More Than 200,000,000 Annual Patient Visits At Risk.
Walmart, one of the world’s largest and most successful companies, announced recently that they are shuttering their Walmart Health unit, including 51 store-based clinics and a virtual care platform.
In addition, Walgreens has closed about 50 percent of its Village MD clinics, with both companies citing low third-party payer reimbursements and rising operating costs resulting in what Walmart referred to as “not a sustainable business.” If these two multi-billion dollar companies can’t make it in primary and immediate care, then it raises the question of who can.
While the large retailers—including CVS/Aetna and Amazon—tend to get most of the press related to their primary and immediate care investments, the reality is that the number of their clinics is dwarfed by the mostly independent urgent care clinics in the United States that are seemingly ubiquitous, but just as financially challenged.
According to the Urgent Care Association, there are more than 14,000 urgent care clinics in the United States, and more than 78 percent of Americans live within a 10-minute drive of one of them. These clinics provide a broad range of acute/episodic, preventive, and, in many cases behavioral health and primary care services to walk-in patients (and others virtually), usually seven days a week, and play an important role in controlling our nation’s spiraling healthcare costs. In 2022, urgent care clinics treated an estimated 206 million non-emergent cases, whereas emergency departments, for example, handled 131 million.
What many people don’t realize is that urgent care clinics are experiencing a level of extreme financial pressure that endangers their availability, range of services, and continued existence, as they—like Walmart’s and Walgreens’ clinics—have been caught between static reimbursement levels from commercial and government payers and rising labor and supply chain costs stimulated by COVID-19 and other factors.
Impact of COVID-19 on Urgent Care
As the former CEO of a large operator of urgent care clinics, I can attest to the fact that our care teams played a critical role on the front lines of the pandemic. During the early lockdowns, our patient volume decreased significantly, but it rapidly accelerated to unprecedented levels as the lockdowns were lifted. Industry estimates are that patient volumes at urgent care clinics generally increased about 60 percent between 2019 and 2020.
While the dramatic increase in patient volume might seem like it was good news for urgent care clinics—as it certainly was for the many COVID-19 patients who depended upon them for diagnosis and vaccinations—the pandemic put tremendous pressure on these healthcare delivery outlets.
Being on the front lines of a global pandemic was very challenging for urgent care providers and other clinic team members. Every day, they faced long lines of sick, frightened and in some cases disagreeable patients, while wearing uncomfortable personal protective equipment that included masks, gowns, face shields, and gloves. I have tremendous respect for these frontline workers, who were truly healthcare heroes during a time of great national need.
As a result of the relentless pressure, it has been estimated that 20 percent of frontline healthcare workers have left the industry altogether. This, in combination with the need to manage surging patient volumes, caused a significant supply / demand imbalance that, in turn, caused labor costs to increase by roughly 30 percent (labor costs generally account for roughly 75 percent of total clinic operating costs). Meanwhile, the cost of third-party services and supplies also increased significantly, roughly doubling, and both these supply chain costs and labor costs have been permanently reset at these higher levels in the post-pandemic era.
I understand and accept that frontline healthcare workers who elected to stay in urgent care under such challenging conditions deserve increased compensation. However, the significant and persistent increase in urgent care expenses has put unsustainable financial pressure on operators because—as compared with most other types of businesses—urgent cares and other healthcare providers are not able to pass increased costs on to customers/patients because the vast majority of their revenues are fixed by long-term contracts with third-party payers.
Between the Rock and the Hard Place
This has left many urgent care operators in dire financial straits at a time when our nation needs their clinics more than ever to provide high-quality, convenient, and affordable acute-episodic preventive and behavioral care, as well as primary care in light of the growing shortage of primary care physicians,
We also need urgent care clinics to help control healthcare costs. It has been estimated that approximately 32 percent of patients who get treated in emergency rooms could be treated at an urgent care clinic and for a fraction of the cost. A 2021 study found that the average cost of an emergency room visit was $1,646, while the average cost of an urgent care visit was $171. Another study showed that emergency room utilization decreased by 17 percent when there was an urgent care clinic in the area.
Despite the fact that urgent care clinics are highly and increasingly valued by patients and are helping to control our nation’s healthcare costs, reimbursement levels from commercial and government payers have not meaningfully increased since before the beginning of the pandemic even though urgent care costs have increased substantially—to the point that many clinics have become consistently unprofitable.
Prompt Action Is Needed
This dire situation must be addressed quickly—with leadership at the federal level through the Centers for Medicare & Medicaid Services (CMS)—or the urgent care clinics many citizens (including chronically underserved Medicaid enrollees) have come to depend upon will disappear, as some already have.
Urgent care clinics—more than 50 percent of which are under sole (usually physician) ownership—are not like large hospitals and health systems that can compensate for losses in one area of their operations with profits from another. Nor do urgent care operators have a strong lobbying presence in Washington or clout with the largest third-party payers. Conversely, urgent care clinics generally are small businesses with lean operating models and limited resources that must be able to cover their costs on a stand-alone basis.
I am no longer directly involved in the urgent care sector and do not have a financial stake in it, but I continue to be a strong advocate because I have seen firsthand how valuable a role urgent care clinics play in our healthcare ecosystem and yet how perilous their financial condition has become. It would be nearly impossible to find comparable outlets for more than 200,000,000 annual patient visits, and prompt action is required to ensure the continued viability of the thousands of urgent care clinics that have proven so effective in managing them.
