Tuesday, May 16, 2017 | Posted by: Crain’s Chicago Business | Urgent Care Association of America
Immediate care clinics offer more than just speedy stitches and X-rays. For several Chicago-area health systems, they also provide a quick path to growth, so regional hospitals are doubling down on them—and spooking private players that have dominated the local market to date.
“The health care systems have been a little slow to grow in the city,” says Sarah Cogswell, a senior vice president in the health care practice of real estate firm Jones Lang LaSalle. “But as millennials continue to drive population growth, the systems are responding.”
Historically, hospitals have tried to increase referrals to their affiliated specialists—and therefore their own bottom lines—by opening primary care practices. Now, though, more hospitals are looking to drum up business through urgent care, which introduces relatively healthy people to their networks at a fraction of the cost of hiring family docs.
Visits to urgent care centers increased 19 percent from 2010 to 2015, according to a study by Accenture. Right now, Chicago proper offers 37 immediate care clinics, more than double eight years ago, according to JLL, which increasingly represents health care systems as they expand and gobble up new space. All but nine are private; the private clinics are run by such players as MedSpring Immediate Care of Austin, Texas, and Concentra Urgent Care, headquartered in Addison, Texas.
Private companies dominate the national market, too, owning about three-fourths of the more than 7,000 quickie clinics across the country. In Illinois, there are 196 immediate care centers in all, about two-thirds of which are private, according to the Urgent Care Association of America, a Naperville-based industry group. Though the niche has already experienced a decade of explosive growth and investment, health system leaders say they’re still bullish.
“We do think there’s going to be continued growth in the immediate care format,” says Scott Powder, Advocate Health Care’s chief strategy officer. The Downers Grove-based health system operates 22 stand-alone immediate care centers in metro Chicago, plus 56 retail clinics inside Walgreens stores.
The clinic business model is straightforward and attractive: Treat as many patients with minor injuries and illnesses as quickly as possible—usually in 30 minutes or less. Patients avoid the chaos and eye-popping bills associated with the ER, while hospital systems skip paying for high-tech equipment, large buildings and lots of physicians. As far as cost savings go, many clinics weigh in at a slim 1,500 square feet, come equipped with X-ray machines but not CTs or MRIs, and staff physicians’ assistants or nurse practitioners.
The rising wave of consumerism in health care has pushed the immediate care market to $15 billion nationally this year, a 27 percent spike since 2011, according to Kalorama Information, a publisher of health care data in Rockville, Md. The number of urgent care centers across the country has increased 14 percent to 9,300 centers since 2008, according to the American Academy of Urgent Care Medicine in Orlando, Fla.
A typical immediate care center sees 294 patients each week, a number Kalorama predicts will grow for the next four years. Per-site revenue is expected to increase to nearly $1.7 million by 2021.
Hospital system executives are well aware of those attractive stats—and are racing to grab desirable locations near what industry consultant Thomas Charland calls “the slam-dunk”: dual-income parents with children who can’t disrupt their entire day to finagle a pediatrician appointment for a sick kid.
HOSPITALS ELBOW THEIR WAY IN
As hospital systems move toward a world in which they’re paid for the quality of a patient’s care rather than simply a fee-for-service, volume-based approach, they have increasingly implemented narrow networks. The premise is that such networks improve patient outcomes by establishing small pools of providers who score well on efficiency and quality measures.
That’s a problem for the private immediate care centers, because patients will be increasingly encouraged to visit a hospital-owned, in-network clinic for, say, stitches or a strep test. “With the emergence of hospital urgent care, a lot of the private operators will be on the outside looking in,” Charland says.
In Chicago, at least one private player is trying to avoid that fate by partnering with a health system. Physicians Immediate Care, based in Rosemont, linked up in 2015 with Presence Health, the state’s largest Catholic health system, to jointly operate 10 clinics in the Chicago area; it now runs 12. Dana Gilbert, Presence’s chief strategy officer, says via email that the joint venture creates more access points and lower-cost settings.
Despite the booming market here, the Chicago area isn’t yet approaching saturation, experts say.
Charland, who runs research consultancy Merchant Medicine out of St. Paul, Minn., tracks the number of clinics in an area and then divides it by 100,000 residents. Any city that scores above a 4.5—such as Louisville, Ky.—is deemed highly saturated. Chicago comes in at a healthy 2.6, assuming a total of 250 stand-alone urgent care clinics plus retail centers like the ones Advocate runs inside Walgreens.
“I think the private immediate care centers are probably closer to saturation than the health systems, but I don’t see the overall market as saturated,” says Cogswell. She says that while the private centers have historically acted like retailers, slipping into strip mall spaces or areas close to the CTA with lots of foot traffic, hospitals have cared more about suburban-style amenities.
In 2013, Northwestern Medicine opened five immediate care centers, in Glenview, Deerfield, Evanston, Lakeview and River North. Last June, a sixth followed in Vernon Hills.
Edward-Elmhurst Health and DuPage Medical Group, meanwhile, are duking it out for immediate care supremacy in the western suburbs. Edward-Elmhurst opened its seventh center, in Oak Park, in February. Downers Grove-based DuPage Medical, the largest independent doctors group in the Chicago area, will open its sixth quick clinic, in Bloomingdale, in June. The group also just received the thumbs-up from the Naperville City Council to build a 21,000-square-foot addition there. It will house the group’s seventh suburban immediate care outpost.