What Do Texas Physicians Face When Starting Their Own Urgent Care Clinics?
Practice Management Feature — July 2017
Tex Med. 2017;113(7):35-42.
By Sean Price
Back in 2006, urgent care clinics were still a fresh concept for Texas medicine. But Christopher Ogunro, MD, was confident the clinic he planned to open that year would fill an important niche by taking pressure off local emergency departments (EDs).
"I'd been working in the ER for a long time," he said. "So I knew that a lot of the people we were seeing in the ER were not real emergencies."
Dr. Ogunro had spotted another local trend: Cypress, the Houston suburb he'd targeted, did not have enough primary care physicians. Residents often had to wait days to get a routine appointment. So he wasn't all that surprised when his first patient at Excel Urgent Care walked in two days before its grand opening.
"She told us what her complaint was, and it was pretty simple, so I addressed it," Dr. Ogunro says. "But she was so thankful that she had her husband take a picture of the two of us and sent me a letter thanking us for agreeing to see her, even though we weren't ready to see patients yet."
Dr. Ogunro's clinic was the first urgent care facility in the area, but it was soon joined by others. Nobody is sure exactly how many urgent care clinics exist statewide or nationwide today because no government agency tracks the numbers. But since the early 2000s, Texas has seen strong growth in the number of urgent care clinics. The industry group Urgent Care Association of America (UCAOA) estimates Texas has about 575, and several dozen new ones pop up each year. Nationally, there are an estimated 7,300 clinics, and several hundred more join annually.
What's driving this growth? Tom Charland, chief executive officer of the management consulting firm Merchant Medicine, says most urgent care clinics are chasing the same core demographic. "They are really going after the outer-ring suburb, dual-income parents with kids for whom if someone is sick or injured, it's chaos because their schedules are so fried," he said. "These are people who are generally very healthy, and they need access on their schedule."
People in that target audience frequently confuse urgent care facilities with retail clinics (like Minute Clinics) and freestanding EDs. There's a good reason: All three are designed for convenience, and some of the services they offer overlap. (See "Telling Them Apart: Retail Clinics vs. Urgent Care Clinics vs. Freestanding EDs.").
Mr. Charland says urgent care clinics become less confusing when seen from a business perspective. Retail clinics and freestanding EDs are mostly owned and run by large companies. But only about 50 percent of the urgent care market is owned by chains made up of five or more clinics. The rest of the market consists of ordinary family practice and emergency medicine physicians.
"There's a very high number of onesie-twosie mom-and-pop urgent cares where an ER doc decided he's not going to do the ER anymore, and he's married to a nurse so they start an urgent care together," Mr. Charland said.
Setting up an urgent care clinic can be daunting for a physician who knows little about business. The Texas Medical Association helps member physicians steer around the many problems they will face while building an urgent care facility (see "TMA Practice Consulting Services."). Dr. Ogunro, who now has three urgent care clinics in the Houston area, is one of many Texas physicians who has made use of TMA's expertise.
"TMA was extremely helpful in setting up the first office," he said. "We did not have any experience with hiring personnel, dealing with vendors or insurance companies, or the day-to-day management of a medical practice."
Kim Stevens is a principal at Innovative Health Resources, a TMA-endorsed health care credentialing and managed care company that has helped hundreds of doctors set up and run medical practices. She says the most important first step in setting up an urgent care clinic is to define what "urgent care" means in terms of services offered.
"Are you just going to be a practice that's open after hours?" she says. "Or are you going to be able to do an image on a fracture? Tell me what you want to do. It's like the layers of an onion. Because what urgent care means to me may not be what urgent care means to you. And the more layers you add to it, the more complicated it gets."
Some urgent care clinics work on a cash-only basis. But most serve patients who rely on medical insurance. As a result, Ms. Stevens says, physicians need to focus on being able to secure managed care contracts with insurance companies before they sign a lease or spend money on equipment.
"They need to pinpoint it to a certain ZIP code as much as possible," Ms. Stevens said. "For example, a managed care company can close its panel to urgent care centers in a ZIP code if they feel they already have ample coverage."
Ms. Stevens says in highly competitive markets like Austin, Dallas, or Houston, this can present a frustrating catch-22. Physicians need to move fast to secure the best available site for their clinic. But they don't want to spend any money on a site until they are sure there are no "closed panels" for urgent care in that area.
Ms. Stevens says many physicians also don't realize they may not be able to run their own urgent care clinic. Depending on the credentialing requirements, only physicians who are board certified in family practice, general practice, internal medicine, or emergency medicine may be allowed to serve as a medical director.
"You'll get these doctors who say they want to open up an urgent care center," she said. "And I'll ask, what's your specialty? And they'll say endocrinology or dermatology."
At that point, she has to break it to them that they may have to credential the facility under another doctor's name.
Ms. Stevens says that credentialing is not the only time-consuming part of the process. Many urgent care clinics choose to be accredited through various accrediting agencies, a process that can take up to a year.
"You also have to negotiate rates with the insurance companies," she said. "Let's say that Aetna comes back and says, 'I'm just going to offer you $25 for office visits.' That doctor's going to say, 'Go take a hike,' knowing that reimbursement rate will not cover his operating costs and the price of treating patients." But then the physician will have to go to cash-only service for that payer and keep trying to negotiate rates while being out of network. Some urgent care facilities are never able to negotiate adequate rates. They may be forced to be "non-participating" for that health care plan indefinitely.
Even with expert help, the credentialing and contracting process takes months. Dr. Ogunro's first clinic took about six months to set up in 2006. But Sean McNeeley, MD, treasurer of UCAOA, says increased competition and other changes in the industry have pushed back setup times to three years in some parts of the country.
"You can't just throw up a shingle now and have people come," he said. "The time it takes to open one has doubled in some markets."
"Location, Location, Location"
Finding a site for an urgent care clinic requires a new way of thinking for many physicians. Unlike family practices, urgent care centers are almost never placed in traditional office buildings. Tommy Newton of Xite Realty, a Texas firm that specializes in siting medical facilities, says typical urgent care clinics can be found in either strip malls or stand-alone buildings surrounded by lots of retail shops. Why? Greater visibility. Just like Starbucks and Chipotle, urgent care centers rely on drive-by traffic to bring in customers.
"If a physician is going to open up an urgent care clinic and is looking at a real estate development, and that physician can take the most prominent piece that has the greatest visibility and access and signage for, say, $20 a square foot, or he or she can save a couple dollars a square foot and go to the back of the development, we find every time that the person who goes to the back of the development loses way more money when it comes to patient base and volume," Mr. Newton said. "Location, location, location means so much more for urgent cares."
Mr. Newton says the best site selection is based on data. How many competitors are nearby? What's the growth rate and average income of the community? Asking these and similar questions can weed out sites that could be a problem long-term.
"You can drive around and see if it's a vibrant development and has a good grocery store that's going to bring in traffic, and it's got good accessibility," Mr. Newton said. "You can see all those things. But the data should drive your decision to get within a three-mile radius [of a site], and then you should start looking at developments."
Like most states, Texas has seen market saturation in the largest cities: Houston, Dallas-Fort Worth, San Antonio, Austin, and El Paso. Mr. Charland says most big cities still have room for some growth. But picking the right site has become trickier and more expensive. As a result, much of the future growth in urgent care is expected to come in midsize cities like Waco and Lubbock or smaller cities like Kerrville or Longview. When setting up a clinic in smaller communities, it helps to be a local doctor who is well-known.
"We've seen ER doctors leave the hospital where the ER's the only game in town," Mr. Charland said. "And they set up an urgent care center and do very well ― much to the chagrin of the hospital."
Ms. Stevens says the ideal situation from the view of negotiating insurance rates is to be the first urgent care clinic in an area.
"If there were another urgent care in the same county that rushed through the process and did not fully review the rates offered by an insurance plan and they contracted at very low rates, well they just set the market," she said. "It's more difficult for us to justify why our [physician] client should get paid what he or she needs to get paid to even cover costs if the urgent care center down the street accepted very low rates."
Making It Work
Karen Ludwig has been office manager at Dr. Ogunro's Excel Urgent Care facilities for more than 10 years. She says a lot of staff hours go into making the clinics convenient for patients.
"We don't have appointments scheduled in the future, so we can't verify people's insurance before they get here," she said. "We can only do that when they're here. And a lot of times it's very time-consuming. We can do a lot online, but some of the major [insurance companies] don't put a lot of the information we need online. Or, we have to drill down to get to their urgent care benefits, which are different from the primary care benefits."
Excel charges for everything at the time of service, and while getting insurance information from patients can be troublesome during office hours, it can be almost impossible in the evenings and on weekends. Insurance companies are simply not available at those times, so finding out if a patient has active insurance is difficult. Even so, Ms. Ludwig says experience has shown them the best ways to estimate copays and fees. "Our goal is that when we get the explanation of benefits from the insurance company that it be a zero balance," she said.
Like many urgent care clinics ― and unlike most family practices ― Excel has its own x-ray and lab on site. Amenities like these, as well as extended hours, tend to make a visit to an urgent care clinic more expensive than a visit to a family physician on some, but not all, insurance plans. Even so, urgent care is still far less expensive than a trip to an ED.
Dr. Ogunro says that staffing his first clinic was a challenge at first because many medical workers were not used to working odd hours. But people are used to urgent care now, and it's no longer an issue. He oversees other physicians, nurse practitioners, and physician assistants as well as x-ray and lab technicians.
About 60 percent of staff members' time is spent on traditional urgent care ― things like sprained ankles, broken bones, strep tests, infections, lacerations, boils, rashes, and fevers. Another 35 percent of their time is spent on occupational medicine ― preemployment physicals, drug screening, and alcohol testing for employers.
"If somebody is hurt on the job, the employer wants to know if that person was under the influence when they got hurt," Dr. Ogunro says. "We're able to do drug screening and alcohol screening while we're fixing the injury."
Meanwhile, about 5 percent of the staff's time is spent on true primary care. Dr. Ogunro says a few patients prefer to have chronic problems like high blood pressure or diabetes treated by his staff and not by their primary care doctor, despite the higher cost. Even so, that's not something he encourages. "They like us, but we have to like them too," he said.
Dr. Ogunro says most patients understand that "urgent care" does not mean care in an ED, but a small minority regularly arrive needing emergency care. He says that the clinic is not set up to handle life-threatening problems, but the staff is trained in stabilizing patients and getting them where they belong quickly. "A lot of people now call ahead and ask, 'Are you urgent care or a freestanding emergency room?' and if it's urgent care, they'll come," he said.
Urgent care physicians are retail merchants as much as they are doctors, and Dr. Ogunro says his clinics market aggressively to expand business opportunities. Usually, this means appearing at community events or speaking to neighborhood employers and schools. They spend a lot of time educating people about the types of problems urgent care can and cannot address. Other times, the marketing staff reaches out to direct competitors. For instance, retail clinics at drug stores often cannot handle more serious cases.
"Our marketing team goes out to retail clinics to let them know, 'Hey, we're here to help you,'" he said. "If there's something you need to x-ray, if you want a doctor to see a patient, send them to us."
Given the steady growth in the number of urgent care centers, the industry seems to be thriving. But Mr. Charland says some potentially dark clouds are on the horizon. In many places, insurance companies are not increasing their payment rates for urgent care. They don't feel they have to because there are so many clinics around. At the same time, physicians are becoming scarcer, so labor costs are going up. If those trends continue, the growth of urgent care clinics could slow. The problem of market saturation in large cities is also a concern.
"There are only so many low-acuity visits out there," Mr. Charland said.
Dr. Ogunro says those factors have not affected his three Houston-area clinics. He was able to get into Houston before many parts of that market became saturated. Professionally speaking, he is glad he started the clinic because he was ready to get out of ED work. But like any new business startup, building a clinic from scratch came with risks.
"It depends on factors that are sometimes out of your control, and it may take a while to become profitable," he said. "I would say, be true to yourself about your reasons for doing it because it's hard at the beginning."
Sean Price can be reached by phone at (800) 880-1300, ext. 1392, or (512) 370-1392; by fax at (512) 370-1629; or by email.
Telling Them Apart: Retail Clinics vs. Urgent Care Clinics vs. Freestanding EDs
Urgent care got its start in the 1970s. The quality of the clinics was uneven at first, causing some people to refer to them as "docs in a box." More importantly, insurance rules forced those early clinics to work mostly on a cash-only basis. The concept peaked in the mid-1980s and then faded.
Around 2000, insurance rules changed, giving patients more freedom to choose where they could receive care. As a result, a spectrum of new, fast-service health delivery systems sprang up. The main ones are retail clinics, urgent care clinics, and freestanding emergency departments (EDs).
Many patients have a hard time sorting out which to use in a given situation. One recent Texas study showed that patients' confusion is costing them money. The study, published in the Annals of Emergency Medicine in March, found that patients frequently went to freestanding EDs believing they were similar to urgent care clinics. Because freestanding EDs have higher overhead and more regulation, they can be much more expensive. The total price of a freestanding ED visit averaged $2,199 in 2015, while a visit to an urgent care clinic averaged $168.
The names of many clinics often add to the confusion. For instance, some urgent care clinics call themselves "minor emergency centers" or "urgency centers" and stress the speed of care. Also, many standard medical practices provide after-hours care that strongly resembles the service provided by urgent care. Here's a rundown designed to help clear up the confusion.
Retail clinics ― These are minor care facilities that can be seen inside grocery stores and drug stores. They are usually small ― no more than about 500 square feet and located inside an existing store. They provide convenience in handling minor issues like strep tests, colds, and bumps and bruises. Retail clinics are usually staffed by a nurse practitioner or physician assistant (who must work under a physician's supervision in Texas). Nationally, about 94 percent of retail clinics are housed inside stores owned by four retail chains: CVS, Walgreens, Rite-Aid, and Kroger. Retail clinics tend to be open after hours and on weekends.
Urgent care clinics ― These centers treat everything retail clinics handle plus injuries and illnesses that are more urgent but not life-threatening ― broken bones, athletic injuries, and asthma attacks. Many are located in strip malls, but more sophisticated ones are in stand-alone buildings near retail shops or hospitals. Services can vary. Some have a lab, and some don't. Some focus on pediatrics, while others accept all patients. They are most commonly staffed by at least one physician who is usually boarded in family medicine, internal medicine, or emergency care. This physician is usually assisted by nurse practitioners or physician assistants as well as technicians. Urgent care clinics tend to stay open late into the evenings and on weekends.
Freestanding EDs ― Most freestanding EDs function like a hospital ED, but they cannot admit patients for ongoing care. Like urgent care clinics, they tend to be located close to retail centers, though there are more regulations about where they can be built. Freestanding EDs are usually staffed like a hospital ED, with ED doctors, nurse practitioners, physician assistants, nurses, medical assistants, and technicians. Because state regulations vary, about 60 percent of freestanding EDs are located in three states: Texas, Colorado, and Ohio. They are often owned by local hospitals or hospital chains. Like regular EDs, most are open 24 hours.
TMA Practice Consulting Services
Physicians face many important tasks and decisions when setting up any medical practice. TMA Practice Consulting's turnkey practice setup service can ease the challenges of starting a new practice or moving an existing practice.
Receive comprehensive setup assistance that includes the creation of a financial business plan, office site review, vendor and technology selection, staff recruiting, and staff training.
Consulting services include:
- Determining setup costs and expenses;
- Developing a pro forma financial plan for loan and cash flow projections;
- Assisting with the purchase of practice management software and an electronic medical record system, medical and office equipment, telephone systems, and insurance (liability, disability, and health);
- Identifying and recruiting qualified personnel;
- Training employees on practice policies and procedures; and
- Providing resources for professional services such as banks, attorneys, and accountants specializing in health care.
If you have any questions, contact TMA Practice Consulting at (800) 523-8776 or by email.
July 2017 Texas Medicine ContentsTexas Medicine Main Page