The bottom line: Urgent-care medical clinics, desirable tenants for mall owners, are a growing segment of the medical retail industry.
By Doni Bloomfield
January 08, 2015 – As retailers struggle to keep up with changing shopping trends, mall operators across the U.S. are looking to fill spaces left empty by the likes of Sears and RadioShack. One promising new group of tenants: walk-in medical clinics, staffed by doctors who can treat common ailments such as pink eye and minor injuries like sprains and burns.
The clinics—regional chains such as City Practice Group of New York and national ones like Concentra, the largest urgent-care organization in the U.S.—are a growing segment of the medical retail industry, says Scott Mason, executive managing director of Cushman & Wakefield’s health-care group. There were 9,400 walk-in clinics in the U.S. in 2013, according to the Urgent Care Association of America, a 20 percent increase since 2009. A little more than a third are located in strip malls and shopping centers.
For mall owners, urgent-care clinics make desirable tenants. Dave Henry, chief executive officer of Kimco Realty, a mall operator in New Hyde Park, N.Y., says clinics often pay higher rents (about $25 per square foot), have better credit, and tend to sign longer-term leases. In 2014 his company signed 40 medical clinic leases, an increase from the 34 it signed in 2013 and 27 in 2012. “For us, as a large landlord of lots of shopping centers, it’s nice,” he says.
Demand is driven by patients who don’t have a regular doctor or can’t get a last-minute appointment with one. Instead of an overcrowded hospital emergency room, they visit a walk-in clinic. The clinics “look for retail outlets with high visibility, high traffic patterns, and signage capabilities,” Mason says, an approach known as the Blockbuster strategy, after the video rental company that wound down last January, because its shuttered retail locations often suit the needs of mall clinics.
Palisades Urgent Care, now owned by City Practice Group, moved into a former Blockbuster in a Kohl’s shopping plaza in Nanuet, N.Y., in November 2012. No appointments are needed at the location, which is open 365 days a year. It’s one of 39 clinics operated by the company. “We see those [outlets] as opportunities to fill a void,” says Nedal Shami, City Practice’s chief operating officer and a doctor.
Concentra, owned by the health insurance company Humana, runs 290 clinics in malls and shopping centers, as well as at standalone locations. The clinics offer routine physical exams, vaccinations, and more specialized treatment delivered by board-certified doctors, registered nurses, and physical therapists.
Hospitals also run mall clinics, which alleviate the demands on their emergency rooms and feed patients into some of their doctors’ practices. Vanderbilt University Medical Center is building clinics in retail settings throughout the Nashville metro area. Its expansion was inspired partly by the hospital’s first major move off its main campus, when Vanderbilt took over a large portion of Nashville’s first enclosed mall, One Hundred Oaks, to house dozens of specialty clinics in 2009. “We’re trying to decamp those patients that truly don’t need the emergency room care to facilities that can give them the quality of care that they need,” says Janice Smith, chief administrative officer of the hospital’s off-campus system.
The average center sees about four patients per hour over a 12-hour day, says Steve Sellars, a board member of the Urgent Care Association and CEO of Premier Health Urgent Care, which manages 30 clinics. “Based on our experience, the [patient] volume continues to grow for two to three years and then it stabilizes some,” he says. Sellars says his company expects to add 30 to 40 clinics over the next five years.
The more than 10 million people who gained insurance under the Affordable Care Act are boosting demand. Some ACA plans offer cheap monthly premiums in exchange for high deductibles for emergency room visits. The average cost to the patient of treating a sore throat at an urgent-care retail clinic in 2013 was $94, according to CareFirst, a health insurer in Maryland; the same treatment in an emergency room cost $590.
Private equity firms and venture capitalists have taken notice of the growing demand and have poured more than $3 billion into urgent-care clinics since 2010, according to PitchBook, a research firm.
Growth is not yet outpacing demand, but, says Kimco Realty’s Henry, the “danger in general is that they’re building so many of them, and there could be a little bit of a shakeout over time.” Says Paul Wexler, head of health-care properties at Corcoran Group: “The jury is still out on whether the economics works out in every location.”