Urgent Care: Exits and Entries

As a newly elected member of the Urgent Care Association Board, I wanted to give my perspective on why the big players like Walmart and CVS are exiting or dramatically cutting back on urgent care. As I wrote this, it really became a "how to make urgent care centers successful" article. I'll give away our "secret sauce" below.

So is urgent care viable? What is the future of the industry? Here is a good article that highlights some of the challenges of the industry and here is why I think Urgent care will be the "front door" of healthcare. Urgent care is much more important to our healthcare ecosystem than most people realize; it's not going anywhere, but it is going to need to transform.

Urgent care is a very simple business model that is insanely hard to implement well. A recent partner of ours asked me, "how are your clinics profitable on such a low reimbursement?" This partner had exited urgent care in the same state and was curious how we succeeded where they had not.

Well, of course, that is top secret, super complex and very confidential; at least I wish that we true. It is simple, just two metrics matter and I will let everyone in on our "secret strategy for success."

The financial part of it boils down to one metric: visits per clinic per day (VPCPD). That is it. Have enough visits, you make money, don't and you don't. Of course rate matters (and I agree we need CMS and others to give us higher rates), and costs matter, but both of those are slow moving and not in our operational teams' day-to-day control. Every single day it is, "how many visits did we get?" Have you ever been into a clinic in a retail pharmacy? Crickets. If an urgent care center is not busy, it's dead no matter what the rate or the costs.

This matters because each clinic makes a bet on how many teammates it will take to staff the clinic each day. All the other costs are fixed or immaterial. After the bet is placed, teammate wages behave as a fixed expense for the day. Every patient that walks through the door is incredibly high margin at this point. Once you cover your fixed teammate wages for the day, every other patient pays for the longer-term, fixed overhead. Get above a certain number of visits per clinic per day and you make money, don't and you don't. Any clinic can make money with enough visits per day.

And how do you stay busy? Keep your patients happy. And guess what, that also boils down to one metric: door-to-door times (D2D). That is it. Get customers in and out fast and they are happy. Take a long time and they usually don't come back. We focus on it and our company wide NPS is 79. At some of our clinics, it is over 90. That is world class.

Our teammates are amazing, but if a patient sits for 2 hours, they are pissed, no matter how amazing our teammates. Don't be rude and do be fast and the patient is almost always happy. Same with the quality of the facility, it doesn't really matter above a certain threshold. D2D times are what patients REALLY care about.

And that is why urgent care is HARD. These two metrics constantly push against each other. More visits can mean longer D2D times. We want more visits AND shorter D2D times. If the D2D times get too long, it doesn't just wear on the patients, it wears on our teammates. They want happy, satisfied patients; the patients are already sick and most likely not in the best mood; our teammates don't want to get yelled at because it is taking forever to get seen. If D2D times spike, things fall apart quickly.

So underneath these two simple metrics is where the complexity lies. To be successful, an urgent care company has to have great leaders, good marketing, competent teammates, quality care, offer a broad variety of services (not just super low acuity) and decent systems that can help the leaders and teammates manage this tension in real time. At NextCare, we work hard at this.

Everyday, our leaders are balancing VPCPD and D2D times. We are working on doing a better job of providing the systems, tools and support to make the care as efficient in the clinic as possible; we want to take the burden off the leaders and teammates so they can focus on clinic flow and caring for our patients (tbh we have a lot of improvement to make here).

The overall market trends in the near term are troubling. Rates have risen much slower than costs. In addition, in many markets companies are building way too many brand new clinics which is resulting in too much capacity.

This increased capacity will mean fewer VPCPD. D2D might will be great, but there just won't be enough patients to go around. The market will fix itself because some urgent care centers won't be able to innovate, market or grow their way through the change.

The big players just haven't been able to figure it out and are deciding the "juice isn't worth the squeeze." When they fail, the visits go to the survivors and VPCPD will rise. The big players pulling out is just the first step in what I think will be major structural shifts, including consolidation, in one of the most dynamic, fragmented, important parts of healthcare.