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Healthcare's silent revolution: How urgent care is transforming healthcare

06/15/2018  |  By: Christian Heuer, Senior Manager, Healthcare Valuation Services

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As a Nashville area resident, you have likely observed the proliferation of urgent care clinics in Middle Tennessee and beyond. While the proliferation of urgent care clinics is highly visible, much less apparent are the adaptations healthcare providers are making to respond to patient preferences.  Urgent care clinics provide a glimpse at the future of healthcare delivery. Here are two key factors exemplified by the urgent care phenomenon: convenience and value.

Convenience

Patients are increasingly seeking care in more convenient settings. Hospital admissions have declined every year in the last 10.[1] Today, two-thirds of surgeries are performed in outpatient settings, compared to half 25 years ago.[2]

Urgent care can be a convenient alternative to traditional points of care. On one end of the spectrum is the emergency room. While readily accessible, it is unnecessary for most healthcare needs – a tornado to blow out a match. Case in point: fewer than 5 percent of patients presenting to an urgent care clinic are diverted to the emergency department (ED).[3] Based on publicly available data on emergency room visits and our experience, emergency room visits are stagnant to declining; however, ED patients tend to be sicker than in the past[4].

On the other end of the spectrum is the traditional physician office, which is often the preferred venue; however, appointment needs coupled with busy schedules can hinder accessibility.  In addition, the generation of patients relying on word-of-mouth recommendations to find a primary care doctor is aging out of the work force, and physicians, who are generally compensated by the number of patients they see, are not incentivized to cultivate the type of patient-physician relationship that was once the norm. A new generation of more transactional patient-consumers has arrived: Social media replaces word-of-mouth, and primary care is relegated to routine visits that can be scheduled in advance. Young adults often do not even have a primary care provider[5].


Due to these dynamics, patients increasingly self-triage their medical symptoms and decide on the optimal setting of care. The healthcare provider of the future will continue to enable patients to become informed “consumers” online and invest in points of service that provide convenience and access to the population served.

What is next on the horizon in terms of convenience? Telehealth and ehealth! Urgent care clinics often have excess capacity, especially outside of peak times and peak seasons. One in 10 urgent care clinics already offers this service, and the trend is expected to continue. Integrated health systems, such as California’s Kaiser Permanente, are currently using telehealth to augment their points of service, with Kaiser’s CEO indicating that more than half of patient encounters were online.[6]

Value

Although “consumer-driven healthcare” has long lost its luster as a buzz word, patients are in fact behaving like consumers. As such, patients compare the price to the perceived benefit of the service. There have been two important developments regarding the price of healthcare: (1) Patients are increasingly price sensitive, and (2) pricing transparency is improving.

Let’s talk about patients’ increasing sensitivity to price. Health insurance coverage of the past was a bit like handing a credit card to a teenager: Patients sought all the healthcare they wanted, and the insurance company bore most of the financial responsibility. Present-day coverage is more comparable to a teenager with an allowance: Patients must cover the first few thousand dollars of health care spending before insurance kicks in. This type of high deductible health plan (HDHP) now makes up a large portion of the private insurance landscape.

Urgent care clinics serve a disproportionate amount of privately insured patients. In a typical hospital setting, half of the patients have private insurance[7], which is in line with the overall US population.[8]  In contrast, 80percent of urgent care clinic visitors either carry commercial (i.e. private) insurance or pay cash (in full) for services received[9]. Price sensitive? You bet. The typical family with a high deductible health plan has a deductible more than $4,000[10] and a Health Savings Account balance of only $2,500[11], creating a significant gap. Price becomes a significant factor in choosing a care setting, and urgent care tends to be transparent and predictable in its pricing.

Determining value is a bit more complicated. The authors of a Harvard Business Review article[12] identify no fewer than 30 elements of value categorized as functional, emotional, life changing, or having a social impact. Urgent care hits many of the functional elements of value (saves time, simplifies, reduces effort, avoids hassles, quality, and informs), and some emotional elements (reduces anxiety, improves wellness). Armed with a smartphone, many a parent can quickly determine that little Eli likely has strep throat, find the nearest (or highest-rated) urgent care clinic, quickly address symptoms, reduce anxiety, and save time in getting their child back to school and mom and dad back to work.

The healthcare delivery system of the future will need to compete on price and value. Because price is relatively fixed, we see an increasing focus on the 30 elements of value with the result of urgent care in many flavors: low cost leader, specialized niche player (pediatric after-hour care), premium branding, et cetera. As the urgent care market becomes saturated, providers will need to continue to create a unique value proposition.

Just like bricks and mortar retailing is moving towards cyber shopping and its hyper-transparent pricing, the healthcare delivery system of the future will continue to move away from the acute care hospital setting into more accessible settings with more understandable pricing. Urgent care is one intergenerational example of this trend. Are you a health system executive looking for ways to meet the demands of a changing healthcare landscape? Make sure you are working with an expert who knows how to navigate all nuances of today’s fluid environment.

Christian Heuer is a Senior Manager with LBMC’s Healthcare Valuation Services. To learn more, contact him at 615-309-2391 or christian.heuer@lbmc.com.

 

[1] American Hospital Association data.

[2] Ibid.

[3] Urgent Care Association data.

[4] Emergency department visits based on public filings of top five publicly traded and top five not-for-profit acute care hospital systems, and LBMC’s proprietary database.  The percentage of ED visitors who are admitted to the hospital is increasing, based on LBMC data and anecdotal evidence.

[5] The Evolving Role of Retail Clinics, Rand Corporation Research Highlight

[6] https://mhealthintelligence.com/news/kaiser-ceo-telehealth-outpaced-in-person-visits-last-year

[7] LBMC research on publicly traded healthcare companies and nonprofit health systems.

[8] Health Insurance Coverage of the Total Population: The Henry J. Kaiser Family Foundation

[9] Urgent Care Association

[10] The Henry J. Kaiser Family Foundation

[11] Trends in Health Savings Account Balances, Contributions, Distributions, and Investments, 2011‒2016: Statistics from the EBRI HSA Database.  Employee Benefit Research Institute Issue Brief, July 11, 2017. No. 434.

[12] The Elements of Value, HBR, September 2016.

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