With the exploding growth of the urgent care franchise model, private equity firms have started jumping in on the trend. Private equity owned urgent care groups are expanding just as rapidly as urgent care locations themselves. Because of high demand and an increasing need for quality healthcare at affordable costs, urgent care franchises are popping up in every city, suburb, and rural area across the country. In fact, by some estimates, currently there are nearly 10,000 urgent care locations throughout the United States. With money to spend, private equity firms are getting in on the action.
In general, a private equity firm is an investment management company that can provide financial backing for opening new businesses – which can include an urgent care franchise. Private equity owned urgent care groups, specifically, are focused on paying high multiples for existing urgent care centers and building new centers from the ground up. According to some analysts, the urgent care industry ranked among the top five areas of interest for private equity investors in 2011. Some of these groups focus on large urban markets and others on small rural communities. Regardless of the market, they’re changing the landscape of the urgent care franchise by consolidating urgent care into very large groups.
Hospitals and insurance companies are also getting into the mix when it comes to buying up and consolidating urgent care centers. When large groups acquire and build urgent care franchises, they are able to spread the brand across the country quickly and efficiently. As an example, according to an article appearing in Practice Velocity, The Hospital Corporation of America in November acquired Urgent Care Extra’s Nevada operations, including 14 urgent care centers in Las Vegas, which added to the base of 24 Dallas-area CareNow centers acquired in an October 2014 deal. The company plans to use this kind of model to grow the urgent care franchise base across a footprint that consists of 165 hospitals in 20 states.
Investors are realizing the advantage of getting into the fragmented urgent care franchise business. According to Becker Hospital Review, slightly more than $29.6 billion, was reportedly invested in healthcare by private equity funds in the form of healthcare buyout deals globally in 2014 alone. However, there are some hurdles that can impede investment for private equity owned urgent care. An article from Law360.com notes that one of the main blocks to investment is the fact that the urgent care franchise landscape is so fragmented with a lack of available platforms of scale. “The overwhelming majority of urgent care sites are owned by participants with fewer than three centers. For example, 53 percent of urgent care companies have only one site, 18 percent have two sites, and then 9 percent have three sites. Further, many of the existing platforms of scale have already been acquired,” the piece notes.
In addition, if current urgent care owners are looking to sell their urgent care franchise or location, they should be cautious to ensure that they are receiving the appropriate compensation for their existing practices. Owners also need to understand the fine print of ownership transfer agreements when it comes to selling their location.