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The Challenges Faced by Independent Urgent Care Operators

Understanding the Market Forces at Play, Addressing the Challenges, and Developing Long-Term Strategies for Sustainable Growth

Part I in the Series

Many independent urgent care operators discover early on, and after significant investments are made, that they may not have a real clear business strategy or roadmap to build long-term value for their business; a strategy that will ultimately lead to a successful and lucrative sale down the road.  Even though their centers may be highly profitable today, they are concerned about the financial risks associated with opening new centers.  Yet they recognize that they need to grow in order to maintain market share and to maximize their return on an eventual sale.  In the end, many independent operators are understandably concerned about the inherent risks associated with urgent care and the current state of the urgent care market in general.   Some of their concerns are as follows:

• Growing competition from hospitals, health systems, large medical groups, national urgent care operators, franchise-based operators, insurance-physician joint ventures, and private equity-backed operators who are encroaching into local markets.
• Consolidation in the industry, which ultimately results in fewer, but much larger urgent care operators that have a competitive advantage simply due to their size.
• The prospect of declining reimbursements when an operator is too small to become a “preferred” provider in a carrier’s network.
• The financial risk associated with opening a new center that does not generate the patient volume originally forecasted.
• Increased costs associated with high deductible plans, investments in new technologies, and the cost associated with participating in new value-based reimbursement models.
• Difficulty attracting and retaining physicians.

So how does a small independent operator compete in a market where the competition is generally much larger with greater access to capital and resources?  Recognizing that size does matter in today’s world of healthcare, operators need to be able to open new centers over a relatively short period of time.  This is necessary in order to increase patient volume, grow earnings, and to maintain market share in a particular geographic area.  However, operators fully understand the financial risk associated with opening new centers; whether it is the risk of losing invested personal capital or the risk associated with personally guaranteeing additional debt.  The real question that independent operators need to ask is:

“How do I continue to grow while at the same time mitigate my risk?”

The Super MSO (Management Service Organization) model, which will be discussed in Part II of this series, can potentially provide for this type of growth and at the same time mitigate risk.  A Super MSO can provide opportunities for a group of operators to start collaborating and developing comprehensive long-term business strategies together, as well as, to begin sharing financial risk.  The Super MSO model can also allow operators to reach that “critical mass” sooner; in other words, to reach that critical number of centers that would make them more attractive to a potential buyer.  Other potential benefits include the opportunity for operators to invest together, greater access to financing and capital markets, sharing of overhead/economies of scale, and greater leverage with managed care contracting.

If you would like to explore possible solutions to the challenges faced in your urgent care practice and/or need assistance in developing long-term business strategies, please contact one of the partners in Gettry Marcus CPA’s health care group who can assist you and provide the necessary guidance.

Gettry Marcus CPA, P.C.’s health care group is comprised of CPA’s who provide accounting, tax, audit, financial, and business consulting to physicians, hospitals and other providers across the health care spectrum.  If you would like to discuss how one of our health care CPA advisors can assist you, please contact Lee Ferber, CPA.

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