How Urgency Will Save Hospitals

Hospital operators including HCA (HCA) and Tenet Healthcare (THC) are opening urgent care centers to fend off competition from CVS Caremark's (CVS) MinuteClinics and Humana's Concentra.

Jul 6, 2014 at 1:45PM

In the next five years the number of urgent care clinics operating across the United States is expected to surge to 12,000, up from about 10,000 today.

Many of those clinics will be owned by hospital chains like HCA (NYSE:HCA) and Tenet Healthcare (NYSE:THC) which are struggling to grow earnings amid government regulation and payer belt-tightening. As a result, urgent care centers may be the most important shift in the hospital industry this decade.


Source: Tenet Healthcare

Care where and when you need it
Urgent care clinics are fast becoming an important piece of America's health care system. They serve more than 160 million visitors a year and represent a market worth more than $15 billion annually.

Their success is owed in part to the hospital industry's failure. Long waits in emergency rooms for breaks, sprains, and the flu coupled with triple digit out-of-pocket invoices are making hospitals the care-of-last-resort.

In the past, many ER patients were uninsured and unable to make payments, resulting in steep write-offs for hospitals like HCA and Tenet. But thanks to the creation of the Affordable Care Act's marketplace and the expansion of Medicaid in many states, more than 8 million people who may not have been able to pay previously, could be paying now.


Source: CVS MinuteClinic

However, instead of paying hospitals they're increasingly paying for care at clinics like those being opened by pharmacy chain CVS Caremark (NYSE:CVS) 

CVS continues to open in-store health care clinics staffed with nurse practitioners that offer services such as flu shots, immunizations, blood pressure testing, and, more recently, care for chronic disease. CVS operates clinics in more than 800 of its stores and plans to nearly double that amount by 2017. 

Reinventing themselves
Faced with competition from venture capital backed independent urgent care facilities like Solantic's CareSpot, a 56 center urgent care chain based in Florida, on one side and CVS' clinics on the other, hospitals are quickly figuring out that they can make money by opening conveniently located stand-alone urgent care centers.

For example, HCA is one of the biggest hospital operators with $8.8 billion in quarterly revenue and it's expanding into what it calls "integrated delivery" health care.

In the past three years, HCA has spent more than $5.5 billion opening 200 new facilities including stand-alone ER's, urgent care centers, surgery centers, and provider clinics. In Nashville, HCA operates 11 urgent care centers, which complement 10 of its hospitals and more than 40 provider locations. HCA expects to spend more than $2 billion this year on growth initiatives that are likely to include opening more urgent care centers.


Source: Tenet Healthcare

Tenet Healthcare is similarly investing in urgent care as outpatient facilities account for an increasingly larger proportion of its revenue. As a result, Tenet launched a new national urgent care brand in May named MedPost. Tenet already operates 23 MedPost Urgent Care centers in eight states including California and Florida, and Tenet plans to double the number of its locations by year end.

Other hospital systems are embracing the strategy too.

Dignity Health System, which is the fifth largest hospital operator in the U.S. and the biggest hospital operator in California, spent over $450 million acquiring the 172 center U.S. HealthWorks chain in 2012. Dignity has since grown the business to more than 200 locations.

New York's Mount Sinai Health System operates 10 clinics with a vision of them serving as a referral source for its other facilities, helping boost patient care for everything from joint replacement to chronic care.

Tenet seems to agree that urgent care will become an important source of future referrals. According to MedPost's Chief Executive Officer Alan Cason, "Continuity of care is also important. We make timely referrals for patients to obtain follow-up and specialty care when needed."

That suggests that hospitals believe there's a much larger (and more lucrative) opportunity available than simply providing a quick x-ray or stitching a cut at these centers.


Source: HCA Healthcare

Protecting its moat
The pressure for hospitals to act is also being driven by insurers that are increasingly blurring the lines between payer and provider.

In 2010, the large health care insurer Humana (NYSE:HUM) acquired the 300 location urgent care chain operator Concentra for $800 million. That gives Humana a cheaper-than-a-hospital option to refer its members to.


Source: Humana Concentra

The cost of providing care for strep throat in an urgent care center is 77% less than in an emergency room and the savings are similar across common ailments including allergies, pink eye, and bronchitis. But it's not just the cost-= savings that make Concentra attractive to Humana. By taking care in house it transforms care from an expense that it has to pay into a profitable business.

Fool-worthy final thoughts
Urgent care centers that are properly located and run are proving to be profit friendly, generating a quarter of a million or more in annual profit per location.

That profit comes in spite of their lower prices, higher rents tied to premium locations, and payrolls that include doctors, nurses and nurse practitioners. Since 10,000 baby boomers are turning 65 every day and they're going to need more care, I expect that hospitals like HCA and Tenet will continue to grow their urgent care footprint in order to maintain market share and offset threats from pharmacy chains including CVS and insurers like Humana. 

This coming blockbuster will revolutionize health care even more than clinics
The best biotech investors consistently reap gigantic profits by recognizing true potential earlier and more accurately than anyone else. Let me cut right to the chase. There is a product in development that will revolutionize not how we treat a common chronic illness, but potentially the entire health industry. Analysts are already licking their chops at the sales potential. In order to outsmart Wall Street and realize multi-bagger returns you will need The Motley Fool's new free report on the dream-team responsible for this game-changing blockbuster. CLICK HERE NOW.

Todd Campbell has no position in any stocks mentioned. The Motley Fool recommends CVS Caremark. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.

Compare Brokers