Premier clinic helped pioneer urgent care, looks to expand

Putting stock in the docs

Baton Rouge-based Premier Health, which helped pioneer urgent care clinics in the area 15 years ago, now owns and/or manages a dozen of the facilities in Louisiana, with more on the way.

The company opened its second Alexandria area location this month. A second Lake Charles clinic will launch in mid-July, and Premier expects to open a Galliano area location by the end of the year.

“We want to accelerate our growth. In five years, we hope to more than double the size of the company so it will be somewhere between 45 and 50 locations,” Chief Executive Officer Steve Sellars said.

Sellars didn’t want to discuss specific locations but expects Premier to target some of Louisiana’s smaller, underserved markets. The company is also looking at opportunities outside the state, if Premier can connect with the right partners.

Premier’s business plan is based on a joint-venture model. The company typically partners with a hospital and one or two physicians. The health system provides the brand. Lake After Hours and Lourdes After Hours draw their names from Our Lady of the Lake Regional Medical Center and Our Lady of Lourdes Regional Medical Center. The physicians provide the health care expertise. Premier basically takes care of anything else: market analysis, site selection, construction oversight, floor plans, facility management, staffing, negotiating contracts with insurers and information technology, not to mention logo design, signs, and marketing and advertising plans.

“It’s pretty much a turn-key model,” Sellars said.

It’s also one of the two most common approaches to urgent care, one of the fastest-growing segments of the health care industry. The other urgent care model consists of independent operators, often backed by private equity firms, establishing chains of clinics and/or buying existing facilities.

Urgent care clinics offer quick treatment for injuries and illnesses that aren’t life-threatening, such as sprains, broken bones, colds, fever and the flu. The clinics offer extended hours during the week and are open on weekends. The convenience and the promise of quick treatment are drawing consumers and investment.

In 2012, the American Academy of Urgent Care estimated there were about 9,000 urgent care clinics in the United States. Those clinics generated $13 billion in revenue, according to Becker’s Hospital Review.

There are now more than 10,000 clinics. By 2017, the estimated number will pass 12,000, and revenue will hit $18 billion.

In addition to catering to Americans’ fast-food approach to health, Dr. Franz Ritucci, president of the American Academy of Urgent Care, said the clinics are thriving because of:

  • The ongoing shortage of family practice doctors. By 2025, the country will need an estimated 52,000 more family practitioners than will be available.
  • The Affordable Care Act. More patients have insurance but don’t have a family doctor. The clinics are a convenient, cheaper alternative to hospital emergency departments, where many of those people sought treatment in the past. An urgent care visit averages about $185. The same treatment in an emergency room could run more than $1,000.
  • Money. Venture capitalists are investing in the clinics because they see the growth and business opportunities.

The number of clinics is changing so rapidly it’s difficult to track, Ritucci said. The American Academy of Urgent Care Medicine website lists 72 in Louisiana.

Sam Yates, who heads the Urgent Care Association of America, said the number is closer to 200.

In Louisiana alone, the association has fielded 42 different inquiries from companies or people interested in starting new clinics, Yates said.

Both Yates and Ritucci said private companies are starting the majority of clinics.

But hospitals are also trying to capitalize on the Affordable Care Act’s newly created pipeline, which contains an estimated 8 million to 20 million new patients, Yates said. Urgent care clinics also offer hospitals another advantage, additional revenue without having to go through the certification some states require to expand the hospital.

Sellars said Premier allows health systems to add urgent care to their services without having to go through the pain involved in learning the business.

“They’re good at running hospitals. We’re good at starting up and running urgent care centers,” Sellars said.

Premier’s expertise includes doing the market analysis to determine the need for a clinic. The company looks at variables such as demographics, the number of children in a community, median income and access to primary care. If there is a need, Premier shifts to site selection, a key in what Sellars calls “retail medicine.”

The clinics depend on customer traffic, so Premier places them near complementary retail businesses, such as grocery stores and restaurants. It costs $400,000 to $500,000 to open a clinic, and that doesn’t include the real estate. Premier leases all of its facilities, which helps control costs.

Premier’s standalone clinics have 3,000 square feet of space arranged around a centralized nurses or work station. Exam rooms lie in pods off the work station, with the supply and medication rooms near the exam rooms. The idea is to minimize foot steps for the staff.

Premier’s approach has worked well enough that annual revenue has grown to the $35 million to $40 million range across all lines of business, including management, consulting, support and professional development services and clinic ownership, Sellars said. Although that sounds like a big number, urgent care is a very low-margin business, similar to a primary care practice from a reimbursement standpoint.

“It’s really a volume-based business; so the busier we are, the more efficient we are, the less waste we have within the system, the better we do,” Sellars said.

That task has become more and more difficult because employers and insurers have reached their spending limits when it comes to health benefits, Sellars said. Everyone is looking to control costs as much as possible. Limiting payments for health services is one of the ways that’s being done.