Urgent Care Startup Mistakes - Featured Image

With so many moving parts, it’s hard to avoid startup mistakes when opening a new urgent care clinic. To make it easier for you to get moving in the right direction, we’ve compiled a list of the top ten urgent care startup mistakes based on more than 30 years of experience and a lot of trial and error.

We have seen many successful startup urgent care centers make some of these mistakes and – because each one offered an opportunity to do it better – went forward toward great success.

1. Selecting a Site Where Adequate Urgent Care Access Already Exists

If your community already has successful urgent care or critical care clinics, that means there are already urgent care professionals with the experience and savvy to be successful. They have made and learned from many of the mistakes you have yet to make. And maybe most important, insurance payers may not be willing to add you to their network due to market saturation.

Established clinics have relationships with local companies to do their occupational medicine. You will be able to market to the unsatisfied companies, but how many of these exist and how likely are you to be able to find them?

The established urgent care centers will not be glad to see another urgent care center competing for their patients, and they could make it tough for you. They may be willing to provide medical services at a loss for a year or two just to make sure that you fail.

Other urgent care centers may try to block your local hospital privileges, which you may need for certain managed care contracts.

They may spend hundreds of thousands of dollars on a public relations campaign to protect their market share. The news of you starting an urgent care center may be drowned out by their constant radio, television and newspaper advertisements.

Starting your city’s fifth urgent care center is hardly news; but starting the first urgent care center in a small city is BIG NEWS.

Delivering outstanding medical care is a great goal. But being the best urgent care center in a saturated market may be harder to achieve. Walmart didn’t start out competing with Kmart, Sears, or any other nationally established chain. Instead, Walmart started in rural Arkansas towns with populations of around 10,000. No one else expected this strategy to work. But because Walmart was the only game in town and it had a simple idea (i.e., deliver the lowest prices on the most goods possible), they were able to attract large numbers of customers and rapidly grew to the largest retailer in the world. For the first 10 years of developing its model, Walmart was starting stores in rural America. While Kmart slept, Walmart was working hard to develop its business model—with great profits and essentially no competition. Having lots of competition is never the secret to success in any business.

Why not find an under-served city (or small town) and, without any serious competition, start your urgent care center, develop your model, and prepare your urgent care staff and systems for great success?

2. Wasting Money on Unnecessary Expenses

Don’t make the mistake of thinking that you have to have the best of everything when starting your urgent care center. Paul Graham* states this well in his article, “How to Start a Startup.” In this article, which is derived from a talk at the Harvard Computer Society, Graham notes that a startup business needs to do three things:

  • Have a good idea. It does not have to be earthshattering. Opening an urgent care center is a good idea because for many communities, it fills the need for access to on-demand healthcare.
  • Add good people to your team. Your startup urgent care center will never be better than the people on your team.
  • Don’t waste good money. Urgent care centers are not immune to failure, and the fastest way to fail is to run out of money.

When you start an urgent care center, you can easily waste an extra $300,000 or more on unnecessary expensive items. Expenses like buying top-of-the-line furniture, buying an MRI or CT scanner, hiring nationally famous architects (yes, we have seen this), hanging expensive artwork, purchasing a $250,000+ completely integrated electronic medical record, purchasing a $100,000+ practice management system with all the bells and whistles for a hospital system, hiring only registered nurses and physicians to staff your urgent care center, buying only brand new (and avoiding used or refurbished) equipment, and other items can bet tempting. Remember they are on the wish list—not the need list. These expenses rarely make a significant difference in how you care for patients. They are very unlikely to produce anywhere near $100,000 of annual revenue.

New urgent care centers usually underestimate the amount of investment that they will need to start up. You will need the extra money to put out unexpected fires later on, so don’t burn it up before you start.

Yes, we have seen gorgeous state-of-the-art urgent care centers spending money “like there is no tomorrow”, but still succeed. How so? They have been lucky enough to do many other things right, AND they discover that they need to tighten their belts and start watching their pennies. Unfortunately, we have seen other startups observe their success and try to emulate them. These centers often make several other serious mistakes, so they rapidly run out of money.

Consider looking online for pre-owned medical and computer equipment and office resources for your startup urgent care center. And be mindful of what you need, and what will genuinely impact your business in positive ways.

3. Not Looking Beyond Your Hometown

Most operators choose to start up an urgent care center in their hometown. Why? Because it’s familiar. It is what they know. However, that may not be the best reason to choose a locality for an urgent care center.

Is it possible that a much better community is less than 30 miles away? If so, choosing the second location could save you $100,000 or more in reduced losses in your startup. A community that needs a new urgent care can ensure more rapid growth and success for your startup. Even better, if you really want to be successful, broaden your horizons and look to another city or even another state.

Local business conditions, number of competing urgent care centers, state laws, contracting and credentialing climate, and population densities can dramatically affect your success with a startup urgent care center. When combined with payers increased reluctance to add to clinic to their network in a relatively saturated market, choosing the right location can get trickier.

As has been said many times in many circumstances, “Three factors are the keys to success: location, location, location.” Nowhere is this truer than in urgent care.

4. Not Considering the Purchase of an Existing Urgent Care

In helping more than 250 urgent care startups, we have found there are multiple ways to assume the ownership of or to purchase existing urgent care centers. Entrepreneurs using these techniques are generally much more successful while suffering less financial difficulty in starting their urgent care centers.

So what are you looking for? Research the urgent care centers already existing in and around your target community. Maybe one of these types of facilities might be available for purchase. It never hurts to ask a few questions.

PURCHASE A MARGINAL HOSPITAL URGENT CARE CENTER.

What if a hospital owns a minimally successful urgent care center and you are sure you can operate it successfully? If the problem is a lack of patients, make sure that you understand why. Is it due to poor reputation, poor location, too much competition, over-staffing, overpaying staff, poor signage, or some other reason? If you are quite sure why the urgent care center failed, then make sure you understand what it will take to turn it around and that you can rapidly effect those changes.

Of course, if the urgent care center is in a poor location, it would be unwise to make the purchase. If, however, the hospital administration is willing to meet with you, you may be pleasantly surprised. Rather than charging you hundreds of thousands of dollars for the center, the hospital may be willing to give the urgent care center to you at no charge, provided you assume the lease and allow the hospital administrators to sell the transfer to private ownership as a positive for the community. To the hospital administration, giving you the urgent care center may be an easy way to erase hundreds-of thousands of dollars of red ink from their books. At the same time, the hospital administration can avoid a public relations fiasco, as the hospital will not be seen as abandoning the community’s need for urgent care services.

URGENT CARE CENTER GOES OUT OF BUSINESS.

If an urgent care business is vacating space in a local shopping mall or some other building, the landlord may be happy to let you assume the lease the day after the current occupant leaves the premises. One entrepreneurial physician jump-started her urgent care enterprise by assuming the lease of three centers on the same day. It was a bold undertaking because she had to train in advance and fully staff her centers and receptionists so she could hit the ground running on day one. But it was a success.

With significant patient flow from day one, the total investment amounted to only two months operating expenses for three centers. Compare this to the typical urgent care center that does not experience a break-even month during the initial 12 months of operation. Even better, the urgent care center purchase price is free.

PURCHASE AN EXISTING URGENT CARE CENTER.

If you are willing to relocate to another part of the country, starting your own urgent care center may be similar to buying a house. The seller may be willing to finance the purchase and allow you to pay back the purchase price from your earnings. This is often a particularly good arrangement, as the seller may be willing to work with you to help ensure a successful transition. Remember, the seller only gets the purchase price of the urgent care center if you stay in business, so the seller has a vested interest in making sure you are successful.

PURCHASE AN EXISTING PRIMARY CARE PRACTICE AND CONVERT IT INTO AN URGENT CARE CENTER.

This technique has been used very successfully in recent years. The existing patient flow of the purchased practice covers the cost of operations right from the start.

The staff is already trained to handle patient flow. If you purchase the accounts receivable, you will have an ongoing source of cash flow from day one. The technique has been used to dramatically reduce the investment needed to start an urgent care center.

ASSUME THE MANAGEMENT OF OR PURCHASE AN OCCUPATIONAL MEDICINE CLINIC.

Once again, the principle of existing patient flow and revenues helps you avoid big losses at startup. Many occupational medicine clinics that are privately owned or owned by hospitals have suffered significant financial hardships because states have implemented stingy fee schedules and workplace injuries have been significantly reduced.

For this reason, an occupational medicine clinic may be available for you to assume. One point to recognize is that you are not bound to the location of the occupational medicine clinic, as companies are more tied to relationships and levels of service than they are to a location. Thus, if the clinic is located in a less-than-ideal location for an urgent care, you can simply move the business to the new location.

Make sure, however, that you take great pains to clearly communicate with the companies and let them know how they will benefit from the additional hours that your services will be available in the urgent care center.

One resource to find urgent care centers for sale are the classified advertisements on the website of the Urgent Care Association.

5. Not Writing a Business Plan

A wise person once said, “He who fails to plan plans to fail.” Putting pen to paper forces you to start to think about many of the issues, purchases and obstacles that you must take on to be successful.

Much of what you write will need to be altered or scrapped in the real-life development of your new urgent care center, but the business plan will give you a framework for success.

Your business plan should answer many questions, such as:

  • Where will you get your financing?
  • How much will you invest?
  • Why choose a specific state, town, or street intersection?
  • How will you market your new urgent care center?
  • Will you rent or buy your urgent care facility?

You will need to answer these questions to succeed.

Even if you don’t need a bank loan and you don’t need to convince any other investors, write your business plan to convince yourself. After you have written it, come back in one week with the mindset of a skeptical investor. See if you would invest your hard-earned dollars if someone else was trying to convince you to invest in the new startup.

Better yet, take the plan to a businessperson who has started one or more successful businesses. Take it to several successful urgent care entrepreneurs. But don’t go asking for approval. Tell them to expose the business plan like a bucket on a post and then level a machine gun at the plan. After the plan has every possible hole shot into it, see if the plan still holds any water.

If your bucket has been shot to bits and you realize that the concept is not yet right, don’t be discouraged. It is much better to have your plan shot to pieces in a virtual world rather than to decimate your finances and future with a plan that never had a real chance of success. It is better to wait a year and rethink your plan rather than rush into a plan that never had any real chance for success and pay for your hastiness for the next decade.

6. Blindly Sticking to Your Business Plan

It is a big mistake to blindly follow your business plan. You will never plan for every contingency that will arise in your startup urgent care center. Before you begin, there will be delays in construction, the city will balk at your zoning, a partner will back out, a vendor will fail to deliver furniture, a managed care organization won’t see the importance of your center, and 100 other minor or major unforeseen problems will arise.

How will you respond to unforeseen adversity? It will not be in your business plan. Every time you trip on an obstacle, you will need to step lively and avoid crashing to the pavement with a nimble sidestep from your preconceived business plan. Planning is necessary, but you can never anticipate every eventuality. Expecting the unexpected and making rapid adjustments will be absolutely critical to your success.

Your business will succeed because you take a positive attitude, even when the whole plan seems headed into an abyss. When things look blackest, your staff will look to you for the light of leadership. Your energy and can-do attitude will be the key to sidestepping the obstacle and illuminating a completely new way to the path of success.

Let your business plan be a launching pad and a general guide but get ready to think on your feet and make changes as needed. Your business plan can help you think through many issues that will otherwise end up rearing their ugly heads as unwanted surprises. A good business plan may determine the speed of your launch, but the height of your trajectory will be determined by your ability to respond to problems and find opportunities to improve it.

7. Underestimating the Finances Required

After you write a business plan for starting your urgent care center, we suggest you arrange access to financial assets that will allow you to invest double the amount (i.e., sustain double the losses) that you had projected in your initial business plan. When it comes to starting an urgent care center, almost everyone is more financially optimistic in prospect than in retrospect. Financial setbacks are very common. You cannot predict what financial surprises will come up, but you should expect them.

We have seen urgent care centers suffer the following financial setbacks:

  • In some states, payers may require an urgent care license and/or CMS participation prior to accepting applications for network participation. In these cases, these requirements may not be able to be met until close to or after center opening, essentially becoming an out-of-network provider during the early months of operations.
  • Regionally and even nationally, we have found that payers or their parent companies have ownership interest in urgent care businesses. In some areas, these payers may deny participation to new urgent care operators.
  • When one urgent care center planned an opening, a large hospital healthcare system opened another just across the street three months before the center was scheduled to open. Growth in patient visits grew at about half the projected rate, and consequent billings and collections were far below financial projections.
  • One urgent care center found that the billing company they engaged for contracting, credentialing, and billing had no expertise or strong interest in urgent care billing. Four months after opening, very little contracting or billing had been completed.
  • An urgent care center hired a management company to manage all finances. After being open for eight months, the center learned that no bills had been paid. They had to endure disconnections of electric, phone and gas. They had a rude awakening when they found their actual financial losses were several hundred-thousand dollars more than they had calculated.
  • One small group of urgent care entrepreneurs discovered they were out of money and would not be able to meet payroll. They had used the equity in their homes to secure the loans to start the urgent care center, and just six months into the startup, they were faced with the prospect of outright bankruptcy.

If you have arranged for access to financial assets that will allow you to survive a cash shortfall, you are far more likely to survive the financial challenges of the first few years.

8. Being Cash-Only, Not Credentialing

Urgent care center receptionist to potential patient:

“Sorry. We don’t take your insurance. You will need to pay cash today.”

This can be a fatal error in starting an urgent care. Hundreds have tried; many have failed. The cash-only model is historically unsuccessful in today’s world of rising insurance premiums, as patients want to use the insurance they pay for. Even the retail clinics in a CVS or Walgreens, staffed with only a nurse practitioner, have credentialed their providers and bill insurance for 95 percent of their patients. If a cash-only model does not work in the big-box stores, it is very unlikely to work in a full-service urgent care center.

Over and over again, we hear startup urgent care entrepreneurs say their situation is unique. They have surveyed the community, and patients are perfectly happy to write a check for $180 a visit. Or they have a personal conviction that healthcare is a “privilege” that has “value,” and “people should pay for it out of their pocket,” then they “will value their healthcare.” This all sounds great. We even agree with much of this. If, however, the urgent care entrepreneur decides to go cash-only, only the school of hard knocks can and will change his or her mind. Her situation rapidly turns out to not be all that unique. She finds out the public really sees most healthcare as a prepaid right of employment. Her patients’ first words to the front desk are almost always the same question, “Do you take my insurance?”

If the answer in your startup urgent care center is, “No. We take cash, check or credit card,” most patients will never see more of your facility than the reception area. If even one quarter of your potential patients walk out the door because you are cash-only, it is likely to take years longer until your new urgent care center reaches break even.

What generally happens when a startup tries to go cash-only? After two or three months of staring at empty waiting rooms, the center realizes their situation is not that unique. They scramble to sign contracts with managed care organizations (MCOs) and credential their urgent care providers. It takes at least three to four months to get the contracts signed. It takes three months to credential the urgent care physicians. It takes another year until the providers are listed in MCO publications listing credentialed urgent care centers. The urgent care hemorrhages several hundred thousand dollars.

All of this could have been prevented if the contracting and credentialing process had begun several months before the opening date of the urgent care.

As with most successful entrepreneurs, they realized their mistake and began “negotiating with insurance carriers.” Today their website clearly states, “We now accept most insurance plans. If we are not enrolled in your program, we will bill your carrier as an out-of-plan provider.”

Yes, the cash-only urgent care rarely works, and it has been tried many times. Entrepreneurs who try it either fail or end up losing hundreds-of- thousands-of-dollars more than necessary. It seems a lot less painful to learn from the mistakes of others rather than think your situation is unique and risk being another object lesson of the futility of the cash-only model.

The lesson here seems quite clear. Find the important managed care organizations in your area, negotiate contracts, and get your providers credentialed as fast as you can. When should you start? It will take at least five months (often more) for almost all plans to complete this process. Although we have worked with scores of startup urgent care centers, we have never seen a startup complete the credentialing process in time for opening day.

9. Thinking Compliance is Not Important

If you don’t think you have to worry about compliance in the first few months after opening, you are correct in thinking that no payer or regulatory agency is likely to audit your center for compliance in the first few months after opening.

You are correct that hospital systems are much more prone to big audits and big fines. You are correct that so-called compliance experts often make compliance into a complex quagmire. But ignoring compliance can lead to serious issues as your practice grows. There are two more types of compliance in the urgent care setting; coding and HIPAA.

Here are a couple of real-life examples of urgent care centers showing the importance of coding compliance:

  • A national managed care organization asked a four-center urgent care to refund $1.5 million for what they interpreted as inaccurate documentation and coding. Much of the MCO’s claims were spurious and based on inaccurate information, but the initial legal bills for this urgent care practice went over 100,000 before the case even got off the ground.
  • An urgent care practice settled with Medicare for five figures (certainly with six figures of legal expenses) for not strictly following the “new patient” vs. “established patient” rules established by Medicare. This occurred, even though many argue these rules should not apply to true urgent care centers. HIPAA and its associated legislation is designed to be scalable. The government does not expect a small startup center to have the same compliance resources as a large hospital system. However, that does not mean compliance for small clinics is not important. Here are a few areas that all healthcare providers need to address to avoid common fines:

RISK ANALYSIS: The Department of health and Human Services understands that not every risk or HIPAA requirement can be addresses from day one. What they will not tolerate is a healthcare organization that doesn’t understand what their risks are. To that end, a risk analysis should be performed by the end of the first year of operation and risk remediation plan should be enacted to address the findings.

BUSINESS ASSOCIATE AGREEMENTS (BAAS): It is imperative that any organization that a center partners with to process, transmit, or store PHI has a BAA. HHS is fining heavily for lack of BAAs.

TRAINING: Just performing a yearly 15-minute training session on HIPAA is not enough to satisfy government requirements. Staff should be trained on privacy, reporting obligations, and security (particularly phishing).

INCIDENT RESPONSE PLAN: Clinics must have a mechanism to detect, investigate and report on privacy breaches. Familiarize yourself with your reporting obligations to patients and HHS.

ENCRYPTION: PHI must be encrypted at rest. The second most common find from the HHS is due to lost and/or stolen laptops or USB drives that are not encrypted.

A WORD ABOUT RANSOMWARE AND CYBERSECURITY: By far, the biggest risk to the healthcare industry is phishing. The amount of data lost and exfiltrated due to phishing attacks cannot be overstated. Consulting with a competent IT firm to install and configure your technology systems is highly recommended.

10. Overstaffing the Startup

When it comes to staffing your clinic, being a minimalist at the start makes sense. Why hire several urgent care receptionists, an X-ray technologist, a registered nurse, a physician assistant and other ancillary staff up front? Before you get very busy, you, the owner, will be intimately involved with your urgent care business.

See if your state requires a certified radiology technician; if not, maybe a nurse or medical assistant can become certified to shoot the X-rays for your startup urgent care. If you are only seeing a few patients per day for a few months, you can use your clinical staff to cover the front desk. Many startup urgent care centers find that this bare-bones arrangement works fine at an average of one (or less) patient per hour.

But what if you don’t have enough staff to handle the patients rushing into your doors? Fantastic! You don’t have a problem. You have a great opportunity. It’s not a problem if a football team scores over one hundred points, but the scoreboard only holds two-digit scores. It is not much of a problem for Bill Gates if his bank statement can’t handle enough zeros to print out his account balance. In the same way, it is no big deal if your patient volume overwhelms your initial staffing model. It only takes a few weeks to hire and train more staff.

But what if growth early on is relatively modest— as it is with most startup businesses? Paying staff to sit around waiting for patients is very expensive. Letting staff go is even more demoralizing, as staff are always looking over their shoulders to see if they might be next. But firing staff early on is painful for you, puts a pall on staff emotions, and gives the staff a feeling that the center is a failing endeavor.

Hedge your bets. Start with a bare-bones staff to minimize your up-front expenses and maximize the chance for your startup urgent care to succeed. You can always hire more people later.

The Takeaway:

Make big plans, dream big dreams, and work hard on perfecting your model so your first urgent care is a huge success. Don’t be afraid to think about operating a multi-site urgent care and serving your entire community. But wait until your first center is a success before writing a business plan or spending time investigating other sites for an urgent care center.

Urgent Care Consultants for Startup & Expansion Hero - Experity

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This resource was first published prior to the 2019 merger between DocuTAP and Practice Velocity. The content reflects our legacy brands.