qotd: Urgent care centers - capitalism in action

The New York Times
July 9, 2014
Race Is On to Profit From Rise of Urgent Care
By Julie Creswell

NORWALK, Conn. — For more than eight hours a day, seven days a week, 52
weeks a year, an assortment of ailments is on display at the tidy
medical clinic on Main Avenue here. But all of the patients have one
thing in common: No one is being treated at a traditional doctor's
office or emergency room.

Instead, they have turned to one of the fastest-growing segments of
American health care: urgent care, a common category of walk-in clinics
with uncommon interest from Wall Street. Once derided as "Doc in a Box"
medicine, urgent care has mushroomed into an estimated $14.5 billion
business, as investors try to profit from the shifting landscape in
health care.

But what is happening here is also playing out across the nation, as
private equity investment firms, sensing opportunity, invest billions in
urgent care and related businesses. Since 2008, these investors have
sunk $2.3 billion into urgent care clinics. Commercial insurance
companies, regional health systems and local hospitals are also looking
to buy urgent care practices or form business relationships with them.

The business model is simple: Treat many patients as quickly as
possible. Urgent care is a low-margin, high-volume proposition.

Urgent care clinics also have a crucial business advantage over
traditional hospital emergency rooms in that they can cherry-pick
patients. Most of these centers do not accept Medicaid and turn away the
uninsured unless they pay upfront. Hospital E.R.s, by contrast, are
legally obligated to treat everyone.

Already, the race is on to build large chains with powerful, national
brands — a McDonald's or a Gap of health care. Wall Street money is
driving the growth, but so are other forces. Millions of newly insured
Americans are seeking care. Others are frustrated by long waits at
E.R.s, or by having to conform to regular doctor's hours.

The insurance giant Humana paid nearly $800 million in 2010 to buy
Concentra, the nation's largest group of urgent care centers, with about
300 currently. Two years later, Dignity Health, a San Francisco-based
health system, acquired U.S. HealthWorks, a group that today has 176
centers.

Even hospitals are embracing the trend. Florida Hospital in Orlando, for
example, has opened 24 Centra Care urgent care clinics.

But some of the most aggressive buyers have been private equity firms,
according to data from a research firm, PitchBook.

In 2010, General Atlantic, a private equity firm, and Sequoia Capital, a
giant in venture capital, acquired a stake in MedExpress Urgent Care,
which operated 47 clinics in four states. Today, MedExpress has 130
clinics in 10 states.

http://www.nytimes.com/2014/07/10/business/race-is-on-to-profit-from-rise-of-urgent-care.html

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Comment by Don McCanne

The growing popularity of urgent care centers is understandable.
Patients can receive timely care with shorter waits, at a cost well
below that of hospital emergency departments. These centers are working
well for patients, for the health professionals who staff them, and for…
yes, passive investors who have learned how to divert to their own
coffers some of the $3 trillion that we are spending on health care.

That's the thing about capitalism. When there is an opening that can
provide a significant return on invested dollars, capitalists jump in,
while socialists stand back and observe, especially since the machinery
of government grinds very slowly.

In the case of urgent care centers, what approaches will provide the
best return for the capitalists? Above all, locate them in wealthy
communities. Do not ever consider placing them in communities with high
poverty levels, even though the medical need may be great. Cherry pick
your patients. You can turn away Medicaid and cashless uninsured
patients and give them instructions on how to get to the nearest
hospital emergency department, which is required by law to accept them.
But cater to the insurance companies that are quite willing to pay your
higher fees as long as they are lower that emergency department fees. In
fact, maybe the insurers will even be willing to pay a premium to buy
you out.

The record is in on for-profit health care facilities. Business
principles trump patient service principles every time. Make the most
money on insured patients that the market will bear, but avoid losses on
uninsured and welfare patients by turning them away.

About those socialists who are standing back and observing, what are
they to do? How do they move urgent care services into communities with
high poverty? They know that the private investors want no part of that.
What about primary care practices? Isn't it unrealistic to expect
physician offices to be staffed 24 hours a day? What about community
health centers? On their tight budgets, can they provide 24hour/7day
urgent care services? What about emergency departments of hospitals? Of
course, they are already serving that function, but at very high fees
that are used to support other money-losing services of the hospital -
not to mention long delays at times other health care facilities are closed.

Under a single payer system, facilities would be established through
central planning based on the health care needs of the community, not on
what would be the most profitable. Passive investors would not be
involved and thus would play no role in those decisions, as they shouldn't.

Private sector investors move in rapidly at any opportunity, structuring
their investments to get the most dollars they can from us while
neglecting those without dollars. Government bureaucrats move much more
slowly, but at least they get it right, making sure that health care is
available for people when they need it. Single payer is what we need.