The One Reason Start-up Urgent Care Centers Fail

The One Reason Start-up Urgent Care Centers Fail

“Fifty percent of new businesses fail in the first year and 95 percent fail within five years,” according to the Small Business Administration.

Headlines about small business “failures” can be daunting—and absent deeper consideration—they could certainly deter anyone from embarking on a new business venture. But scratch the surface and you’ll find this data is really misleading—at least as it pertains to urgent care.

A common question of attendees at Urgent Care Association of America (UCAOA) conferences is “what percentage of urgent care start-ups fail each year?” Because there is no central registry of urgent care start-ups, because “failed” centers rarely publicize their demise, and because the range of operating models encompassing “urgent care” is broad— an accurate statistic cannot be provided. But anecdote and a better understanding of the reasons why urgent care centers “succeed” should reassure the prospective urgent care investor.

When Considering Government Statistics
Small Business Administration (SBA) data provides little insight to urgent care “success” rates because it encompasses all industries, all regions of the country, and it includes “non-employer firms”—businesses without employees— which are home-based businesses, individuals employed elsewhere who consult on the side, and independent contractors primarily in technical and construction trades. In fact, roughly 40 percent of new businesses report being a “hobby” that supplements the owner’s income from another, full-time job. These non-employer firms—which start at a rate three times that of employer firms—represent three-quarters of businesses in the United States but account for only three percent of business receipts. So when counting the odds of business success, you must first consider the universe of businesses in a dataset. Most likely it does not specify urgent care in your community.

Second, the inherent assumption that businesses fail due to financial losses ignores the more common reasons why businesses “cease” including a change in employment of the owner, inviting new investors or reorganizing the business into a new corporate structure, selling, acquiring or merging into a larger business, passing on the business through inheritance, or “serial entrepreneurialism”—opening a new business beyond the original business. “Exiting a business entity” does not necessarily mean “ceasing operations” and “failures due to operating losses” is a small subset of all business “exits.”

For Urgent Care Specifically
Given the lack of applicability of government data and the lack of availability of data specific to urgent care—we rely on anecdote and experience to evaluate not the statistics of how many urgent care centers succeed or fail, but rather, the reasons behind their success or failure. Ultimately there is only one reason why urgent care centers “fail”— permanently cease operations—and that’s because they’ve exhausted their working capital.

Working capital is the cash needed to make payroll, pay rent, buy supplies, and otherwise fund business operations. In a mature business, working capital comes from sales revenues but until an urgent care center attains break-even profitability (that is, when patient revenue exceeds operating expenses), working capital is supplied by bank loans and owner equity. When investors underestimate how much cash is needed, or incorrectly project the time it will take the center to break even—the center risks running out of cash before it breaks even and has had a chance to succeed.

Factors that may cause a delay in achieving break-even profitability include:

  • Bad location—including lack of visibility, high rental rates, too much competition, or absence of consumer demand.
  • Not getting contracted with major payers, soon enough, or contracting at unfavorable rates—insured patients will generally migrate towards providers who accept their plans.
  • Not spending enough money on marketing, choosing ineffective marketing tactics, or not aggressively marketing the center immediately upon contracting with major payers.
  • Not controlling staffing costs—including staffing to capacity rather than demand and not cross-training employees.
  • Spending too much money on the facility build-out—going “all out” on furnishings, fixtures and equipment.
  • Opening in the First Quarter instead of late summer—effectively missing out on the first January-March “busy season.”

To avoid exhausting working capital it’s imperative that a start-up accurately project how much money the operation will require—not only the costs of building out and opening the center, but also the costs of staying in business for one to two years until there is sufficient patient revenue to cover the center’s overhead. And upon making those projections, to spend time developing sound business plans, conservatively managing cash by controlling expenses, and having a reserve or credit line available should the time it takes to break-even be longer than anticipated.

About Urgent Care Consultants

Urgent Care Consultants (UCC) has helped over 200 start-up urgent care centers, with a 99% success rate. Using a proprietary predictive performance algorithm, UCC can assure your project starts with choosing the optimal location for driving patient volumes. UCC then assists in creating a detailed financial pro-forma and business plan that considers the timing of expenditures and cash flows, to assure adequate working capital. Using “Start-up Pro,” a comprehensive 1,500+ item workplan encompassing all activities from inception through grand opening, UCC and its partners help coordinate financing, center design and build-out, definition of operating and staffing models, and development of detailed marketing plans. UCC also provides templated policies, procedures and operating manuals. And through its partnership with Practice Velocity, UCC works to assure contracting and credentialing starts on schedule, enabling participation in local networks, a best-in-class workflow using PV’s award-winning VelociDoc EHR, and full service billing services.

8 Principles for Improving Your Urgent Care Operation

8 Principles for Improving Your Urgent Care Operation

The number of health care choices available to consumers for minor illness and injury is rapidly expanding. Not only does the urgent care industry continue to add locations—meaning in some communities patients have several competing urgent care options—but pharmacy-affiliated retail clinics, walk-in family practice offices, freestanding emergency room centers and hospital ED fast-tracks are all vying for the same foot traffic as your urgent care center. When there is competition, to be successful, an urgent care center must stand out in consumer’s minds as the first place to go when a minor illness or injury occurs—and for the urgent care operator, that starts with taking the patient’s perspective in everything you do.

1) A patient’s first impressions upon entering the facility set his or her expectations for the visit.

Has a patient ever walked in to your urgent care center, signed in, sat down, and then left without being seen by the doctor? Do you know, or will you ever know, the reason why he or she left? The answer may lie somewhere in the cliché, “you never get a second chance to make a first impression.”

Consider the patient’s perspective upon entering your center. Is he/she greeted with a smile and a friendly “how may we help you?” Or does the greeting entail a barrage of permanent and copy paper signs instructing the patient to “sign in here and wait to be called,” “turn off cell phones,” “do not change the TV channel or thermostat,” and “notify the nurse if waiting more than 15 minutes?”

What is the appearance of front office and waiting area?  Is the front desk organized and free of clutter?  Is the waiting area decor inviting to the patient, is there a variety of seating arrangements including sofas and chairs, and does it include basic amenities like Wi-Fi, television, coffee and bottled water? And perhaps most important—is the center spotlessly clean?  Meaning…no dust on plants or furniture, no stains or litter on the floor, no clinical or unpleasant odors, empty trash cans, organized magazines, and good repair of the physical plant, furnishings, fixtures and equipment?

The patient’s first impressions will set the tone for the rest of his or her visit. If the front office is hectic, disorganized, and cluttered—and the waiting room is crowded, dirty and in disarray—the patient will expect “second rate” medical care reflective of the surroundings.

2) Cleanliness is a virtue, so use a checklist to assure all is complete.

Patient demands that a medical facility be clean cannot be understated.  Not only does a clean facility make a strong brand impression, when you consider that a patient with a cold or the flu contaminates up to 30-percent of the items they touch—a clean facility is also a requirement for the health and safety of the staff and all other patients. A patient who perceives that a medical facility is unclean is certain to not return, may post negative reviews online, and may also complain to the health department or his or her insurance carrier. As an urgent care center operator, cleanliness needs to be removed from the patient’s “satisfaction equation” by having firm processes and systems in place.

How do you know your facility is clean? You should develop a regular cleaning checklist to assure all tasks are completed and to keep cleaning crews focused and accountable. Checklists can be developed for hourly, daily, weekly, and monthly cleaning tasks. Those responsible for cleaning—no matter how many times they have cleaned—should check off items as they’re completed and the center operations manager or a responsible staff member should periodically conduct spot reviews of the facility and completed checklists to assure accountability.

3) Realize you are not running your business on your time.

Urgent care is a unique business model in that the name implies a service standard of promptness. Even if they put off their urgent care visits by days or weeks—by the time patients finally do arrive in the center, they are likely to think that their medical situation requires immediate attention. Therefore, when urgent care patients experience long waits, lags in communication, passive staff, and delays in moving between process steps—they’re certain to become impatient and dissatisfied.

National studies show that when surveyed as to why wait times occur, patients consistently point to something deliberate on the part of the service provider—that the company didn’t care about the customer’s time, that it was taking advantage of the customer, its processes were inefficient, or that it had the wrong processes  and technology in place. Only a handful of consumers acknowledge the difficulty in coordinating operations to avoid wait times or empathize that service providers try but cannot precisely predict wait times.

The key takeaway is that the patient is not operating on the center’s time or even the physician’s time—the patient is operating on his or her own time.  And the patient’s time is now, immediate, and proactive.

4) Don’t make things complicated for your patients. Strive for simplicity.

When patients seek medical treatment for an acutely rising illness or injury, they want care right away without any hassle. However, when designing processes, systems, training and forms, there is a tendency in health care to think only in terms of compliance, how policies are needed to “protect” the center, and how providers and staff are impacted.

Taking a cue from retail, hospitality, banking and other “service industries,” urgent care operators should seek to make the “patient’s journey” as smooth and unencumbered as possible. This entails explaining to patients what should occur during their visits and replacing thick packets of registration forms, confusing financial policies, and annoying post-visit collections tasks with technology that facilitates processes, captures and disseminates information, and streamlines financial transactions.

Walk “the patient’s shoes” though every step of a typical visit from arrival to departure (and even post-departure) and question—what does the patient do, see, feel, hear, and think? Whenever something doesn’t seem quite right—that’s inconvenient, confusing, annoying, or wastes time—examine the underlying processes, staff training and systems to make the appropriate changes.

5) There is no excuse for not knowing what is happening with your business—the Internet makes it transparent.

In customer service, the cliché used to be “a patient who has a good experience will tell one or two friends while a patient with a bad experience will tell five or ten.” Today, with the advent of social media (Facebook, Twitter) and online review sites including Google and Yelp—patients who have bad experiences can tell hundreds or even thousands of “virtual friends.”  A Wall Street Journal survey recently revealed that 16% of consumers regularly post complaints online—not only broadcasting their anger, but naming company names—and that 37% read online reviews before acting.

Have you read your center’s online reviews recently? Set a regular schedule to review and track what is being said about your center on the Internet, and take such commentary as a call to action to fix whatever issues patients have with your center. When a patient has a sufficiently bad experience that they’re willing to write an online review, odds are they aren’t the only one—others have had similar experiences but chose to remain silent.  The best way to prevent negative reviews in the future is to fix the problems that past patients pointed out.

6) Take customer feedback to heart.

What do you do when a patient provides you with feedback on your service or suggestions for improvement? When approached regarding problems, does your staff respond with excuses or do they acknowledge the patient’s concern and act immediately to resolve it? When a patient has an issue with an urgent care center’s service, the last thing he or she wants to hear is an explanation why. The way someone handles a dissatisfied patient is a litmus test for the center’s entire customer service philosophy.

Likewise, patients who make suggestions for operational improvement are more valuable than the highest paid consultants—through their experiences they’re providing a roadmap on how to make the urgent care center successful. When an urgent care operator disregards these suggestions, it’s as if they really don’t care about the future success of the business. If the center exists to serve its providers and employees “today” and the patients are viewed as mere chattel to be “processed”—then go ahead and respond defensively to (or worse, ignore) patient feedback.

7) Management, not the staff, has ultimate responsibility for the day-to-day operations.

An operations manager is responsible for developing and implementing processes and systems, as well as recruiting, hiring, and training staff to delivery consistent, high quality care. Moreover, the manager is the ultimate person responsible for when those processes, systems and people fail. The manager who thinks he’s doing nothing wrong is likely to blame all three, but doing so is cowardly, lazy and reactive. If something isn’t working, it’s the manager’s duty to identify the cause of the problem and correct it.

While a common concerned raised by urgent care operators goes to the “limited labor pool” and “how hard it is to find good people,” the same could be said of Starbucks, Nordstrom, Marriott and others who pride themselves on delivering exceptional customer experiences while working with often low wage staff. These “best in class” providers somehow manage to find and develop “good people” or at least squeeze good experiences out of the people they have—so there’s no reason why your urgent care center can’t do likewise.

8) To grow the business, you must get the word out.

If an urgent care center delivers exceptional service, patients will return and tell others to do likewise, but word-of-mouth alone is insufficient and takes too long for a center to meet its critical operating volume. That’s why urgent care operators need to spread the word—by way of advertising, grassroots marketing tactics and community engagement, and public relations. Urgent care is successful insofar as the center achieves “top of mind awareness.” Meaning, that whenever a need arises that the urgent care center can resolve—that the patient will chose to come to the center first. Marketing budgets for a single urgent care center often range from 5% of revenues to $50,000 or more—if your center is spending proportionally less on marketing and also not hitting your volume targets—then you really need to make investments today to increase awareness in your community and drive traffic through the door.

What else can you do?

These eight principles are by no means conclusive or exhaustive—experienced urgent care operators can add many more to this list. The underlying themes are to recognize the patient as a paying customer who chooses to use the center versus other options, who expects a clean facility, friendly and helpful staff, hassle-free processes, and sensitivity to their time. To the extent than an urgent care center does these things, and lets the community know, it will have a leg up on competitors who are inwardly focused.