The Economics of Urgent Care Centers

As the U.S. health care system struggles with strained emergency room capacity, primary care physician shortages, and rising health care costs, the demand for the Urgent Care Centers (UCCs) has been stimulated to provide non-critical care.

UCCs provide both convenience and cost efficiency to patients. UCCs are open for longer hours than primary care physicians, long waits at emergency rooms (ERs) are eliminated, and costs are lower. According to a recent review from the National Center for Health Statistics (NCHS), visits to the ER can easily cost more than $1,000. The average visit to a UCC, in contrast, runs about $150. Such cost differences matter not only insurers but also to consumers with high-deductible plans and uninsured patients paying out-of-pocket.

According to the Urgent Care Association (UCA), as of June 2017, there were 7,639 UCCs, an increase of nearly 6% from 7,271 in 2016, and 6,946 in 2015. About 22% are owned by hospitals, 15% are part joint ventures with a hospital system and 19% are corporate-owned entities. This $18 billion urgent care industry is expected to grow 5.8% in 2018.

Private equity investment firms, sensing this opportunity, have invested $2.3 billion in UCCs since 2008. Wall Street money is driving the growth, but insurance companies and hospitals are also embracing the trend. Hospitals are also getting into the business of urgent care. They eliminate non-emergency cases from ERs. They also allow hospitals to integrate their health systems because patients who need follow-up care can be referred to a specialist within the system.

Although profit margins in UCCs are small, it is a high-volume proposition. The business model is easy to understand: treat many patients as quickly as possible and the money will start to add up.