09.06.2016 Newsday | Investments, doctor shortage drive growth of LI urgent care
By Victor Ocasio
Long Island’s urgent care chains are expanding, planning in some cases to double their size in the next year or two, driven by patient demand for faster access to treatment, and by plentiful investment capital.
There are at least 108 urgent care centers in Nassau and Suffolk counties, according to estimates from the Urgent Care Association of America (UCAOA), an industry trade group. The group does not have historic numbers, but one industry observer said the number of Long Island centers has at least doubled in the past decade.
Large chains such as GoHealth Urgent Care, ProHealth Urgent Care, StatHealth, PM Pediatrics and CityMD all plan to open new local centers this year.
“I think we can say that on Long Island urgent care is turning into Starbucks,” Todd Stack, general manager of Healthcare Services for Melville-based Henry Schein, said of urgent care’s proliferation. Stack oversees the health care product distributor’s equipment sales to urgent care centers throughout the United States.
And like Starbucks, urgent care chains are also bringing a retail orientation to the health care business, in terms of site selection, facility design and a focus on timely customer service.
It’s an orientation that hospitals can learn from.
“Without question, the health care industry does not have strength in retail methodology or experience in building a retail type of environment,” said Adam Boll, vice president of operations for Northwell Ventures, an investment arm of health care giant Northwell Health. Northwell has a 50 percent stake in GoHealth’s New York operations.
Urgent care, a category of walk-in clinics that treat nonlife-threatening ailments and injuries requiring immediate attention, has grown rapidly since its inception in the 1980s, industry insiders said. Many centers offer extended hours, are open seven days a week, have small diagnostic labs and come equipped with costly technology like X-ray machines. The average cost of a visit to an urgent care center was $150 to $200 in New York State last year, according to an estimate from the North East Regional Urgent Care Association (NERUCA).
In 2015, urgent care brought in an estimated $16.2 billion in revenue, and it is expected to grow to $19.7 billion by 2020, according to an industry report by research firm IBISWorld.
The UCAOA estimates there are 7,100 urgent care centers across the United States; IBISWorld puts the number closer to 9,300. Because the industry is fragmented, with some primary care offices also offering urgent care hours, exact industry figures are unavailable.Behind urgent care’s popularity with patients is difficulty accessing primary care doctors, a problem projected to worsen in coming years.
According to a report released in April by the Association of American Medical Colleges, the number of primary care physicians is projected to fall short of demand by as much as 35,600 doctors in 10 years.
“The bottom line is urgent care is flourishing because of the shortage of primary care physicians,” said Margaret Simat, an urgent care consultant and co-founder of NERUCA, which has a Lido Beach office.
Simat said that as primary care practices reach patient capacity and retirement-age physicians close their practices, fewer graduates are replacing them.
With the levels of financial debt medical students are graduating with, she said, “they don’t want to take on debt to start a practice.”
Emergency rooms are expensive, inconvenient alternatives for urgent care.
Nationwide, the demand for emergency care at hospitals is up, but the total number of ERs has fallen by about 500 over the last 20 years, according to the American Hospital Association.As hospitals face challenges from this increased demand, urgent care providers have found opportunities in treating patients in their communities.
Enabling urgent care’s explosive growth, experts and executives said, is an influx of private capital from investment groups such as TPG Capital, Spanos Barber Jesse & Co. and Scopia Capital Management, all of which have invested in chains expanding on Long Island.
Dr. Marc Salzberg and Dr. Paolo Coppola co-founded StatHealth when they opened their first center in Smithtown 11 years ago. “Our idea was to have one office, and that was it,” Salzberg said. After seeing strong demand, they decided to add more locations.
Salzberg said the business received many calls over the years from private equity groups looking to buy a stake. In May, they reached a deal with California-based Spanos Barber Jesse, which invested an undisclosed amount in the chain.
“The reason we did it was to have working capital to expand instantly,” he said. The company, which has nine locations on Long Island, plans to open a 10th this fall, in Selden, Salzberg said. The company is currently looking at about half a dozen potential locations and is considering expanding to New Jersey, Maryland and Massachusetts.
PM Pediatrics, an urgent care provider started in 2005 in Syosset, specializes in treating the range of patients from newborns to college-aged adults. It has 19 locations in New York, New Jersey and Maryland, with four on Long Island.
“When we first opened and I started negotiating with insurance companies, they had no concept really of what urgent care was,” said Dr. Jeffrey Schor, co-founder and co-CEO of PM Pediatrics. “In the last couple of years the whole environment has exploded.”
The company, one of 40 from Long Island on Inc. magazine’s 2016 list of the nation’s 5,000 fastest-growing companies, plans to open between eight and 10 locations over the coming year, with up to four planned for the Island.
Between 2005 and 2011, PM Pediatrics opened four centers. After receiving capital from Scopia Capital in 2012, the company has more than quadrupled its locations.
“The rate limiting step for us was getting the financing,” Schor said. “Now you’re in a world where there’s a lot of money out there.”
Manhattan-based CityMD, which has 15 centers here — the most on Long Island — was founded by eight doctors in 2010. It received a “small investment” from private equity investors in 2013, said Dr. Nedal Shami, chief strategy officer. That year it acquired competitor Premier Care and its 12 Island locations.
“At its core, we shared a very common philosophy around patient care and around the mission of delivering high-quality care,” Shami said.
GoHealth Urgent Care, an Atlanta-based group started in 2012, is the national urgent care brand of Access Clinical Partners, of Menlo Park, California. It has 12 locations on Long Island and plans to open seven more here this year. The company has 43 locations nationally, with a total of 26 in New York State.
Access Clinical initially acquired five urgent care centers in Portland, Oregon. In 2014, it received an investment from TPG Growth — a $7 billion investment group with headquarters in San Francisco and Fort Worth — formed its joint venture with Northwell Health, launched the GoHealth brand and opened its first New York location.
“We were built from the very beginning to partner with large integrated health systems,” said Todd Latz, chief executive of GoHealth Urgent Care. Partnerships with established health care providers, he said, allow GoHealth to integrate into a system’s “ongoing continuum” and work with established hospitals.
Currently, the urgent care chain also has health-system partnerships with Portland-based Legacy Health, and Dignity Health, the largest hospital provider in California.
ProHealth Care Associates, a Lake Success-based physician group with more than 270 primary and specialty health care facilities in the metro area, plans to add 10 locations — two slated for the Island — to its metro area roster of 26 ProHealth Urgent Care centers.
Last year, ProHealth’s management company was purchased by Optum, a subsidiary of health insurance giant UnitedHealth Group.
What makes urgent care centers so popular among patients, operators said, is convenience and lower costs than alternatives. “The industry has gone through a shift and has really come to understand that urgent care is all consumer focused,” said Shaun Ginter, UCAOA board member and chief executive and president of Massachusetts-based CareWell Urgent Care.
GoHealth was recognized last year for its “retail store” design by the International Council of Shopping Centers. The care centers often feature open designs where patients can see physicians, and “privacy glass” that can be made opaque with the flip of a switch. The company focuses on running facilities with small footprints in high-traffic areas.
Sarah Arora, president of GoHealth’s New York market, said having a retail mentality plays a major part in site selection.
“We look for places where people live their lives,” she said, which often brings them into strip centers with more day-to-day shopping offerings, like supermarkets, coffee shops and banks. It’s all part of moving “away from this hospital on a hill model.”
To work, centers need to be located in heavily trafficked areas where they can see around 40 patients a day. “Urgent care is really most successful when there is a population density of 50,000 or more folks,” said Stack of Henry Schein.
Other retailers can point the way when searching for new sites.
“The formula that’s been around for probably about 25 years about where to put an urgent care center is to find a McDonald’s, draw a circle around it and go any place in that circle,” said Simat of NERUCA. “They’ve done all the footwork.”