taking visits away from those other lines of service.
Second, you are creating one more option for patients to sort through when choosing the appropriate option to match their issue. Look on any health system website where they offer retail clinics, telehealth, urgent care, primary care and emergency services and you will almost always find a complex matrix that is supposed to help a patient figure all of this out.
And finally, as if provider recruitment wasn’t difficult enough, you end up with one more line of service that competes for a very limited and expensive supply of providers. When a service line isn’t profitable and creates confusion for patients, why would you add to the misery by taking providers out of the pool to staff a retail clinic?
WHAT ABOUT TELEMEDICINE
I mentioned earlier, I’m sensing that there is growing unease by the urgent care community around telemedicine in the same way they felt threatened by retail clinics in 2006. It’s only logical to be concerned about disruption when it comes to new technology.
But my view is that telemedicine platforms aimed at simple illnesses is nothing more than a shiny new object. It hasn’t taken long for operators of these expensive platforms to voice disappointment. Applied to the acute episodic illness space, telemedicine has all of the same potential for lack of acceptance, confusion, unpredictability and saturation that retail clinics have had.
I remember when I was in the tech field we had a saying for technology that went off the rails: “An amazing solution for which there is no known problem.” Some who work in the telemedicine space are guilty of promoting such solutions. That’s not to say that some telemedicine applications ARE amazing solutions for which there IS a known problem, such as rural health access, the lack of mental health professionals for teenagers, or teleICU applications.
There is too much capacity addressing acute episodic illnesses. The scope of services for remote diagnosis of acute episodic illnesses is even more limited than retail clinics. Reimbursement is still low or unpredictable. And there isn’t an infinite number of visits that fall into the acute episodic illness category. So if you are about to spend $100,000 or more on a telehealth platform aimed at this acute episodic space, pause and look at the data.
THE ACUITY QUESTION
If I have managed to convince you that urgent care is the best option when looking to the future of on-demand medicine, the next issue is where on the acuity spectrum you design your urgent care platform. There is clearly a fork in the road around this question. We now have low-acuity urgent care platforms, usually under a joint venture between health systems and private operators, with a mobile C-Arm x-ray. Suturing is limited by the skill of the provider on duty. Chest pain is out of the question.
On the other hand, there are many urgent care operators, particularly among hospital operators, who are designing their scope of services – and thus their provider and equipment model – around higher acuity and decanting the emergency department (ED). This is intentional, especially in markets where population health is the dominant model. Higher acuity means a wider scope of service. A wider scope of service means a larger available market. A larger available market means higher patient volume.
However, if you venture into the high-acuity space, you must have a staff that not only is skilled in the clinical aspects of high acuity, but also a staff that works as a team. A fast pace is critical, not only because you will see cases that require rapid response, but because you will see a lot more patients who demand fast service.
OUR MOMENT TO SHINE
Which leads us back to the daunting challenge. In the on-demand space, our patients are now much more sophisticated customers in that they expect the same experience from us as they do other retailers and hospitality organizations. This is our moment to shine and take the rest of healthcare with us!
This industry started in the 1970s and is still going strong. There is no data to suggest the growth curve is going to change anytime soon. Healthcare consumers are hungry for the things that urgent care medicine provides: convenience and quality at a fair and transparent price. This is a great place to foster change throughout the healthcare ecosystem. More than anytime, this is urgent care’s moment to shine.
