Health systems partnering with urgent care clinics can strengthen brand, attract new revenue

The way health systems interact with patients has been steadily changing to become more like retail services. Call it the "retailification" of healthcare: People are becoming accustomed to interfacing with health services that are accessible, convenient and have a strong service component attached to them.

Urgent care clinics, which have emerged in greater numbers over the past few years, cater to this growing need for consumer convenience. Health systems understandably want in on the action, but rather than make a go at creating urgent care clinics themselves, oftentimes the best strategy -- from a financial and strategic perspective -- is to partner with the ones that already exist.

The goal is to treat the patient as a customer, as opposed to the historical model of healthcare, which revolved primarily around the physician or provider and what was convenient for them.

"Urgent care has been proliferating for a number of years," said Wyatt Ritchie, managing director at Cain Brothers, an investment banking firm that focuses on the healthcare services industry. "Health systems have been in and out of urgent care. In the past three to five years there's been a growing understanding of the need to get into the community, not have such a centralized infrastructure, and be more service oriented."

THE CHALLENGES OF GOING IT ALONE

Some health systems have tried to get into the urgent care space on their own, but historically they haven't been very successful at it, said Ritchie. It's generally not what they do well.

"I've never seen a health system manage their urgent care like a strategic business unit," said Ritchie. "Typically there are a handful of clinics in a market that report to the hospital CEO in that market, so it's really an afterthought from the hospital's point of view. These are not big dollars from the economics of the situation, so it's not a huge focus of their day-to-day effort. And for a big centralized health system, it's a very different DNA in terms of how to run these businesses. They don't have the historical chops to do it."

In true partnerships, there's capital that's contributed, and the health system is typically leveraging the expertise of the urgent care clinics, particularly when it comes to things like staffing. The system also has an opportunity to leverage its own brand -- they may have a great brand reputation already, but an urgent care partnership can amplify that by providing that all-important aspect of convenience to patients.

If a customer receives subpar service in an urgent care setting, it can damage a health system's brand reputation in the long term. It's the way the industry is going, Ritchie said.

"You interface with a service and they might say, 'The physician has a spot at 3 o'clock on a Thursday a month from now,'" he said. "You've got to rearrange your whole life. That's the only area of life where that's the case."

CREATING A STRONG PARTNERSHIP

The first step in creating a strong partnership is simple: picking the right partner. The health systems that do it right will conduct a series of interviews in an attempt to find strategic alignment around what the system is trying to accomplish with the urgent care provider. This entails a meeting of the minds from each organization.

"We're seeing situations where there's joint economic ownership, with risk at stake, so both parties are aligned economically," said Ritchie. "And you try to coordinate some level of clinical integration."

This involves setting up the appropriate infrastructure. The health system needs to feel like it's getting a strategic advantage from being in an urgent care environment.

For the partnership to be ultimately successful, certain health systems may need to tweak some of the ways in which they operate. For example, some systems like to control the minutiae of day-to-day operations, which can be a struggle when attempting to edge into the urgent care world. Relinquishing some control can go a long way toward lubing the gears of a successful partnership.

"Health systems can be particularly strong in a market, which gives them contracting power, and sometimes there's a temptation to leverage contracting power to get better rates from payers," said Ritchie. "But you might be defeating the purpose of creating low-cost access to care."

THE INVESTMENT PICTURE / RESULTS

Those who do urgent care on a standalone basis can be successful, but there aren't a lot of barriers to entry, Ritchie said. Investors in particular are interested in creating barriers to entry -- some kind of advantage, something that distinguishes their version of urgent care from the average Joe.

Partnerships can be helpful in establishing that. It's proven to be attractive to investors; they want to ensure the partnerships don't become too onerous, but they see advantages in the market long-term.

For health systems that have successfully established urgent care partnerships, the results have been satisfying from a dollars-and-cents perspective.

"There hasn't been any question that most of these health systems have seen pretty drastic improvement in their financial results," said Ritchie. "It's proven itself in the financial performance. So far it's been pretty strong and pretty compelling."

Health leaders can take it as a lesson: They've got to improve their performance when it comes to customer services. Consumers are expecting, and demanding, more than they have in the past.

"I expect to see more 'retailification' of healthcare," said Richie. "Obviously it's not going to be for heart surgery or some of these things that are more acute, but for things that are not acute, we'll continue to see a trend towards that."

Twitter: @JELagasse

Email the writer: jeff.lagasse@himssmedia.com