Source: Portland Business Journal 

By Elizabeth Hayes

April 15, 2016

Last summer, Zoom+ helped Jody Greene get to work on time.

Greene had come down with a sinus infection and didn’t have a primary care doctor. So she made an online appointment at a Zoom+ center in Portland’s Pearl District near her job and still managed to make it to her desk at the usual hour.

Zoom+, which started with a single location at Bridgeport Village a decade ago, placed a bet that tens of thousands of Jodies — or “Sarahs,” as co-founder and CEO Dr. Dave Sanders calls his customer base — are out there, demanding care where they want it, when they want it. Today Zoom+ has 25 centers in the Portland-Vancouver region and treats a quarter of a million patients a year.

Zoom+ is hardly alone in the neighborhood/retail center game. There are no fewer than 75 urgent or on-demand centers in and around Portland . Major health systems — Providence Health & Services, Legacy Health, Kaiser Permanente Northwest and Adventist Health — have jumped in enthusiastically, with a wave of new locations popping up or on the drawing board. And a handful of independent players are in the game as well.

The result is a hyper-competitive marketplace that has pitted some of the region’s biggest health care providers against one another in an all-out war for patients — or consumers, as they’re viewed these days.

“It’s definitely a concern, because we see them going up all over town, and every health care system is putting in its own solution,” said Eric Weeks, senior director of Legacy Medical Group. “We clearly have more saturation in the marketplace than we have before. But we have more people utilizing urgent care than in the past, and some of them, frankly, don’t want a primary care physician but want to get their care episodically.”

Even with demand for urgent-care services rising, it’s unlikely all these entrants will survive. With a nearly 10-year head start, Zoom+ has an established footprint and well-known brand. But Kaiser, Providence and Legacy have name recognition, hospitals and hundreds of thousands of their own insured patients they can drive to their centers.

Centers rising

The retail revolution is happening in response to changing consumer values: speed and convenience, often over long-term relationships with a family doctor, especially at a time of a nationwide shortage of primary care physicians. Whether they’re called urgent, on-demand, convenience or express care, most are open seven days a week and evenings and see patients with non-life-threatening symptoms — sore throats, earaches, rashes and sprains. They take walks-ins and same-day appointments, with wait times of 30 minutes or less.

With more people insured and more of them in high-deductible health plans, there’s also an incentive for patients to seek cheaper care alternatives than the emergency room. According to Medica Choice Network, the average ER cost for allergies, for instance, was $345 vs. $97 in an urgent care setting. For urinary tract infection, the difference was even greater: $665 vs. $112.

On-demand centers make their prices readily available, with office visits generally in the range of $125-$160 for self-pay patients, less for those who are insured.

At the same time, consumer demands, as well as regulatory changes, have impacted hospitals’ revenue mix. A decade ago, nearly 57 percent of the dollar amount Oregon hospitals charged derived from inpatient care. Now the proportion is almost equally divided between inpatient and outpatient, as more procedures have migrated to ambulatory settings and systems respond to Medicare and Medicaid incentives to lower hospitalizations.

Retail centers, with their relatively low overhead, can fill the gap, provided they achieve a high volume.

“Urgent care is very profitable,” said Bill Stinneford, senior vice president at Buxton, a Fort Worth-based consumer analytics firm working with Adventist Health to evaluate center sites. “If you’re a health system, you need that type of business to support the rest of it.”

Management consulting firm Oliver Wyman projects “at least $200 billion in current health care spend is poised to flow from traditional venues to one or more of these alternative, new front door sites,” including virtual care.

Competitive edge

In Portland, center operators are jockeying to stand out.

Zoom+ last year expanded beyond urgent care into what Chief Creative Director Steve McCallion calls a “radical redefinition of primary care,” as well as beefing up its “advanced care” offerings. For example, at the Zoom+ Performance Lab in the Pearl District, you can test your nervous system function. The company’s marketing leans heavy on catchphrases — “Sarah,” platonic ideal Zoom patient, and “twice/half/ten,” which stands for “twice the health, half the price, ten times the delight.”

It is also now in the insurance game. Greene, who was treated at Zoom+ for her sinus infection, is now on a Zoom+ group insurance plan through her employer, the tech-marketing firm Response Capture. She frequents Zoom+ centers regularly for wellness checks and to treat various maladies.

“We were in and out when my son had pink eye, and we left with a prescription and didn’t have to go elsewhere,” Greene said.

Adding insurance to its business model allows Zoom to keep patients inside the Zoom ecosystem. But, while Zoom is Portland’s most-established center operator, it’s an upstart in insurance.

On the other hand, Kaiser may be a newer entrant to the convenience center game, but it dominates Oregon’s health care landscape. The company is the largest insurer, with nearly 530,000 members. It operates two hospitals and four urgent care centers in the Portland metro area. Kaiser is piloting a new convenient care model in the Pearl District this fall, with plans to add more if the prototype center is a success.

Kaiser’s closed-loop system can steer existing members to the retail center and, conversely, entice nonmembers through the door and funnel them to its hospitals and health plan. Providence, which also owns hospitals and one of the largest health plans, enjoys a similar advantage for its Express Care centers, which it plans to expand to nearly 20 this year both within Walgreens and standalone.

Legacy, which is buying a 50 percent interest in PacificSource Health Plans, operates its own urgent care center within Legacy Good Samaritan ER. But the vast majority are in partnership with GoHealth Urgent Care, which was founded in Northern California and initially purchased five existing Portland-area centers. Since launching the joint venture last year, the footprint has grown to a dozen, with plans for eight more in 2016.

Dr. Gregory Carroll, regional president and medical director for Legacy-GoHealth, calls the company’s model “urgent care 2.0.”

“People may come to our retail site, but it’s fully connected to the Legacy system, so they get the best of both worlds,” Carroll said. “Say you need to go to (Legacy’s) Randall Children’s Hospital. The pediatric doctor pulls up your chart, and it’s already in the system. There are no redundancies or loss of communication. We’re eliminating waste over ordering tests and X-rays. You start to get efficiencies for patients.”

Even with the closed-loop advantage enjoyed by Portland’s powerhouse health systems, independent center operators see a place for themselves in the crowded marketplace. AFC/DoctorsExpress is the third-largest urgent care chain in the U.S., but is less well-known in Portland, where it has three locations and four more on the way.

Dan Reese, director of sales and marketing, said the key differentiator is this: 90 percent of patients see a doctor, not a nurse practitioner.

“It’s more about the quality and comprehensive service,” Reese said. “You go to some of these urgent care centers and you’re greeted by someone with a white lab coat, and you have no idea what their credentials are. It’s getting very gray about who’s treating a patient.”

Winners and losers

As it stands now, it’s too soon to say how much demand is really out there and which centers will flourish or flounder.

Legacy-GoHealth centers received 7,500 patients in December, slightly ahead of expectations, Weeks said.

In the short-term, those numbers may continue to rise.

Seventy percent of respondents to the business consulting firm Oliver Wyman’s national survey on on-demand centers said they are aware of retail centers, up slightly from 66 percent three years ago. And it’s not just the young and healthy that are accessing services: “Consumers have found the new front door, they like it and they’re likely going to start using it more and more,” the survey found.

For his part, Zoom+’s Sanders welcomes the competition and sounds a confident note.

“We’ve all done analytics on what we think the population base and demand is,” Sanders said. “It isn’t like they’re all equivalent, any more than all restaurants are. Some are As, Bs and Cs. Some will be successful and others less so. Probably there will be a period where folks come into the space and leave.”

He is also quick to highlight that Zoom was early to the game and that he believes that vision gives it a clear edge when it comes to market share.

“Most health care companies don’t have an original strategy or original thought about how the world is going to go,” he said. “They’re saying, ‘Who’s succeeding, who can I copy?’ For 10 years, they said, ‘That’s not going to work.’ We pointed to the light — neighborhood-based (care) — so they’re saying, ‘That’s interesting, I’ll do it too.’”

Ironically, Zoom is the one provider in these center wars that’s taking a pause, after a flurry of new locations last year. Now its focus is on serving demand for digital care.

“We’re going to focus on what we do well,” Sanders said. “We’re not in a race.”

An urgent need

On-demand centers are growing rapidly nationwide, according to Urgent Care Association of America: