Edgemont in the News

Five healthcare companies looking for acquisitions in the get-well-quick sector

By Laura Cooper – Feb-18-2015

When people need a doctor and can’t wait for an appointment, urgent care centers provide a convenient alternative to emergency rooms.  Now, hospitals, physician groups, private equity firms and even insurance companies are finding that there is money to be made by helping people get well soon.

Luke Mitchell, a Managing Director from Edgemont Capital Partners has seen significant growth in the urgent care sector, with deals going on all around the country. “It ends up being less about geography and more about community,” said Mitchell. “Most of the growth in new urgent care centers is suburban and rural.”

Private equity, large healthcare companies and hospital groups have taken notice. HCA Holdings (HCA)– the largest U.S. hospital operator — purchased CareNow, an operator of urgent care centers in Texas for an undisclosed price last October. A number of large hospital groups are also likely buyers in the space, including Community Health Systems (CYH). Mitchell explained that for hospital groups with a wide geographic footprint, they do not necessarily need to make buys in areas that cover the entirety of their hospital system, but could do acquisitions for a portion of the addressed market.

“A lot of people view urgent care as the leading edge of innovation,” Mitchell explained. “If you believe we’re moving to a customer-centric experience in healthcare, urgent care is one of the great opportunities to do that. It fills this need for emergency room visits and primary care.”
Payors, Mitchell said, are eager to be involved in the urgent care space because the price of a visit to an urgent care center is much lower than that of a traditional emergency room visit. “For something like a laceration, it’s way easier to get into the urgent care center versus a primary care,” Mitchell explained, noting that urgent care is also gaining a foothold outside of urban centers, where there is often a longer wait time to see primary care physicians.

Possible buyers in the payor space include large insurance providers such as Aetna Inc. (AET), Cigna Corp. (CI) and Anthem Inc. (ANTHM).UnitedHealth Group Inc. (UNH) is already in the space with its Optum clinic urgent care facilities.

Meanwhile, Blue Cross and Blue Shield of North Carolina decided in 2012 to make an investment in FastMed Urgent Care, in order to expand coverage. According to figures provided by the company at the time, patients in North Carolina often spend over four hours in an ER visit, costing $1,500 per visit as opposed to the average cost of $142.20 at urgent care centers.

“Payors like urgent care because it satisfies a problem for them and their patients,” Mitchell explained.

Humana Inc. (HUM) put its Concentra urgent care business on the block last year with Goldman Sachs Group Inc. advising, and it is seen as attractive to both strategic and private equity buyers because the business is one of the largest providers of urgent care.

This year there is likely to be an uptick in M&A as many large private equity firms that have been invested in the companies come up to the three-plus year mark in their investment, according to Mitchell.

Urgent care saves money for insurers and time for patients. And as long people continue to get sick or hurt — which is to say, as long as there are human beings — the sector will remain attractive.