July 2015: Consolidation, Competition and Confusion – 2015 Mid-Year Review

If you are reading this publication, you are more than likely a hospital system or medical group executive interested in making the right decisions in this converging, mass-market space of on-demand, low-acuity medical care. But if you are looking at both the urgent care and retail clinic markets, there are mixed signals to sort out. In the first six months of 2015 the urgent care market continues to show gains. When run correctly, not only can urgent care clinics show strong returns, but they can be highly strategic in the broader competitive dynamics of a health system’s service area. For these reasons, we continue to recommend entering or expanding in this space, either directly or through joint ventures with established independent operators.

The retail clinic market continues to show conflicting signs between strength and weakness.  With few exceptions, we recommend extreme caution. Hospital systems have historically made mistakes in this market largely because they fail to look at what is now a substantial history of experience.

The first half of 2015 provides evidence that the two markets couldn’t be on more different paths.  Urgent care shows steady growth, predictable margins and private investment from all sectors: private equity, angel investors, health insurers and health systems.  The retail clinic market, on the other hand, can best be described as a strange mix of those who have burned enough cash and are exiting the market, and those who continue to believe that it will see growth.