Urgent care fills a unique gap that exists between the emergency department and primary care. Many people were exposed to urgent care for the first time during COVID – meaning more visibility for the industry, and hopefully more opportunity. According to UCA, there are over 14,000 urgent care centers in the U.S. today with a growth rate of seven percent.
But a new business doesn’t open overnight. If you’re researching how to start an urgent care, know that you’re not just looking for step-by-step instructions. You also need to factor in risk mitigation. That’s why a lot of new clinics choose to work with a consultant who not only helps you check boxes, but also positions you for the greatest success.
With risk mitigation in mind, we’re sharing advice from our own consultant team so you can get a good idea of everything from cost to site selection to other key success factors. Here’s what’s ahead:
If you’re reading this, you’re probably in the first steps of researching and planning – two things that need to be done thoroughly to ensure success. If you’ve never opened a clinic before, and you are trying to do it without a consultant, now is a good time to find others who have experience opening a new urgent care. As you get into specifics like finding vendors and selecting major equipment (e.g. radiology,) their advice can help you save a lot of time and money.
With that in mind, let’s lay out some timelines. One of the first things you should do is choose a location. We have a section on this below that can help, but it’s important to do early because different states have different rules and regulations, market saturation, etc. — all of which can impact your revenue potential. You may discover that the best place to open isn’t even in the state where you originally planned to operate. This matters if you’ve already spent a few hundred dollars registering a business name with a different Secretary of State, or secured insurance that might change drastically, for example.
So no matter what model you follow, your first steps should include a well-informed location selection, setting up your business details, and writing your business plan. American Family Care has this checklist you can review – and they offer franchising opportunities if that’s something you’re considering.
AFC’s recommended timeline is as follows:
Outside of location selection, this is a very logical order. This blog can help answer some questions that may be relevant when you write your business plan, which some people choose to first.
As far as timing of your build-out and other logistics, the following are good general guidelines on when to expect to do what once you’re ready to kick off.
Budgeting – Funding: 9-12 months out (except radiology which should be earlier because of design and building codes and regulations)
Securing site: 3-4 months into project (need address for contracting & credentialing)
Contracting & Credentialing and getting in network with major payers: 10-12 months
Design – Working with architect/contractor: 6-9 months out
Ordering Equipment– Final selections/order placement: 45-90 days out
Clinic set-up, order supplies, hiring, training, technology configuration, compliance, etc.: 45-90 days out
Opening day: 12-14 months from when you start project
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Before we dive into more of the startup process, we know you’re wondering about cost. What’s important to know is not just how much it costs to open an urgent care, but what you need to break even, and what factors will impact your profitability.
How much money you need to start your business will depend on factors we’ll explain below, but the simple answer is that the average cost to open an urgent care clinic is estimated between $1.3-1.5M, or more. This is generally broken down as such:
Your true cost will depend on market, goals, and available resources. And, as we mentioned, you also need to be thinking about how much money you need to stay in operation during those critical early days while your accounts receivables are maturing. That depends on important variables like location, size, and your real estate arrangement.
Prime real estate may be easy to spot, but it’s not always easy to come by. Whether you’re planning to buy, build, or lease clinical space, opening your urgent care in the right location is crucial. Highly visible, high-traffic, easily accessible retail space may require a bigger initial budget, but in the long run, it may pay off with a greater flow of patients.
Geography will also affect your costs. While California is known for its entrepreneurial successes, startup costs in cities across the Golden State are high compared to almost anywhere else in the country. On the other hand, cities in the south, like Chattanooga, Louisville, and Wichita are the most startup-friendly based on costs. Salary requirements will also fluctuate based on geography.
Rural, urban, or suburban? No two localities are alike. It may be cheaper to build or lease in a rural area, but you may find it much costlier to find — and pay — providers.
One other important consideration is the accessibility to payer networks. Over the last few years, insurance providers have become more aware of market saturation and are limiting access to new clinics in places where coverage is high. Read more about selecting the best location in the section “Location Selection.”
The average urgent care is about 3,000 square feet, but you should choose the size of your space based on expected patient volume and the services you plan to offer. If you plan to offer exclusively urgent care, you may not need as much space as a clinic offering physical therapy, OccMed, or wellness services. Always choose clinic space with the best location you can afford that offers a workable floor plan. Most importantly, never choose size over location.
Do you plan to lease space, build a new office, or buy an existing clinic? Investigate all your options before making a decision as your choice will affect your start-up costs.
Location should always be your first consideration. The majority of urgent care operators, especially those just entering the industry, lease space. In particular markets, situations may be more favorable to either build-to-suit or purchase land and own the property.
Whether you buy, lease, or build, assess the space and the services you plan to offer. And work with an architect and/or designer experienced in the urgent care space. An experienced builder can keep you compliant, make the most of the space, and help you stay within your budget.
Keep in mind that state and local building codes and insurance company guidelines may have some impact on specific design elements, although they do not dictate things like the number of rooms or placement of objects. Some states require special permits and licensure. Be sure to check local regulations.
Your overall cost will also depend on things like equipment, furnishings, and services. Here are a couple of checklists you can use to determine financial needs.
Remember that supplies can usually be delivered within a few business days, so plan for what you need at startup to carry you through opening.
It generally takes between 25-30 average visits per day to reach profitability in urgent care. The key variables in what number of patients are needed include:
If your expenses are too high and/or your contracted rates are too low, you may never reach profitability with any number of visits. If your expenses are low and your contracted rates are high, you might be able to break even at 20 patients per day.
One of the most critical things you need to start a business is money. And in order to get money, you need a business plan. You can go to five different sources and get five different (but similar) guidelines on how to write one. Our consultants have helped over 500 startups succeed, so we’ll describe the sections they’ve proven highly effective. We’ll share more about their services below, but if you want to go it on your own, here is what to include:
Location considerations are so critical to the success of your business that the topic needs to be explained at greater length than we can cover here. We highly recommend reading this JUCM article by Alan Ayers that goes into great detail about selecting a location site for your urgent care. He has nearly twenty years of experience in urgent care and is Experity’s President of Consulting. Outside of what this article explains, here are some preliminary questions to ask around location.
Generally speaking, the majority of urgent cares are located close to dense residential areas and in the suburbs, where families with children are most likely to live. Middle class, dual income, with kids, hectic lifestyle—these are the people who are most likely to visit an urgent care.
Before you make your decision on location, think about the proximity to patients. How many visits do you need to be profitable? Is the area growing? Shrinking? Are the retailers busy?
There is a saturation point when it comes to healthcare providers, especially when they offer similar services. When looking for your perfect location, look for other urgent cares or same-day primary care office in the area. Find out if they have specialized services like pediatric urgent care or OccMed. If not, these may be service lines for you to consider.
Think about the principle of supply and demand. Will your urgent care fill a need in the community?
After you analyze the demographic, competition, and market, you can make a sound decision about location.
To be successful, you have to be seen—easily, often, and by many people. This often means choosing a location close to frequently visited retail spaces. Think big box retail, grocery stores, major intersections. Choose places that people pass regularly during their daily lives. Become such a familiar sight that when people need urgent care services, your clinic will be the first one they think of.
One major component of visibility is signage. What are the sign restrictions at your preferred location? If it’s a retail center, will your name be prominent on the center’s main sign? Can the sign be seen from the street, or is it blocked by other buildings or trees? What kind of restrictions are in place regarding window and door signs?
Because convenience is key to urgent care success, make it easy for people to find you with a highly visible location and signs that are easy to see and have an impact.
When in need of urgent care, easy in-and-out parking is essential. Is there space to drop off and pick up patients? Will patients have to walk an unreasonable distance to get to the office?
Setting up your urgent care in a perfect location may require a bigger initial budget than expected, but in the long run, it may pay off with more patients.
Earlier we mentioned that a successful startup is not just about getting everything in place to open, but also factoring in risk mitigation. If you’re not going to use a consultant to mitigate your risk, these are some key success factors based on critical mistakes other urgent cares have made.
The top reason why urgent care centers fail is lack of working capital. Working capital is cash that you need on hand to cover the expenses of your business. These include wages and salaries, benefits, rent, utilities, supplies, any marketing, any other expense related to your business. Generally in business, working capital comes from your revenues. It comes from cash from operations. So you see patients, you generate revenue, and then that provides money to pay your expenses.
But in a startup business, your expenses are going to be greater than your revenue, so generally you need money put aside, which is going to come either from owner’s equity, investments that the owners make in the business, or from bank loans. You need money saved to cover these expenses until the operation is at a break-even point and the operation starts putting out enough cash to sustain itself and cover is own expenses.
Unfortunately, the ramp-up time to those break-even revenues can take longer than anticipated, and essentially the urgent care center exhausts its working capital or it runs out of cash. Generally, we expect an urgent care center to break even within six months, although in some cases we would budget eight or even twelve months, depending on the circumstances.
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.
A thought some startups have is “I’ll open my clinic as cash-only payment and the insurance companies will follow.” Not the case! Not only is this not true on the insurance company side but it can also be a PR nightmare to open your doors in which your patients with insurance are out of network. In the patients’ minds, once out-of-network, always out-of-network. Your front desk teams will be overwhelmed with patients calling with questions on their EOBs and the clinic will most likely have to write-off a large portion of unpaid bills. Plus, you will lose the positive word-of-mouth marketing that startup urgent cares benefit from.
The important thing with payors is to have a realistic timeline and understand what the process entails. This process begins with contracting and credentialing. These words are not interchangeable as they pertain to very different pieces of the puzzle. Credentialing is the process of verifying your practitioners are licensed in the appropriate manors to the appropriate state, while contracting is the process in which you request to be in-network and negotiate reimbursement with the payors.
In most cases this process as a whole, averages a 6-9 month period and can occasionally exceed even that timeframe. There are many caveats to this process. Knowing the when, how, and what of the contracting and credentialing process is vital to the success of your clinic. This step is best left to a professional and is well worth the cost.
Here are a few other pieces of advice that can help you break even sooner:
There’s a lot to cover when starting a new urgent care. Even when you’ve got the basics down, you may not have the expertise to scrutinize the details that can make or break your success once you’ve opened your doors. Visit volume has been volatile in the years since the pandemic, so if you want assurance that you’re doing the right things not only for opening, but also for your future, hiring a consultant is a smart strategy.
Before you choose a site and sign a lease, get the guidance of the consulting partner that knows urgent care. Ninety-nine percent of our urgent care consultation clients are still operating today. From financial plans to compliance, you’ll have the tools and information to make sure you’re set up for success when you go live. Tap into our experience from the initial capital investment to projecting performance during your first seven years of operation.