The Quandary of Opening an Urgent Care Without Contracts 

Alan A. Ayers, MBA, MAcc is President of Urgent Care Consultants and is Senior Editor of The Journal of Urgent Care Medicine.

Urgent Message: In addition to delaying and decreasing revenue, being out-of-network with private and government payers adversely affects an urgent care center’s ability to capture and retain patients. 

Health care in the United States is generally reimbursed as employee benefits or by federal, state or local governments as social assistance or retirement entitlement. According to the Centers for Medicare and Medicaid services, only 11% of health care nationally is considered “self pay,” a percent we see consistent in urgent care (https://www.cms.gov/data-research/statistics-trends-and-reports/national-health-expenditure-data/nhe-fact-sheet; https://www.statista.com/statistics/325824/payer-mix-of-urgent-care-services-in-the-us/).  In order to file a claim and receive reimbursement (i.e. “take assignment”) directly from these payers, an urgent care center must “participate” (i.e. be “in-network”) with the payer by having a contract, and, in many cases, all clinicians providing services under the contract must also be credentialled with the health plan or government agent.   

Without completing the payer’s contracting and credentialling process, an urgent care center would be considered “non-participating” or “out-of-network” which jeopardizes its ability to bill and receive payment from a third party. 

Patient Mindset Regarding Insurance is Changing 

 Given that 89% of health care is paid by third parties, patients in the United States generally don’t expect to pay for health care services.  The economics of the situation is that insurance companies allocate health care to beneficiaries with providers like urgent care acting as the “middleman” delivering a service.  Because every provider participating in a network is supposedly “equal to” all others in terms of quality, service and outcomes, medical businesses in the past could almost be considered “B2B” delivering services on behalf of the payers who send them patients but also dictate which procedures, tests, and prescriptions those patients can receive from the provider. 

Now, things have changed over the past two decades as urgent care has been on the forefront of a “new consumerism” in which patients see themselves as contributing to the cost of benefits through taxes and payroll deduction and therefore see the role of a provider as helping them attain the “full value” of the benefits they’ve paid for.  Urgent care shifted the paradigm from “B2B” to “B2C” by appealing directly to patients through investments like marketing, real estate, diagnostic capabilities, and night/weekend hours.   

Despite choosing an urgent care center using “retail” criteria like location, curb appeal and online reviews, unlike retail, patients simply will not pay out-of-pocket for a benefit they believe is covered.   

Sidebar 1:  Insurance Networks Provide Discounts Regardless of End Responsibility 

Opening Without Contracts Leaves a Lasting Bad Impression 

The cliché “you only have one chance to make a first impression” can’t be understated by a new urgent care center that requires repeat visits from all members of a patient’s household and positive word of mouth including online reviews to achieve its budgeted revenue.  

Yet if a patient balks or is turned away because the center cannot bill their insurance, years into the future the patient may continue to believe the center is out-of-network, may never return, and may tell family members and co-workers with the same insurance to avoid the center.  Even if the center received its contract the next day, patients have long memories and likely won’t bother to verify in the future if the center ever became contracted. 

Every patient who decides to try an urgent care center has a “bounty” on their head.  That bounty is the sunk marketing cost required to achieve the top-of-mind awareness that led the patient to the urgent care when they had a need.  If a patient balks due to out-of-network status, the center not only loses the opportunity to earn revenue on today’s visit, but it also loses its entire investment in advertising, signage, and online promotion. 

At Least 75-85% of Covered Lives are Required 

To avoid disappointing new patients, a center should plan on opening with in-network status constituting at least 75-85% of the covered lives in their trade area.  Because of the heavy market concentration of a handful of large payers followed by many obscure plans, it’s not realistic that a center will open with 100% of in-network contracts.   

In most states, 75% coverage is attained with the largest 6-7 payers in a market.  In a highly concentrated market, 75% coverage may be achieved as few as 2-3 payers.  The largest payers in every market are described as “BUCA”—Blue Cross/Blue Shield (BCBS) United Healthcare, Cigna, and Aetna—plus privatized Medicaid (i.e. Centene, Molina) where applicable.   

In most states, the leading payer will be a BCBS plan, with 35% to >50% share, followed by United Healthcare (UHC).  Nationally, UHC has a 28% share (14% of commercial populations) although actual percentages vary by state.  Of course, there are exceptions, such as regional plans including those affiliated with local health systems.  

Before signing a lease, a prospective urgent care operator should contemplate: 

• Conducting a payer landscape review of the trade area to identify the major payers by covered lives, segmented by Commercial, Medicare, and Medicaid plans. 
• Prioritizing contracting and credentialling efforts by covered lives, prioritizing payers with the greatest coverage.  You can continue to add in smaller plans post-opening. 
• Assessing whether there are any closed or limited networks, provider and product types available, and expected reimbursement by plan. 
• Consideration of the payer mix includes understanding whether Medicaid has been privatized and expanded, who has the State Medicaid contracts (i.e. BCBS, UHC, or local hospital HMOs) 

What Happens When Opening Out-of-Network 

Opening without contracts requires an operator develop an interim financial policy, holding claims when possible, and/or finding creative ways to contract such as primary care or acquiring another operator: 

An interim financial policy empowers the front desk to accept out-of-network patients while also clearly and consistently communicating to patients how their transactions will be processed.  For example: 

• If a contract is expected soon, it may be best to accept the co-pay and write off the balance, emulating taking the patient’s insurance.  Because this policy foregoes most of the patient revenue, taking in only $25-50 per patient, it can be considered an investment in future business as a patient with a good experience will return and tell others to do likewise. 
• Submitting an out-of-network claim to the payer has uncertainty in payment, payment may be issued to the patient leading to collections issues, triggers out-of-network coverages on patient plans, and may result in higher patient financial responsibility if no contractual allowances are taken.  It can also be time intensive for staff to manage process including checking with payers on payment status.  However, out-of-network payments can be higher than contracted rates for some plans. 
• Requiring patients pay the self-pay rate will turn them off.  Many patients will balk and go to an incumbent competitor that accepts their insurance. 
• Claims can be held and retro-dated for contracting and credentialling with Medicare, some Medicaid, and Tricare, according to Phyllis Dobberstein, RCM Compliance Manager for Experity.  Tricare and Medicaid typically require some level of enrollment.  Private payers including Blue are subject to timely filing and thus typically aren’t held. Regardless, even if retro claims are paid, it still leads to a delay in cash flow while expenses are accruing. 

Even with an interim policy in place, it’s important that the front desk follow processes including real-time eligibility (RTE) and credit card on file (CCOF).  Otherwise it’s difficult to change front desk behavior once habits are established and once patients learn how to transact with the center. 

Contracting as a Primary Care 

If urgent care contracts are simply unavailable (i.e. a network is “closed”), then an operator may look at acquiring another practice for it’s contracts, although such targets are difficult to identify, the operator would have to run two centers during an interim period, and the ability to do “location adds” is never guaranteed. 

The other option is to contract as a primary care.  The practice would need to change it’s legal name to something indicating “general practice” (avoiding terms like “urgent care” or “emergency physicians”) and address the following potential hurdles: 

• There may be limitations on an Emergency Medicine physician’s ability to credential as a PCP, unless dual-boarded in Family Medicine; otherwise a “PCP” is normally Internal Medicine, Family Medicine, or Pediatrics. 
•  Lower co-pays for “office visits” offer a marketing advantage versus “urgent care” but also result in lower front desk collections. 
•  Primary care contracts do reimburse for wellness services, physicals, flu shots and other vaccinations, which are typically not reimbursed in “urgent care” thus enabling new revenue streams for the practice. 
•  Being listed in insurance directories as “primary care” does set an expectation the center will provide “primary care” services including annual wellness physicals, management of chronic conditions, vaccinations, etc.  These services can be a great source of incremental revenue but also introduce the complexity described in Sidebar 2. 

Sidebar 2: Complexity of Adding Primary Care to Urgent Care 

Patient utilization is typically “Primary Care Lite” for working age, generally healthy adults as chronically ill patients typically receive primary care from a specialist and children and seniors typically receive age-appropriate primary care through focused “medical homes” 

Opening Without Contracts is Often Unnecessary 

When starting a new urgent care, contracting and credentialling can take 9 to 12 months total. However, that process can start as soon as the center has an address and Tax ID number and progress simultaneous to other activities including the build-out and set-up of the physical facility…with all activities synchronized around a timely and on-budget “grand opening.” Opening without contracts is thus unnecessary when there’s an actively managed workplan. 

Some operators pick an arbitrary opening date, such as January 1, because it’s the start of a new tax year or the last date of a previous employment contract.  Others time their opening to the 3-month notice required of employed clinicians, which coincides with the 3-month credentialing timeline.  Timing of opening should really be when the clinic is “ready.” 

Exhausting working capital—funds set aside to cover operating losses until a center achieves “break-even”—is ultimately the reason why urgent care businesses fail.  Prolonged collections, reduced volumes, and reduced Net Revenue per Visit hinder cash flow while operating expenses are incurred regardless of the revenue. 

Considering labor is >75% of an urgent care center’s operating costs, staffing of clinicians and support staff causes the greatest “bleed” on working capital when staff is scheduled but the center is not yet ready to realize revenue on the visits seen.  By contrast, rent is only ~10% of overhead meaning it’s far cheaper to pay rent on an empty facility rather than bleed salary and benefit costs. 

Sidebar 3: Seeking Expert Advice 

Conclusion 

Patients expect urgent care to accept their network health benefits, even if the patient is ultimately responsible for payment, so as a consumer-focused health care delivery channel, it’s nearly impossible for an urgent care to succeed long-term without being contracted with the leading health plans in its trade areas.   

The risk of opening out-of-network is impaired cash flow, thus depleting working capital.  To mitigate this risk, a start-up should engage experts to accurately assess the payer landscape, prioritize payers, understand contracting alternatives, and devise a workplan that coordinates contracting and credentialing activities to coincide with a timely opening.