PeaceHealth’s ZoomCare acquisition starts immediately
PeaceHealth has clung to its tri-state territory of Oregon, Washington, and Alaska for decades.
But starting last December, the nonprofit hospital system suddenly grew into a five-state corporation that opened in Colorado and Idaho. No new hospitals were bought or built. Rather, wholly owned subsidiary ZoomCare rented three rooms, each approximately 2,000 square feet, and opened emergency clinics in Boise, Denver and Boulder.
The moves were part of ZoomCare’s swift drive to find a place in the increasingly crowded, competitive and innovative area of emergency care.
Entrepreneurs and healthcare systems started adding emergency clinics many years ago. As a result, PeaceHealth, based in Vancouver, Washington, was a little late when it bought Portland-based ZoomCare for an undisclosed sum in December 2018. Since then, PeaceHealth has made up for lost time.
ZoomCare, which had 37 clinics in 2018, now has 60 in Washington and Oregon – mostly in the Seattle and Portland regions – as well as the new ones in Idaho and Colorado.
Since the purchase, ZoomCare has doubled its workforce to around 900. And it’s aggressively testing an expensive new super-center model for emergency care. These clinics are staff and equipment intensive in 7,000 square foot facilities that combine elements of a hospital emergency room, primary care clinic, emergency clinic, pharmacy, telemedicine and medical imaging department with some specialties like podiatry and physics therapy thrown for good measure.
“It takes a village to run one of these centers,” said Torben Nielsen, CEO of ZoomCare, declining to disclose the number of employees in a super center.
According to Nielsen, ZoomCare’s supercentres “perfected the perfect visit. We have perfected how we can have a seamless, frictionless experience. “
ZoomCare now has three supercenters – two in the Portland area and one in the Seattle area – and is considering opening two more in the Portland area, Nielsen said.
ZoomCare tries to prove its financial viability
Healthcare executives in the Pacific Northwest became aware of this when PeaceHealth announced it was buying ZoomCare from its founders for a profit. Like other venerable nonprofit hospital systems, PeaceHealth seeks to guess the future of healthcare and position itself for sharp change. The purchase of ZoomCare seemed like a key game.
Now the challenge for ZoomCare will prove financially viable, as the high volume of walk-in patients will be needed on the same day to cover the clinics’ significant personnel, equipment and leasing costs.
Nielsen won’t say much about ZoomCare’s finances other than showing its revenue growing rapidly and funding the expansion of PeaceHealth and ZoomCare’s own cash flow. While ZoomCare is 100% owned by PeaceHealth, it has its own board that sets its strategy, he said.
“We are very independent,” he said.
ZoomCare is losing money and may not break even until late 2023. This came out of a review of PeaceHealth’s finances by Fitch Ratings last September. The review, which valued $ 745 million in bonds PeaceHealth took out last year, found that PeaceHealth used $ 100 million of that money to “continue investing in its ZoomCare platform.”
Losses at ZoomCare and the financial crisis of the COVID-19 pandemic will hurt the profitability of the entire PeaceHealth system this year, but the system’s profits should return to normal by 2022, Fitch said.
ZoomCare is “likely to make good returns” in the future, although it will face increasing competition, added Fitch.
Urgent care systems need ingenuity
Emergency care executives across the country are constantly tinkering with the right formula to increase patient volume and sales. Their target audience includes a variety of people who need immediate care and would otherwise go to an emergency room. People frustrated with waiting for an appointment at traditional primary care; younger people who have few ongoing health problems and do not have a basic provider to which they are loyal; and people who are comfortable with quick virtual visits.
“Emergency care is typically a walk-in healthcare experience, and doing a good job running this type of business requires a great deal of ingenuity,” said Lou Ellen Horwitz, CEO of the Urgent Care Association of America-based Illinois-based trading group.
Within PeaceHealth – with 10 hospitals, a primary care network, approximately 18,000 employees, and annual sales of $ 2.8 billion – ZoomCare is a little cog.
“PeaceHealth bought ZoomCare because they were interested in this innovator who is really trying to create a different model of healthcare,” said Nielsen, senior vice president of business transformation for PeaceHealth, prior to his appointment to the ZoomCare position. “They wanted to learn, and what better way to learn than to actually own them?”
More and more hospital systems dare to provide urgent care in order to diversify from staff-intensive inpatient hospitals. “Health systems are still an increasingly large part of the (emergency) industry, as they either acquire an independent group and include them in the group or set up their own emergency centers,” said Horwitz.
Some markets – the Portland area and parts of Arizona, Texas, and Florida – are already pretty full of emergency clinics, and some could compete against each other, she said.
But other regions have room for more, said Horwitz. A market can be ripe for an emergency clinic if it’s big enough – Horwitz said it needs at least 20,000 people – and has overcrowded emergency rooms and few basic providers.
ZoomCare deviates from some standards
Emergency clinics have traditionally focused on treating injuries or illnesses that require same-day treatment but do not deserve an emergency room visit.
However, some clinic networks such as ZoomCare do not feel bound by it. ZoomCare’s supercentres have x-ray, CT, and ultrasound machines and can treat 90% of the cases a typical emergency room treats for a fraction of the price an emergency room charges, Nielsen said. The supercenters are “a model for on-demand emergency care,” he said.
Plus, most emergency clinics don’t try 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, she said. But Nielsen said ZoomCare doesn’t stick to that tradition either. Zoomare is staffed so its employees can take on ZoomCare providers as first responders, he said.
ZoomCare is not alone in this approach. Nova Health, based in Lane County, has 18 urgent care hospitals, and most of them also act as first responders, taking in patients on a long-term basis.
Many clinics in Seattle, Portland
No question about it, urgent care is booming. A survey by the Urgent Care Association this spring found 10,419 emergency clinics nationwide, up from 9,616 in 2020 and 8,770 last year.
Experimentation has spawned many models.
In Seattle, a key market for ZoomCare, the Tacoma-based multicare nonprofit hospital system with eight hospitals and 26 emergency centers is a major force.
In Portland, another key market for ZoomCare, the nonprofit Legacy Health has taken a different approach. Rather than opening its own emergency clinics, the system worked with five hospitals with Georgia-based nonprofit emergency care company GoHealth. The Legacy / GoHealth partnership started in 2015 now operates 17 emergency clinics in the Portland area. GoHealth has 158 emergency clinics nationwide, to which all regional hospital groups are affiliated.
By operating emergency clinics in their hospital markets, hospital systems can keep the patients – and the revenue they generate.
At the start of its partnership, Legacy said: “Our goal is to provide additional access for daily, immediate health needs with service and connection to the entire Legacy network.”
Another player in the Oregon emergency market is American Family Care, an Alabama-based chain with five emergency clinics in the Portland area. The company is unique in that it franchises its emergency model for an annual franchise fee of $ 60,000 per clinic. The company has 225 emergency clinics nationwide, a mix of branded franchises and company-owned clinics. Getting into the business isn’t cheap. According to American Family Care, an investor’s start-up cost is $ 1 million to $ 1.4 million upfront.
A typical emergency clinic has approximately $ 1.7 million in annual revenue, although the amount varies widely depending on the size and type of services offered, according to published reports.
Speed is of the essence
A key value for ZoomCare is the speed with which patients receive appointments quickly and on time on the same day. The typical visit takes only 15 minutes, according to Nielsen.
“People live in the 21st century where everything starts on demand,” said Nielsen. “When you buy something, a package, you buy it and in many cases it will be on your doorstep a few hours later. We live in a needs-based economy of the 21st century. We are experiencing this in all other industries and are introducing this concept into health care. “
Another focus is telehealth, which has risen sharply in many medical locations due to the pandemic. Most of the patients in the most urgent care systems – including ZoomCare – fall into the 20- to 50-year-old group who quickly turned to telemedicine.
Nielsen said some of ZoomCare’s newer clinics saw a decrease in in-person patients over the past year, but an increase in telemedicine visits. “So we know that the demand is there.”
The Finch Report repeated this.
“PeaceHealth is still in the first investment phase with (ZoomCare),” said the report. “With the pandemic, the volume of the clinics either fell or did not come about as expected, but the share of digital demand fared better. As a result, PeaceHealth plans to focus more on digital growth in new markets. “
According to Nielsen, ZoomCare’s new clinics in Idaho and Colorado show that the company has the ability to leverage opportunities at its own discretion rather than staying in markets that include PeaceHealth operations.
Currently, ZoomCare is largely done with the initial expansion, he said.
During the pandemic, ZoomCare was able to open clinics “in very good locations at really good prices,” he said. ZoomCare rents all locations.
“Over the next year, we’ll be taking advantage of that footprint and really optimizing 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 contact Christian Wihtol at [email protected].