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Urgent Care Centers: A Merging Trend in Health Care

Submitted by on June 17, 2011 – 10:08 AM 2 Comments

By Lucia F. Bruno, J.D., LL.M., M.B.A.

Urgent care medicine has emerged as one of the fastest growing specialties in the United States.  Many family practitioners view this new form of health care as a convenient compromise to the traditional practice of medicine; absent the time and travel between offices, nursing homes and hospitals.  Likewise, emergency room physicians perceive urgent care medicine as a viable way to use their triage skills without the stress associated with a hospital setting. With approximately 8,700 urgent care centers (UCCs) nationwide and an increased percentage throughout Pennsylvania and New Jersey, many physicians question the financial incentives and legal complexities unique to this practice of medicine.  This article will address some of these growing concerns.

Ownership Structure:  Choose Your Destiny Wisely

Innovation is the principle source of differentiation and competitive advantage; innovative structuring of a UCC is no exception.  Amongst the plethora of buyouts, mergers, acquisitions, and joint ventures, investors need to weigh structuring options and management models carefully, as future profitability swings in the balance.   

Currently, only a select number of states require physician ownership of UCCs: Texas; California; Ohio; Colorado; Iowa; Illinois; New York; and New Jersey.  The 2010 survey released by the Urgent Care Association of America (UCAA) indicates that physician or group physician ownership accounts for approximately 50% of structuring, with the remaining as follows:  Hospitals 27.9%; Corporations 13.5%; Non-physician individuals 7.7%; and Franchises 1.0%.[1]

So what makes one ownership structure more profitable than another? Hospital-based UCCs are part of an existing operation; therefore, the hospital’s tax identification number is also used by the UCC which can lead to billing complications amongst other regulatory issues.[2] In contrast, freestanding UCCs are independently incorporated, maintain their own tax identification and management structure, and can bill accordingly. Although a myriad of other factors influence profitability including: overhead expenditures; reimbursement rates; and the accurate use of CTP codes; the answer to profitability lies in the fundamental accounting principal of net income, also known as net profit, (Total Revenue – Total Expenses = Net Income). This is the amount of money left in your pocket after all expenses have been paid.

When deciding which ownership structure to select, investors must balance the initiative of the UCC with the financial goals and objectives of its investors.  Regardless of structure, increasing patient volume and holding operating expenses below the level of collections will increase profitability.[3] Historically, hospital-based UCCs have failed to keep operating expenses down; as a result they struggle to break even and in the worst case scenario suffer financial loss and eventually close.[4]

Licensing:  The EMTALA Distinction

Licensing isn’t just a mere technicality; it is a precursor of how you’ll do business.  Currently, only one state, Arizona, has an Urgent Care License requirement.  Other states such as Illinois, Delaware, and New Hampshire have placed restrictions on how UCCs can be identified and marketed to the public.

In determining how to license a health care facility many jurisdictions examine ownership interest, business structure, size of the facility, and the nature of the care provided.  Since UCC practitioners specialize in the treatment of disease, illness and/or injury on an episodic basis and don’t provide obstetric services, in-hospital admissions, long term management of chronic diseases or other conditions requiring continuity of care, practitioners need only maintain state licensure necessary to practice medicine, in addition to a license to operate the lab or other diagnostic imaging equipment, where applicable.

Unlike physician-owned UCCs, hospitals may offer urgent care as an extension of the emergency department, as a fully controlled ancillary service, as an equity joint venture, or as a landlord/tenant.   Many hospital-based UCCs, or those situated on the hospital campus (or within 250 feet), are considered Type B Emergency Departments subject to specific licensing requirements, as well as EMTALA (Emergency Medical Treatment and Labor Act) statutes and JCAHO (Joint Commission on Accreditation of Healthcare Organizations) guidelines.

The Centers for Medicare and Medicaid Services (CMS) defines a “Dedicated Emergency Department” as any department or facility of the hospital, regardless of whether it is located on or off the main hospital campus, that meets at least one of the following requirements: (1)  It is licensed by the state where it is located, under applicable state law, as an emergency room or emergency department; (2)  It is held out to the public (by name, posted signs, advertising or other means) as a place that provides care for emergency medical conditions on an urgent basis without requiring a previously scheduled appointment; or (3) During the calendar year immediately preceding the calendar in which a determination is made (based on a representative sample of patient visits that occurred during that calendar year)  it provides at least one third (1/3) of all of its outpatient visits for the treatment of emergency medical conditions on an urgent basis, without requiring an appointment.[5]

It is important to keep in mind that there are three distinct parts to the third criterion set forth by CMS. In order to be categorized as a “Dedicated Emergency Department” a UCC must meet all three parts, not just one or two.  Therefore, investors must ask themselves the following: (1) are over 1/3 of the patient visits on an urgent basis; (2) without an appointment; and (3) for the treatment of an emergency medical condition?  Many will answer “yes” to the first two components, but almost all will answer “no” to the last component given the nature of care provided.  Based on the last response, those UCCs are not “Dedicated Emergency Departments” for licensing or EMTALA purposes.[6]

Regulations:  What You Don’t Know Could Hurt You

Irrespective of the applicability of EMTALA or JCAHO, there are a whole host of other federal regulations that govern the day-to-day activities of urgent care medicine.  Although ownership interest frequently dictates the regulations for which investors must comply, such as STARK and anti-kickback laws, others apply across the board.

All UCCs must comply with the privacy measures of the Health Insurance Portability and Accountability Act (HIPAA) and the security mandates of the Health Information Technology for Economic and Clinical Health Act (HITECH).  UCCs that operate a laboratory for blood tests or other related diagnoses must also adhere to Clinical Laboratory Improvement Amendment (CLIA) guidelines, in addition to Drug Enforcement Agency (DEA) mandates for the storage and dispensation of narcotics.  Finally, if the UCC provides services to Medicare or Medicaid patients, it must comply with the conditions of participation and reimbursement.   Knowing the rules of the game ahead of time can mean the difference between victory and defeat.

Coding:  Not Just a Numbers Game

One of the best ways to increase revenue in a UCC is to optimize billing and coding.  When negotiating a contract with a managed care organization it is incumbent upon UCC owners to make certain that reimbursement amounts and payment codes are specified in the contract.

CMS has designated two HCPCS (Healthcare Common Procedure Coding System) codes for UCC use: S9083 – for global fees, irrespective of the treatment provided; and S9088, an “add on code,” for reimbursement of expenses unique to the practice of urgent care medicine, such as increased overhead and wage costs.

Although these codes were never intended for submission to, or reimbursement by, Medicare or Medicaid many managed care organizations, such as United Health Care, now refuse to reimburse freestanding UCCs for anything other than professional procedure codes.[7] For those unfortunate enough to be caught up in the denial process, attempting to negotiate a reasonable compromise or a slight increase in fee schedule may be their only alternative.

Marketing to Increase Revenue:  The “Me First” Mentality

In today’s competitive economy traditional healthcare marketing strategies no longer work.   As more consumers gravitate towards urgent care medicine as a less costly, more convenient, option to traditional healthcare investors need to stay one step ahead of the competition in order to finish ahead of the pack.

Since urgent care medicine is premised on consumer choice, a successful marketing plan will focus on customer service and convenience as a top priority.   A clear vision of your goals and objectives will give you more than just direction; it will give you a marketing framework that you can build your UCC around.  A few simple strategies to effectively market your UCC are as follows:

  1. Identify your niche market:  UCCs would do well to aggressively promote services to consumers with young children by marketing themselves as conveniently located and offering extended service hours.  Other targeted audiences include local employers and HR directors interested in pre-employment physicals, drug screening and immunization programs.
  2. Set up a website:  Yellow book advertising simply doesn’t fit the mind of today’s consumer. Today, consumers search online before they do anything else; therefore, it is crucial to develop a website and list your site with several directories and search engines.  If you do not list your website, it will become an orphan site that is not known and rarely visited by revenue- generating consumers.
  3. Signage: One of the most important marketing elements is a large, well-lit, sign prominently displayed in high traffic areas.  Since zoning restrictions regulate outdoor advertising, it is important to check with your local municipality regarding restrictions before you purchase a property or sign a lease for your UCC.
  4. Free Press: The local media is an invaluable asset in marketing your UCC.  Get to know local reporters, and let them know that you are available to do interviews for TV or newspaper stories on relevant healthcare topics.  Unlike other forms of media, this is completely free and has the greatest potential to reach a mass audience.[8]

As UCCs continue to expand across the country, the fields are ripe for investors to harvest the infinite possibilities posed by this merging trend in health care.

###

Lucia Francesca Bruno, JD, LLM, MBA, is Principal Shareholder of Physicians’ Legal Group, LLC (www.physicianslegalgroup.com).  She can be reached at(215) 688-3909.

 


[1] Urgent Care Benchmarking & Statistics, http://www.ucaoa.org/resources_stats.php (Aug. 2010)

[2] Tony Barber, Pros & Cons to Freestanding vs. Provider-Based Models, (Mar. 2011)

[3] Brent Cosens, Financial Lesson in Urgent Care and Occupational Medicine, (Jan. 2009)

[4] Robin M. Weinick, Phd., Renee M. Bentancourt, BA, No Appointment Needed, The Resurgence of Urgent Care Centers in the United States, (Sept. 2007)

[5] 42 CFR Parts 413, 482, and 489 [CMS-1063-F] RIN 0938-AM34, https://www.cms.gov/EMTALA/Downloads/CMS-1063-F.pdf

[6] http://www.practicevelocity.com/urgent_care/coding/type_b_ed.php

[7] Urgent Care Policy-New, UHC Network Bulletin, Vol. 29, Jan.2009, pg.3

[8] http://www.practicevelocity.com/resources/marketing.php

 

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2 Comments »

  • As the marketing director for DVUC, it is also important to advertise according to seasonal changes. This will not only help the prospect patients know that you are well informed of the seasonal health issues but also remind them that you are availalbe to them if they need your services.

    Thank you for a great article,

  • Laura Katz says:

    Thank you for the article. Do you have any information as to an average marketing budget size? Either by % or $ of revenues that you recommend? Any insight would be beneficial.

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