You probably got into medicine because you wanted to make a difference in the world. You recognized that urgent care fills a gap in the healthcare market. You get to interact with a diverse range of patients, fulfilling your own vision of how healthcare should be done.
Now that you’ve been up and running for a while, the administrative burden is keeping you from what you love: practicing medicine. It’s time to decide whether to hold and maintain or grow. How do you take your practice to the next level?
Growth takes risk and thinking strategically. If you find yourself at the point of wanting to grow, but not quite sure how to do it, then you’ll want to read further.
Current Landscape for Urgent Care Practices
Before figuring out how to create a growth plan or implementing an acquisition strategy, it is important to know the lay of the land. Knowing who’s buying and why is an important step toward effective negotiating. Knowing why practices are selling can position you to make an attractive offer that beats out your larger competitors.
- Hospitals and health systems are one of the most active buyers of urgent care centers. This enables them to diversify services, handle consumer demand or simply generate a different revenue stream. It is also a way to more easily enter different markets and drive referral business to other parts of the hospital system.
- Large Physician Groups have been actively acquiring practices for some time now. These groups have saturated many urban and suburban markets. Such groups offer help with branding, operations, and administration—especially staffing, contracting, purchasing, revenue cycle management, and so on. Quite often, such large groups are backed by Private Equity investors.
- Private equity firms are a type of financial sponsor that invests in the private equity of other companies. These firms often invest in industries, such as urgent care, that are fragmented, meaning that there are a lot of industry participants. Their goal is often to bundle a few practices together with the aim of one day selling to a larger buyer, usually either another private equity group or a large strategic investor such as a hospital or a large group.
- Insurance companies, such as United Healthcare and Anthem, have been acquiring urgent care centers, too. Doing so helps them control their cost of services and improve operating efficiencies. In return, they offer sellers the branding, financial stability, and economies of scale of a larger entity.
- Smaller practices frequently choose to sell, meanwhile, to reduce administrative and regulatory burdens, simplify marketing and branding, or have more financial stability.
Ways to Grow Your Practice
Now you know who is buying and why. What about growing? There are several strategies, and the right one depends on your circumstances and goals.
1. Stay Independent & Grow Organically. You can choose to stay a lone wolf and expand your existing practice. You can grow in your existing location or build a new practice from scratch. If your core services can sustain expansion, you have some options:
- Add more providers or ancillary services
- Upgrade your facility
- Refine internal processes
- Market more aggressively
- Target a new patient demographic
- Establish new locations locally and regionally
2. Grow Through Merger or Selling a Partial Stake. Another option is to merge with another practice or sell a partial ownership interest in your current practice. This involves the following:
- Do a “check-up” on your practice in preparation to sell
- Know the potential buyers and their interests
- Understand the phases in the Merger & Acquisition process
- Negotiate effectively
3. Grow Through Acquisition. You can play the acquisition game even if your urgent care center isn’t a behemoth. Do you know a physician who’s retiring? Maybe there’s a clinic in an attractive neighboring market. Before you consider this option, weigh the risks and benefits properly.
- Develop a strategic plan
- Identify and screen potential practices to buy
- Perform due diligence on the target company
- Make an offer and negotiate
- Have a plan to integrate the acquisition into your existing practice
- Repeat the process (assuming you’re going for an empire)
Alternatives to Merger & Acquisition
Maybe staying independent isn’t the way forward, but you aren’t sure about merging with or buying another practice. Partnerships, joint ventures, affiliations and servicing relationships, or forming a common corporate “parent” with another entity are viable alternatives. When considering one of these alternative arrangements, carefully research the legal and tax implications of a proposed operating agreement and organizational structure. Think about ways you can collaborate to benefit the community.
Is autonomy in your medical practice important to you? What will benefit your patients most? As you consider the options, be clear about your own values. As the proverbs goes, “where there is no vision, the people perish.”
Luis de la Prida, MBA, is Managing Partner and Certified Merger & Acquisition Advisor with NYBB Group, LLC.