Urgent Care Overview

Transcription

Urgent Care Overview
McGuireWoods
Investing in Urgent Care: Key Business and Legal Considerations
November 14, 2012
The Allen Mooney & Barnes Companies
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Urgent Care
Overview
Urgent Care Overview – Intro to the Sector
Healthcare provided on a walk-in, no appointment basis for acute illness or injury that is not life or limb
threatening and is either beyond the scope or availability of the typical primary care practice or retail
clinic.
Urgent Care
Patients
 High Quality
 Lower Cost Setting
 Convenience and
Primary
Care
Offices
No
Appointment Necessary
Retail
Clinics
Payers
Emergency
Rooms
 Greater Access
 Low Cost Alternative to the ER
 Higher Range of Acuity
Average wait time for an appointment with a primary care physician exceeds 20 days
The average cost difference between an ER visit and an urgent care visit can be substantial
Approximately 120 million ER visits/year - 71% are unnecessary, and could be treated at an urgent care
center
Sources: National Hospital Ambulatory Medical Care Survey: 2006 Emergency Department Summary; Press Ganey 2010 Pulse Report Emergency Department –
Patient Perspectives on American Healthcare
Investment Banking
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Urgent Care
Overview
Urgent Care provides the right balance of cost and quality while covering a wider range of services to
patients.
Cost per Episode
Patient Satisfaction
$570
64%
65%
$600
61%
60%
$400
$200
63%
$110
$156
$166
55%
50%
$0
Source: Annals of Internal Medicine. 1 September 2009;151(5):321-328
Investment Banking
55%
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Urgent Care
Overview
Lower Acuity
Higher Acuity
Primary Care
Care
Provided
Customer
Service
Issues
Preventative and family care
administered by PCPs
Convenience: Low
Delivery of care: High
Retail Clinic
Urgent Care
Emergency
Rooms
Time sensitive,“ common
cold” care administered by
RNs or nurse practitioners
Time sensitive, low-tomid acuity care
administered by
physicians, PA’s, RNs,
and nurse
practitioners
Emergency care for
serious, high acuity
patients
administered by ER
physicians and RNs
Convenience: High
Delivery of care: High
Convenience: Low
Delivery of care:
High
Convenience: High
Delivery of care: Low
 Shortage of PCPs
 Appointments impair the
ability to deliver timely
care
 Generally there is a lack
of mid-acuity care (Xrays, stitches, etc.)
 Typically physicians not
on-site
 Typically do not
diagnose / treat midacuity patients


Patient awareness
of the urgent care
model
Range of services,
convenience,
speed of delivery



Overcrowding
Long wait-times
for nonemergency
patients
Expensive
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Investment Banking
Urgent Care
Overview
 Urgent Care, as defined by the Urgent Care Association of America, is healthcare provided on a walk-in, no
appointment basis for acute illness or injury that is not life or limb threatening and is either beyond the scope
or availability of the typical primary care practice or retail clinic.
 Urgent Care Centers (UCCs) have been operating in the U.S. since the 1980’s.
Currently, in the United
States, the number of urgent care centers range from 4,000 to 9,000 (based on level of adherence to criteria
developed by the Urgent Care Association of America) and an estimated 700-800 facilities providing walk-in
urgent care medical services open each year.
 The industry is growing quickly based on a number of factors discussed later (see below chart for center and
revenue growth) Urgent Care industry is estimated at ~$13B and expected to grow to ~$18B by 2017.
Growth of the Urgent Care Sector
$17,000
10,434
$15,000
$13,000
7,608
8,396
9,428
11,000
9,000
8,000
$17,936
$7,000
$7,188
5,989
$8,014
$8,865
$9,359
$10,096
12,000
10,000
6,502
5,687
11,714
9,899
6,995
$11,000
$9,000
8,066
8,700
9,022
10,903
11,350
$11,143
$11,915
$12,287
$13,012
$13,689
$14,332
$15,149
$15,996
$16,806
7,000
6,000
5,000
4,000
$5,000
3,000
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Revenue ($mm)
Sites
Sources: Urgent Care Association of America, IBISWorld
Investment Banking
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Urgent Care
Overview
Urgent Care Overview – Ownership Overview
 The UC industry is highly fragmented with very few large scale operators. As evidenced by the below tables
and competition tables on the following pages, the large majority of urgent care providers have one center.
 Urgent care centers and chains are generally owned by physicians, groups of physicians, hospitals and
corporations
 The number of operators with more than 10 centers is very low – along with the numerous industry tailwinds,
this is a key driver in the large valuations scenarios in the marketplace for urgent care acquisitions.
Urgent Care Ownership
Owners
Physician or Physician Group
Hospital
Corporate
Non-Physician Individual
Franchise
Total
Sites per Ownership
% of Total
50.0%
28.0%
14.0%
7.0%
1.0%
100.0%
No. of Sites
1
2
3
4-10
10+
Total
Sources: Urgent Care Association of America, IBISWorld
Investment Banking
% of Total
53.0%
18.0%
9.0%
14.0%
6.0%
100.0%
6
Urgent Care
Overview
There is a Select Group of Large Operators
Source: Company websites
Investment Banking
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Urgent Care
Overview
There is a Select Group of Large Operators, Cont’d
Source: Company websites
Investment Banking
8
Urgent Care
Overview
Major Themes Driving Urgent Care Industry
Growth continues to be driven by Two Unsustainable and Irreversible Trends
Increasing
Healthcare
Costs
Decreasing
Access to
Care
“As the health system continues to struggle with costs and capacity, traditional care delivery
models will give way to alternative models of care outside of physicians’ offices and
hospitals...”
PricewaterhouseCoopers’ list of Top 10 health issues
– February 2010
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Investment Banking
Urgent Care
Overview
Demand Drivers - Increasing and Shifting Healthcare Costs
 Healthcare is one of the largest and fastest growing segments of the US economy
─ As of 2011, HC accounted for $2.7 trillion of annual expenditures, representing more than 17%
GDP, and is expected to grow to >$4.6 trillion by 2020
─ Physician and Clinical Services – which is the second largest expense category and the one most
relevant to UC industry– accounted for ~$529 billion in 2011, or approximately 20% of the nation's
total healthcare expenditures, and is expected to grow to >$800 billion by 2020
 Health insurance costs are increasing and being shifted from employers to employees.
─ The average cost of insurance coverage for a family went up 113% from 2001 to 2011 with the
worker contribution increasing 131% during this same time period.
─ The percentage of covered workers enrolled in a plan with a general annual deductible of $1,000
or greater more than tripled from 2006 to 2011.
Average Annual Premiums for Family Coverage
$15,073
113%
Premium
Increase
$10,944
131%
Worker's
Contribution
Increase
31%
27%
15%
22%
$1,787
Worker Contribution
25%
20%
$4,129
2001
35%
30%
$7,056
$5,269
% of Covered Workers with Deductibles of $1,000 +
2011
Employer Contribution
18%
10%
10%
12%
5%
2006
2007
2008
2009
2010
2011
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Investment Banking
Urgent Care
Overview
Summary of Why UC Can Help Healthcare
Widening PCP Shortage…
…and overcrowded ED’s…
 Current shortage of ~9,000 primary
care physicians in the US
 Gap expected to widen with increased

 From 1997 to 2007, number of ED visits


health care coverage under Patient
Protection and Affordable Care Act
(PPACA)
– ~30,000 by 2015
– ~45,000 by 2020
– ~65,000 by 2025
Declining family practice residency
demand (2,329 of 2,555 open positions
filled in 2009)
Physician Supply and Demand
primary care as care-coordinator but
many currently have no medical home
People with Private Health Insurance
Visits in millions
People in millions
4,900
220.0
4,800
210.0
4,700
4,600
4,500
180.0
2017
2015
2013
ED's
2011
ED visits (millions)
190.0
2009
4,400
200.0
2007
135.0
125.0
115.0
105.0
95.0
85.0
75.0
2005
Physician Supply
Physician Demand
 PPACA signed March 2010 will take
effect by 2014
 Expands healthcare coverage to ~32
million Americans over next 10 years
 Focus of act is to increase utilization of
2003
2008 2010 2015 2020 2025
increased by 23% while number of
hospitals and EDs decreased by ~9%
ED visits number over 120 million
annually
Average 2010 ED wait time grew to ~4
hours
ED Visits and Number of EDs
People in thousands
950
900
850
800
750
700
650
…expected to get worse?
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Investment Banking
Urgent Care
Overview
Demand Drivers – Physician access vs. patient demand
Key Themes
 Current shortage of ~9,000 primary care physicians in the US
 Gap expected to widen with increased health care coverage under Patient Protection and Affordable
Care Act (PPACA)
– ~30,000 by 2015
– ~45,000 by 2020
– ~65,000 by 2025
 Declining family practice residency demand (2,329 of 2,555 open positions filled in 2009)
Physician Supply vs. Demand
950
900
850
800
750
700
650
2008
People in thousands
2010
2015
2020
2025
Physician Supply
Physician Demand
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Investment Banking
Urgent Care
Overview
Demand Drivers – Physician access vs. patient demand
 As of June 2011 there were more than 66 million people living in a primary care health professional shortage
area in the United States according to the Department of Health and Human Services (HHS). In addition, a
2009 study by the National Association of Community Health Centers (NACHC) placed the number of
individuals “lacking access to primary care” at 60 million, an increase of over 4 million from 2007 levels.
 For Americans with a regular physician:



57% report having access to same or next-day appointments with that physician
63% report difficulty of getting access to care on nights, weekend or holidays without going to an
emergency room
20% of adults waited 6 days or more to see a doctor when they were sick in 2010



Primary care physician shortages of ~45,000 by 2020
Growing population of patients with greater share of healthcare needs
Increase in patients with insurance due to the Patient Protection and Affordable Care Act (PPACA)
 In the coming years, it is believed that physician access will become increasingly more difficult due to:
 The typical primary care physicians’ role is expected to expand in the future, which will further limit the time
available to see scheduled patients. This will likely leave them with 2 options:
 Expand their own office hours and accept more unscheduled patients
 Partner with urgent care centers to handle episodic visits in a collaborative and mutually supportive
manner
 Family Practice residencies also face a continued downward spiral of applicants to their training programs. Of
the 2,555 open positions in 2009, only 2,329 positions were filled. Additionally, fewer medical school seniors
selected Family Medicine as their specialty than in 2009 compared to 2008 (1,083 vs.1,172).
Sources: Urgent Care Association of America, White Paper ‘The Case for Urgent Care’
Investment Banking
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Urgent Care
Overview
Demand Drivers – Emergency Department Realities
Key Themes
 From 1997 to 2007, number of ED visits increased by 23% while number of hospitals and EDs
decreased by ~9%
 ED visits number over 120 million annually
 Average 2010 ED wait time grew to ~4 hours
ED Visits and Number of EDs
ED visits (millions)
ED's
135.0
4,900
4,850
4,800
4,750
4,700
4,650
4,600
4,550
4,500
4,450
4,400
125.0
115.0
105.0
95.0
85.0
75.0
Visits in millions
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Investment Banking
Urgent Care
Overview
Demand Drivers – Emergency Department Realities
 Urgent Care Center medicine growth and development has been fueled by the public’s desire for immediate
care and has been accelerated by patient frustration over long waits in the emergency department for nonemergency care and a reduction in available primary care appointments.
 From 1997 to 2007, the number of ED visits increased by 23% while hospitals and emergency rooms
decreased by ~9%. According to the U.S. Centers for Disease Control and Prevention, this trend of increasing
ED visits has jumped drastically in recent years as emergency room visits reached over 136 million in 2009,
up from 124 million in 2008. This growth represents the largest increase since the government started
tracking the figures in the early '90s. Additionally, in 2010 the average waiting time in ED’s had risen to
approximately 4 hours.
 In 2008, persons aged 18-44 years old had the highest overall rate of ED visits (51%), however those aged
65+ had the highest rate per thousands (41%) of ED visits. By 2030, the number of elderly is expected to
climb to 72.1 million or 19.3% of the total population. Also by 2030, the number of people aged 85 years and
older is expected to increase from 5.5 million to 8.7 million due to increasing life expectancy. This increase in
life expectancy will not only increase demand for healthcare services, but also for innovative and more
sophisticated methods of providing those services.
 With fewer emergency rooms and an increase in emergency room visits in addition to the decrease in primary
care physicians, the demand for walk-in immediate care should continue to grow.
Investment Banking
Sources: Urgent Care Association of America, AHA Trendwatch Sourcebook 2010, American Academy of Urgent Care Medicine, U.S. Census Bureau
and Community Health Systems, Inc. (NYSE:CYH) 10-K
15
Urgent Care
Overview
Demand Drivers – Increase in Insured Lives Expected
Key Themes
 PPACA signed March 2010 will take effect by 2014
 Expands healthcare coverage to ~32 million Americans over next 10 years
 Focus of act is to increase utilization of primary care as care-coordinator but many currently have no
medical home
220.0
210.0
205.0
201
201
202
202
193
193
194
195
2011
2012
2013
195
195.0
214
204
201
2010
200.0
200
213
2017
210
2016
215.0
190.0
185.0
180.0
2015
2014
2009
2008
2007
2006
2005
2004
2003
People in millions
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Investment Banking
Urgent Care
Overview
Recent Trends in Urgent Care that Will Change the Sector
Hospitals Partnering
Recent Managed Care Partnerships
 Hospitals currently own a growing segment of
the urgent care market.
 Managed Care is seeing an important trend to
lower ER utilization.
 Many see it as aiding in ACO efforts, diverging
 Over
Select Partnerships
Select Partnerships
 July 2012 CareSpot (formerly Solantic) formed a
 Wellpoint
 Central DuPage Hospital in Chicago and North
 Blue
 Allina Hospitals and Clinics in Minnesota has
 Blue
ER overcrowding, and after hours care, amongst
others.
JV with HCA in order to build urgent care centers
in Tennessee.
Memorial Hospital in Minneapolis both have a
chain of stand-alone urgent care centers
surrounding the hospital to fend off competition.
entered into a contractual arrangement with
MinuteClinic, which is located in CVS
Pharmacies.
the last few years, some important
transactions have been announced
invested in Physicians Immediate
Care, which operates 20 clinics in Illinois,
Oklahoma and Nebraska
Cross Blue Shield of North Carolina
recently invested in FastMed Urgent Care, which
operates clinics in NC and AZ.
Cross Blue shield of
invested in Doctors Care.
South Carolina
 Humana
acquired Concentra, who has
increasingly become more focused on urgent
care.
17
Investment Banking
Urgent Care
Overview
Select Trends Affecting Health Systems
 Advent
and growth of Accountable Care Organization
(ACO) model
– Private market attempts have been on-going since
2006
– March 2010, PPACA authorizes CMS to create
program for ACOs to contract with CMS
– March 2011, DHHS sets actual guidelines ACO’s
must meet to contract with CMS
– Currently 221 ACO’s in 45 states as of June 2012,
a 35% increase from the 164 in 41 states identified
in September 2011
 Physician consolidation accelerating
– Summer 2012 - U.S. MD Holdings forming publicly
traded hospital and physician group
– January 2011 - THR acquisition of Medical Edge
ACOs by Sponsoring Entity
CommunityBased
Organization
2%
Insurer
13%
Physician
Groups
32%
Hospital
Systems
53%
 Bundled payments / direct contracting increasing
– Studies by CMS and Harvard Medical
School point to lower healthcare spending
with improved healthcare quality in recent
programs
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Investment Banking
Urgent Care
Overview
Hospitals Acquiring Physician Practices
 Hospitals and health systems have emerged as an attractive suitor for many urgent care providers. Key issues
to consider around these transactions are fair market value, stark, and anti-kickback concerns.
 As the below chart indicates, hospitals are acquiring physician practices at a rapid clip and consolidation is
expected to intensify with the PPACA.
 Urgent Care is seen as a way to lower ER utilizations, decrease secondary visits, promote the medical home
concept, lock in additional downstream referrals to hospitals while competing with bundled payments and
ACOs.
Divestitures
Acquisitions
History of Hospital Acquisitions
Source: The above graph is from VMG Healthcare
Investment Banking
19
Urgent Care
Overview

Other Considerations – Referral Patterns in the Industry
Typical Referral Pattern in the Urgent Care
Industry
─
Percent of Centers Referring Percentage of Patients to
Outside Facilities
In the 2010 UCAOA Benchmarking study
90% of urgent cares maintained a list of PCP
15%
referrals and 100% maintained a list of
specialist referrals.
–
37%
The graph on the rights shows the percent of
centers referring percentage of patients to
35%
outside facilities
16%
•
It is clearly indicative of strong
potential
< 10%
21 - 60%
10 - 20%
61 - 100%
20
Investment Banking
Urgent Care
Overview
Acquirer
Managed Care Focusing on Urgent Care
Announced
9/12/12
7/26/12
2011
11/22/10
Target
Description
BCBSNC announced an minority investment into FastMed. The terms of
the deal were undisclosed.
Wellpoint and LLR Partners, a private equity investment firm, purchased
a controlling interest in Physicians Immediate Care (PIC). At the time of
the acquisition, PIC had 20 clinics, mostly located in Illinois in and
around the Chicago area.
Highmark made a minority investment into MedExpress in 2011.
According to industry sources, the investment amounted to a $50mm
investment for a 10% stake.
Concentra, which has annual revenue of about $800 million, provides
urgent care, physical therapy and wellness services from more than 300
medical centers in 42 states. It also operates more than 240 worksite
medical facilities.
Humana paid approximately $790 million for
Concentra. Concentra continues to diversify into urgent care through
several small scale acquisitions.
21
Investment Banking
Urgent Care
Overview
Managed Care has Also Been Partnering with Providers
 In the past
year, M&A between payers and providers has increased blurring the lines between the
traditionally opposing sides of healthcare.
 In an attempt to lower current costs, and avoid future unnecessary care, payers have been partnering with
and aligning incentives to providers with the goal of increasing the efficiency of care while still maintaining
the quality of care, and vice versa.
Acquirer
Announced
Target
Description
8/11/11
Partners, the largest hospital and physicians network in Massachusetts,
acquired Boston-based nonprofit insurer Neighborhood Health Plan.
8/31/11
UnitedHealth's health services unit, OptumHealth, will handle nonclinical operations at Monarch HealthCare
8/22/11
6/28/11
Wellpoint acquired for-profit Medicare contractor, CareMore. CareMore
provides integrated coordinated care at its 26 clinics throughout
California, Nevada, and Arizona. The acquisition allowed WellPoint to
become more deeply involved in direct patient care, to help improve
health while preventing medical bills from rising.
With the acquisition of WPAHS, Highmark will focus on continuing to
provide quality care and efficient service as a mean to reduce costs.
Approval WPAHS
Deniedwill remain separate entity from Highmark as WPAHS will
continue to work with other payors.
22
Investment Banking
Urgent Care
Overview
Discussion on a Few Select Transactions
23
Investment Banking
Urgent Care
Overview
AMB’s Valuation Observations on the Urgent Care Market
Small Players
Medium Size
Players
Large Regional
or National
Regional
Players
Typical Urgent Care EBITDA Multiples
18x
15x
15x
12x
12x
12x
8.x
9x
8.x
6x
5x
5x
3.5x
3x
1-3 centers
4-6 centers in similar geography
7-10 Centers in attractive geography
Quickly growing into additional regions
with strong operating margins and
prospects
Note: The above chart represents AMB’s belief in what participants may be willing to pay for certain assets and in no way is meant to
provide specific valuation advice. Valuation is determined by a number of factors.
24
Investment Banking
Urgent Care
Overview
Important Disclosures
This document is being provided in connection with an actual or potential mandate or engagement and may not be used or relied upon for
any purpose other than as specifically contemplated by a written agreement with the Allen, Mooney & Barnes companies. This document
is intended solely for the use of the party to whom it was provided to and is not to be disclosed (in whole or in part), summarized, reprinted,
sold, redistributed or otherwise referred to without the prior written consent of the AMB companies.
Allen Mooney & Barnes Brokerage Services (“AMBBS”) is a broker/dealer member of FINRA and SIPC. Allen Mooney & Barnes
Investment Advisors, Inc. (“AMBIA”) is an investment adviser registered with the U.S. Securities and Exchange Commission.
Information presented in this document is for informational, educational and illustrative purposes only. While the information in this
document is from sources believed to be reliable, the AMB companies make no representations or warranties, express or implied, as to
whether the information is accurate or complete and assume no responsibility for independent verification of such information. In addition,
the analyses in this document are narrowly focused and are not intended to provide a complete analysis of any matter.
Past performance is not necessarily indicative of future performance. Estimates, projections or indications of future performance can be
identified by certain statements, such as “believes,” “expects,” “may,” “will,” “should,” “seeks,” “approximately,” “plans,” “estimates” or
“anticipates” or the negative of those words or other comparable terminology, as well as by statements concerning projections, future
performance, developments, events, revenues, expenses, earnings, run rates and any other guidance on present or future periods. Any
such statements are forward-looking in nature and involve risks and uncertainties. Any statements of future performance are based on
assumptions that might not be realized and a number of factors, including without limitation, the volatility of the securities markets, the
overall environment for interest rates, risks associated with private equity investments, the demand for public offerings, activity in the
secondary securities markets, competition among financial services firms for business and personnel, the effect of demand for public
offerings, available technologies, the effect of government regulation and of general economic conditions on our own business and on the
business in the industry areas on which we focus and the availability of capital to us. We are under no obligation to update the information
presented in this document or to inform you if any such information turns out to be inaccurate or misleading.
The information in this document is not, and is not to be construed as, an offer or a solicitation to buy or sell any securities or any other
financial instruments or a recommendation or endorsement to engage in or effect any particular investment or transaction. Moreover,
under no circumstances should the information in this document be considered legal, tax or accounting advice or relied upon therefore.
The recipient is advised to rely on the advice of its own professionals and advisors for such matters and should make an independent
analysis and decision regarding any transaction based upon such advice.
The information in this document is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such
distribution or use would be contrary to law or regulation or for any distribution or use that would subject the AMB companies to any
registration requirement within such jurisdiction or country.
25
Investment Banking

Urgent Care Overview

Transcription

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