The "Saks Fifth Avenue" of Urgent Care?

I once heard a doctor describe his operation as the “Nordstrom” of urgent care. From “always please the customer” to “exceptionally great customer design”…perhaps a fantastically descriptive moniker to motivate staff. But there’s just one problem…insurance reimbursement.

Nordstrom, Saks, Neimans, et. al. sell a limited assortment of goods to a limited segment of the population at high mark-ups and thus, very profitably. "Nordy’s" was earning a 36% avg. gross margin pre-COVID. It's great for those who can afford to "splurge" but the reality is much of the population couldn’t wear the clothes even if they could afford them.

Walmart, by contrast, is a “mass” retailer known for "always low prices." People often mistake Walmart for being a very “profitable” company. 2% margins on food and 7% on general merchandise is not “highly profitable.” Walmart is just a very big company…a scale business that uses its buying power to muscle low prices from suppliers, then taking pennies in profit on billions of check-out scans. If Nordstrom were forced to operate at Walmart's margins, its operation would look very different.

Likewise, if urgent care could set its prices, perhaps it could be “Nordstrom” but the limitation in urgent care is insurance reimbursement. “Case rate,” which pays the same for a brief head/chest visit as for a time-consuming laceration repair, has led to a degradation of acuity in urgent care. Preventive care is often prohibited by payers and vaccines have become the domain of chain pharmacies. Whereas the early urgent care centers founded by Emergency Medicine physicians were truly "alternatives to the ER," over 10 years we've seen the workforce shift from highly-compensated and hard-to-come-by Emergency Medicine physicians, to Family Medicine physicians, to now much of the front-line patient care is by PAs and NPs. Urgent care today has a strong 80/20 rule where the top 10 diagnoses make up over 80% of what comes through the door. And less than 15% of patients receive an x-ray.

Given that labor is the highest operating cost and short wait times drive patient satisfaction…optimizing throughput is now critical. Centers that have embraced COVID19 rapid testing have learned how to move a lot of patients through quickly in a crisis. By definition, the focus on throughput makes urgent care more of a "scale" business.  Greater efficiency in terms of more patients per hour better leverages the cost structure while getting patients in/out quickly leads to more repeat visits. Thus, urgent care has turned to online queuing systems and e-registration technologies that help level ebb-and-flow throughout the day. Highly defined workflows including simplified charting technologies also drive backoffice efficiency.

Naturally, I anticipate offense from those who's operation I just compared to Walmart. This is by no means condescension...rather, I'm just pointing out an economic reality when price is a constraint. If urgent care could set its own prices in a fee-for-service model, we could cultivate a "high touch" business model more similar to Nordstrom. Walmart is not a bad thing. Walmart (NPS=62) and Nordstrom (NPS=64) actually rank similar in customer satisfaction. The expectations are just different. While a lot can go wrong in pleasing discriminating Nordstrom customers, Walmart customers are more put off by inconveniences like out-of-stocks and long check-out lines.

So, while we all aspire to “Nordstrom” service, as an industry we need to address the “case rate” problem.  There’s now more overlap of urgent care with telemedicine in terms of conditions seen than with the ER. But if we could get paid to do more procedures, more diagnostics, more observation…then urgent care would be better positioned to provide more personalized experiences…and the value being the further decanting of hospital emergency departments.