The urgent care industry has been growing steadily over the last decade. But the last 18 months have shown a significant increase in patient visits to urgent care facilities. In fact, new patients nearly doubled compared to the previous year based on data gathered by Experity.
The COVID-19 pandemic has driven a large portion of the demand due to testing requirements and overcrowded ERs. But the surge of attention doesn’t seem likely to fade away after the pandemic either. Over the last 18 months, the urgent care industry has been able to showcase its many advantages and, in some cases, offer an alternative solution to emergency departments.
Urgent care facilities fall somewhere between primary and emergency care. This has led to some confusion on the role they play within the healthcare industry. Oftentimes patients may simply bypass urgent care and go straight to the emergency room simply because they are unaware of the offerings. But the pandemic has brought increased awareness to the urgent care industry and new patients are quickly seeing the advantages it has to offer.
- Affordability – Studies show that treatment at urgent care facilities is roughly one-tenth of the cost of treatment in traditional ERs.
- Convenience – A 2018 report found that 70% of patients waited under 20 minutes to see an urgent care provider. On the other hand, the average emergency room wait is 40 minutes, and sometimes longer.
- Increased offerings – Urgent care providers can provide a wide variety of services to its patients. This allows for the treatment of many different ailments typically directed to the ER. However, providers aren’t limited to emergency-type services either. Regular services such as blood and urine tests and X-rays are also offered. An advantage that has been significantly capitalized on due to COVID-19.
The many benefits and offerings of urgent care can make it a no-brainer for patients looking for a low-cost alternative. But low-cost doesn’t necessarily mean low-dollar either. The urgent care industry is estimated to hit $38.5 billion in revenue by the end of 2021. That’s over double the $15 billion estimated in 2017.
With the implementation of new technology such as telemedicine, urgent care facilities are becoming even more accessible. Offering patients with additional accessibility and cost savings while creating additional revenue streams at the same time.
With the increasing popularity of urgent care providers, emergency rooms are getting a well-deserved reprieve. A 2021 study found that zip codes with established urgent care centers had a 17.2% decrease in residential ER visits. It also “reduced the total number of uninsured and Medicaid visits to the ED by 21% and 29.1%, respectively.”
While this might seem likely to harm the financial outlook of EDs, research has found that healthcare spending isn’t seeing a significant drop. The study states that “each $1,646 lower-acuity ED visit prevented was offset by a $6,327 increase in urgent care center costs.”
This suggests that the lower costs of urgent care facilities are increasing accessibility and reaching patients that may otherwise avoid seeking medical care. With this extended reach, urgent care providers can help bridge the gap and access underrepresented patients within the healthcare industry.
Urgent care providers are positioned well to take over a portion of the ED clientele base. While this puts them in direct competition with each other, many EDs have begun working with urgent care providers rather than against them. This is often done through partnerships that allow EDs to have better patient capacity management, as an urgent care provider can operate as an impromptu “overflow”.
The COVID-19 pandemic has undoubtedly played an important role in the massive volume spike urgent care providers have experience since early to mid-2020. While urgent care visits are up over 30% since June 2020, the question remains: Will this volume last?
Urgent care centers have seen a record-breaking number of new patients, and it’s believed that a large portion of these patients will stay. With the incentives of lower costs and faster service, a large majority of patients are expected to become recurring clients.
Furthermore, it’s difficult to formulate accurate projections for a post-pandemic world. But urgent care centers are positioned well to adjust to the variable patient volume. In fact, the global urgent care center market is projected to reach almost $26 billion by 2023, which equates to a near CAGR of 5.3%.
But that doesn’t mean the industry is necessarily a green light for expansion. Although the urgent care industry has experienced considerable growth of late, several reports show a potential oversaturation of the current market. The Urgent Care Association stated that “76.6% of the U.S. population resides within a 10-minute drive to an urgent care center.”
Oversaturation coupled with the competition of EDs and general care hospitals could limit the potential growth of the industry in the near term. Rough estimates state that around 50,000 patients are needed to support an urgent care provider. That number has since been surpassed, which may make it difficult for new providers after pandemic protocol loosens.
The urgent care industry has seen significant growth over the last 18 months due to COVID-19 testing. This has brought in a record amount of new patients which may further buoy recurring patient volume. The industry continues to grow at a steady 5.3% CAGR, but certain signs are signaling potential oversaturation and increased competition that may lead to lower growth in a post-pandemic world.
HVG believes the industry will begin seeing some consolidation and fewer new clinics being opened. We’ll also expect to see continued activity from private equity buyers. Recent transactions point to average EBITDA multiples of between 3.0x and 5.6x and revenue multiples ranging between 0.6x and 0.9x.
 This in no way is intended to represent an opinion of value or a calculation of value. Each urgent care center should be evaluated individually, and the appraised value should always be based on the specific facts and circumstances.