PeaceHealth’s ZoomCare Acquisition Off To Flying Start
For decades, PeaceHealth has stolidly kept to its three-state territory of Oregon, Washington and Alaska.
But starting last December, the nonprofit hospital system suddenly blossomed into a five-state venture, opening in Colorado and Idaho. It didn’t buy or build new hospitals. Rather, its wholly owned subsidiary, ZoomCare, rented three spaces, each 2,000 square feet or so, and opened urgent care clinics, in Boise, Denver and Boulder.
The moves were part of ZoomCare’s brisk push for firm footing in the increasingly crowded, competitive and innovative field of urgent care services.
Entrepreneurs and health systems began adding urgent care clinics many years ago, so Vancouver, Washington-based PeaceHealth was a tad late in the game when it bought Portland-based ZoomCare in December 2018 for an undisclosed sum. Since then, PeaceHealth has been making up for lost time.
ZoomCare, which had 37 clinics in 2018, now has 60 in Washington and Oregon – mainly in the Seattle and Portland areas -- plus the new ones in Idaho and Colorado.
From the time of the purchase, ZoomCare has doubled its staff to about 900 people. And it is aggressively testing a costly new urgent care “super center” model. These clinics are staff- and equipment-heavy in 7,000-square-foot facilities that blend elements of a hospital emergency room, primary care clinic, urgent care clinic, pharmacy, telehealth and a medical imaging department, with some specialties such as podiatry and physical therapy thrown in for good measure.“It takes a village to run one of these centers,” said ZoomCare CEO Torben Nielsen, while declining to disclose staffing numbers at a super center.
Nielsen says ZoomCare’s super centers “have perfected the perfect visit. We have perfected how to have a seamless, frictionless experience.”
ZoomCare now has three super centers – two in the Portland area, and one in the Seattle area – and is considering opening two more in the Portland area, Nielsen said.
ZoomCare Seeks To Prove Financial Viability
Health care leaders in the Pacific Northwest took notice when PeaceHealth announced it was buying for-profit ZoomCare from its founders. Like other venerable nonprofit hospital systems, PeaceHealth is trying to divine the future of health care and position itself for sharp change. The ZoomCare purchase seemed a key play.
Now, the challenge for ZoomCare will be proving itself financially viable, reeling in the high volume of same-day, walk-in patients it needs to cover the clinics’ substantial staffing, equipment and leasing costs.
Nielsen won’t say much about ZoomCare’s finances, other than that revenues are rapidly growing and that the expansion is being funded by PeaceHealth and by ZoomCare’s own cash flow. While wholly owned by PeaceHealth, ZoomCare has its own board that sets its strategy, he said.
“We very much operate as a standalone business,” he said.
ZoomCare is losing money and won’t break even until perhaps late 2023, according to a Fitch Ratings review of PeaceHealth’s finances last September. The review, evaluating $745 million in bond debt that PeaceHealth took out last year, said PeaceHealth was using $100 million of that money for “continued investment in its ZoomCare platform.”
Losses at ZoomCare plus the financial crimp of the COVID-19 pandemic will hurt the profitability of the overall PeaceHealth system this year, but the system’s profits should return to normal by 2022, Fitch said.
ZoomCare is “likely to generate good returns in the future,” although it will face increased competition, Fitch added.
Urgent Care Systems Need ‘Acumen’
Around the nation, urgent care executives are continually tinkering, trying to find the right formula for boosting patient volumes and revenue. Their target audience variously includes people who need immediate care and would otherwise go to an emergency room; people who are frustrated by the wait times for an appointment in a traditional primary care setting; younger people who have few ongoing health problems and don’t have a primary care provider they’re loyal to; and people who are comfortable with quick virtual visits.
“Urgent care is typically a walk-in health care experience, and doing a good job of managing that kind of business requires a significant amount of acumen,” said Lou Ellen Horwitz, CEO of the Urgent Care Association of America, an Illinois-based trade group.
Within PeaceHealth – which has 10 hospitals, a primary care network, roughly 18,000 employees, and $2.8 billion in annual revenues -- ZoomCare is a small cog.
“PeaceHealth bought ZoomCare because they were interested in this innovator that’s really trying to create a different model of health care,” said Nielsen, who was PeaceHealth’s senior vice president for business transformation before being appointed to the ZoomCare post. “They wanted to learn, and what better way to learn than to actually own them?”
More hospital systems are venturing into urgent care to diversify from staff-heavy brick and mortar hospitals. “Health systems continue to be a bigger and bigger part of the (urgent care) industry as they either acquire an independent group and bring them into the fold or start up urgent care centers of their own,” Horwitz said.
Some markets – the Portland area, and parts of Arizona, Texas, and Florida -- are already fairly crowded with urgent care clinics and some may be competing against each other, she said.
But other regions have room for more, Horwitz said. A market can be ripe for an urgent care clinic if it is big enough – Horwitz said a population of at least 20,000 is needed – and has crowded emergency rooms and few primary care providers.
ZoomCare Diverging From Some Norms
Urgent care clinics traditionally have focused on treating injuries or illnesses that need same-day care but don’t merit an emergency room visit.
But some clinic networks, like ZoomCare, don’t feel bound to that. ZoomCare’s super centers feature X-ray, CT scan and ultrasound equipment, and can handle 90% of the cases a typical emergency room handles, at a fraction of the price an emergency room charges, Nielsen said. The super centers are “an on-demand emergency care model,” he said.
Also, most urgent care clinics don’t seek to become a patient’s primary care provider, Horwtiz said. If a walk-in patient doesn’t have a primary care provider, the clinic will refer them to one,c she said. But Nielsen said ZoomCare doesn’t stick to that tradition either. Zoomare is staffed so that its walk-ins can adopt ZoomCare providers as their primary care provider, he said.
ZoomCare isn’t alone in taking that approach. Lane County-based Nova Health has 18 urgent careclinics, and most also function as primary care providers, taking on patients on a long-term basis.
Many Clinics In Seattle, Portland
There’s no question urgent care is booming. An Urgent Care Association survey this spring found 10,419 urgent care clinics nationwide, up from 9,616 in 2020, and 8,770 the year before.
Experimentation has spawned many models.
In Seattle, a key market for ZoomCare, a big force is the Tacoma-based nonprofit Multicare hospital system, with eight hospitals and 26 urgent care centers.
In Portland, another key market for ZoomCare, nonprofit Legacy Health has taken another approach. Rather than opening its own urgent care clinics, the five-hospital system partnered with for-profit urgent care operator GoHealth, which is based in Georgia. The Legacy/GoHealth partnership, started in 2015, now runs 17 urgent care clinics in the Portland area. Nationwide, GoHealth has 158 urgent care clinics, all affiliated with regional hospital groups.
By operating urgent care clinics within their hospital markets, hospital systems are able to hold on to patients – and the revenues they generate.
Legacy, in launching its partnership, said: “Our aim is to provide additional access for everyday, immediate health care needs with service and connection to the entire Legacy network.”
nother player in the Oregon urgent care market is American Family Care, an Alabama-based chain with five urgent care clinics in the Portland area. The company is unique in that it franchises its urgent care model for a $60,000 per-clinic annual franchise fee. The company has 225 urgent care clinics nationwide, a mix of branded franchises and company-owned clinics. Entering the business isn’t cheap. American Family Care says an investor’s upfront startup costs run $1 million to $1.4 million.
A typical urgent care clinic has annual revenues of about $1.7 million, although the amount varies widely based on size and types of services offered, according to published reports.
Speed Is Of The Essence
A core value for ZoomCare is speed, giving patients same-day appointments, on time and fast. The typical visit lasts just 15 minutes, according to Nielsen.
“People live in the 21st century where everything is starting to be on demand,” Nielsen said. “If you are buying something, a package, you buy it and it is on your doorstep in many cases a few hours later. We live in an on-demand 21st century economy. It’s what we experience in all other industries, and we are taking that concept into health care.”
Another focus is telehealth, which has soared in many medical venues due to the pandemic. Most patients at most urgent care systems – including ZoomCare – fall in the 20-50 year-old group, which has been quick to adopt telehealth.
Nielsen said that some of ZoomCare’s newer clinics saw a drop-off in in-person patients last year, but an increase in telehealth visits, “so we know the demand is there.”
The Finch report echoed that.
“PeaceHealth is still in its initial investment phase with (ZoomCare),” the report said. “With the pandemic, the clinics' volumes either declined or did not materialize as expected, but the digital demand portion performed better. As a result, PeaceHealth is planning to increase its focus on digital growth in new markets.”
Nielsen said ZoomCare’s new clinics in Idaho and Colorado show that the company is free to pursue opportunities as it sees fit, and doesn’t have to stay in markets that are also home to PeaceHealth operations.
For now, ZoomCare is largely done with its initial expansion, he said.
During the pandemic, ZoomCare has been able to open clinics “at very good locations at really good price points,” he said. ZoomCare leases all of its locations.
“Over the next year we are going to take that footprint and really optimize our patient flow and experience,” he said.
The key to patient volume, he said, is “being relevant, having a product and experience that our customers really love, where they want to come back.”
You can reach Christian Wihtol at [email protected].
May 24 2021