Fortus launches urgent-care business

UTICA — On July 5, MV Medical Practice, P.C. formally opened its office at 1908 Genesee St. in Utica under the d/b/a Primary Urgent Care. The practice is located in the South Towne Plaza and occupies 4,800 square feet of space leased from the Little Safford Corp., owned by F. Eugene Romano.

Primary Urgent Care offers extended hours to patients with medical conditions similar to those treated in primary care but with an emphasis on episodic illness and minor trauma such as flu, sore throats, ear aches, minor injuries, sport accidents, vaccinations, testing, physical examinations, and workplace medicine.

MV Medical Practice, which filed as a New York professional corporation on April 18, 2016, is owned by Rebecca LaValley, M.D. Dr. LaValley, who is board-certified in family practice, earned her medical degree from SUNY Upstate Medical University in Syracuse. Her urgent-care center, open 76 hours a week, is staffed by eight full-time and 20 part-time or per-diem employees. The staff includes a physician, nurse practitioners, radiology technicians, medical assistants, nurses, a receptionist, and a practice leader.

“The urgent-care center is managed by Upstate Providers, LLC,” says Jeremy Enck, the company’s CEO. “We have a three-year contract with Dr. LaValley to oversee the business so she can concentrate on the clinical side delivering quality health care. MV Medical Practice pays Upstate Providers a fee for its management services. Our eight-person management team is responsible for staffing, IT, public-relations, accounting, maintaining the facility — in other words everything required to run a business. Upstate Providers selected this site back in September because of the large population near the center, easy access and parking, and the fact that the location had previously housed an urgent-care center.”

The space was originally occupied by Independent Urgent Care, which was bought by the Mohawk Valley Health System and renamed Genesee Urgent Care. Mohawk Valley Health System subsequently closed the office.

The idea to open Primary Urgent Care originated with Michael Maurizio, chairman of the Fortus Group, headquartered in Utica. Fortus specializes in recruiting and staffing medical professionals and technicians for both temporary and permanent placement. “Mike saw the need for an independent urgent-care center not affiliated with a hospital,” explains Enck, who is the president and CEO of Fortus in addition to his role as CEO of Upstate Providers. “This area is underserved, and the demand for urgent care keeps increasing. Consumers expect health-care services to be as responsive and accessible as other service industries. They want on-demand care. Consumers are also facing a higher share of health-care costs, which motivates them to seek lower-cost care.

“New York State regulations prohibit a non-physician from owning an urgent-care facility,” continues Enck, “so we created the management company to operate the business side and attracted a venture-capital company from Dallas to invest in the startup. The total cost to renovate the property, buy equipment, and fund the launch was approximately $500,000. Fortus is the majority stockholder in Upstate Providers. The investors loaned Upstate Providers the startup funds and anticipate repayment with interest. They also own 25 percent of Upstate Providers stock. We project that Primary Urgent Care should generate about $2 million [in revenue] annually. The Genesee Street center is just the first of a chain of five to 10 urgent-care centers we want to create within a 100-mile radius of Utica.”

The Fortus Group employs 37 people at its corporate headquarters located at 2717 Genesee St. and about 100 contractors placed nationwide. The firm’s revenue topped $10 million in 2015.

Industry overview
The concept of urgent care originated in the 1970s when it was derided as “Doc in a box.” The idea is simple: fill a gap between the high-cost and inconvenience of being treated in a hospital emergency room or trying to get an appointment promptly with a primary doctor. The business model requires treating many patients quickly to compensate for the lower margins. Nationally, 70 percent of the reimbursements come from commercial health-insurance carriers, and those who aren’t covered by insurance pay in advance for their treatment. Today, the industry generates more than $15 billion annually, and investors — from angel investors, health insurers, hospitals, health-system-owned centers, and private-equity groups — are rushing to profit from its continuing growth. Analysts say the timing for additional investment is right, not only because of increased patient demand accompanied by a reduction in the supply of primary, health-care physicians, but also because the reimbursement model is moving away from fee-for-service medicine to value-based care that emphasizes outcomes.

According to a 2015 report by the United Hospital Fund of New York, using 2014 data, the Empire State has 366 urgent-care centers, of which 103 are located in New York City. The centers are usually located in areas of relatively high-population density or high income. A benchmarking survey by the Urgent Care Association of America (UCAOA) conducted in 2014 reported that 91 percent of urgent-care centers surveyed anticipated growth, and 87 percent had acquired or built a new location that year. The responding centers were open, on average, about 79 hours weekly, had been in business seven years, and served a target population of 127,000. Ownership was divided among hospitals (27 percent), two or more physicians (20 percent), corporate entities (19 percent), individual physicians (17 percent), joint ventures with a hospital (15 percent), non-physician investors (4 percent), physician investors (2 percent), and others (2 percent).

The benchmark survey found that 34.1 percent of urgent-care centers were located in shopping centers/strip malls, 33.2 percent in free-standing buildings, 19.1 percent in medical offices, and 13.6 percent in mixed-use buildings. Of those visiting urgent-care centers, 66 percent had an outside, primary-care physician. Waiting times to see a provider averaged 30 minutes or fewer, and the patient visit did not exceed an hour. A 2014 report by Kalorama Information concluded that a successful urgent-care center needed a minimum of 8,000 patient visits a year to survive. The national average was 14,000.

Challenges
Enck reflects on the urgent-care challenges he faces. “This industry is highly fractured,” he avers, “and there is a lot of M&A activity nationally as players try to gain market share. The hospitals, in particular, are very aggressive in their competition, because they see urgent care as a way to direct patients to more expensive care in their systems. Big health-care groups like UnitedHealth are gobbling up urgent-care chains because they are profitable and offer a lower cost to the insurer.” (In a fourth-quarter/2015 earnings call in January, Larry Renfro, vice chairman of UnitedHealth Group, which is the nation’s largest health-care payer, was quoted by Forbesmagazine as saying the company would also grow as a provider through its OptumCare division. “We currently operate over 160 care centers, with the goal of operating several multiples of that number five years from now.”) While we haven’t seen competition yet from big-box stores like Walmart, Walgreens, and CVS who operate retail, health-care centers, I assume it’s only a matter of time before they open in this region.”

In addition to competition, Enck also faces the challenge of physician supply. “It’s clear that the demand for physicians is growing faster than the supply. The problem here is compounded by the difficulty in attracting physicians to the Mohawk Valley. Fortunately, Fortus has more than two decades of experience recruiting professional practitioners, which is a tremendous advantage. Still, I spent every day from January to mid-April interviewing to hire the best-qualified staff I could find.

All of the new hires were employed, so it was a long process, which kept me in the office until 10 every night.”

In March 2015, a study sponsored by the Association of American Medical Colleges (AAMC) forecast physician supply and demand between 2013 and 2025. During this period, demand will grow by 17 percent. By 2025, the demand for physicians will exceed the supply by a range of 46,000 to 90,000. The shortfall of primary-care physicians is projected at 12,500 to 31,000. The study concluded that, under every scenario considered, the physician shortage will persist. AAMC also forecasts that one-third of all current physicians will turn in their white coats and stethoscopes by 2020 and retire. During the same period, the U.S. Department of Health and Human Services forecasts that the supply of doctors will increase only 7 percent.

Another challenge Upstate Providers faces is the blanket of state regulations that govern health care. The growth of ambulatory care has pushed the New York Department of Health, Public Health and Health Planning Council (PHHPC) to consider a gaggle of new options to regulate urgent care covering registration, accreditation, licensure, reporting, and other restrictions. “The health-care industry has experienced a lot of change, especially in the last few years,” posits Enck. “Urgent care is expanding very quickly, and the regulatory landscape in the state is both complex and uncertain. On the one hand, this is an obstacle that keeps out some competitors, but on the other hand it also requires a lot of time and expense to comply with the regulations.”

Reimbursement is another challenge faced by Primary Urgent Care. “Signing up [insurance] carriers is a slow, tedious process,” asserts Enck. “We couldn’t begin until April, when we hired Dr. LaValley and then received a corporate-identification number to enter into the health-care system. Each commercial carrier has to be contacted, and each has its own procedure for processing claims. It’s a work-in-progress. We’ve only been open a month, but we are already processing [on average] 25 patients a day, which we anticipate will grow soon to 40 a day. The payers all want to lower their reimbursements to the providers, so that puts the pressure on us to be more efficient and see more patients to compensate for declining reimbursements. Our clinical team is also alert to reminding our patients of other services that we offer. For example, if a patient comes in to treat a sore throat, the staff could then suggest a vaccination or physical exam. That saves the patient an extra visit and increases our per-visit billing. Since half of our patients don’t have a primary doctor, it’s not uncommon to perform multiple services with each visit.”

Business/marketing plan
Before Upstate Providers considers opening additional offices, it is focused on managing the Genesee Street site to garner more experience and data about the operation. “I think we did a good job hiring and preparing for the ribbon-cutting,” reflects Enck. “This is still a new business, and although we worked closely with a consultant to launch this venture, I want to feel comfortable that we really understand what the patients are looking for and that we provide an experience that meets or exceeds expectations. There is no doubt we will grow the number of centers, because there are opportunities to serve this marketplace. Expansion could come by building urgent-care facilities de novo, buying a practice, or both. While the creation of new centers has exploded in urban areas, we also see potential in areas with populations as small as 20,000.”

A 2014 Mercer Capital report that researched the value of urgent care indicated that the cost for treatment was comparable to a primary-care visit. In addition, the Mercer study found that only 4 percent of patients required transfer to an emergency room and only 15 percent had to be sent outside the center for diagnostic testing. Annual revenue averaged $2.5 million, generating a pre-tax profit of 8 percent. The majority of the expenses went for salaries and benefits of center employees. The study also noted that the centers were beginning to earn higher margins by offering ancillary services.

The task of introducing the new, urgent-care center to the Utica community fell to Jillian Ducato, the marketing public-relations manager at Fortus. “In anticipation of opening the center,” Ducato emphasizes, “we relied on television advertising; promoting through Facebook, tracking the ‘likes,’ ‘shares,’ and ‘reviews’; mailers; radio; and articles in the local press. The TV advertising was built around the fact that the center’s staff was local and very involved in the Utica community. I think it was particularly effective, because we sponsored the Boilermaker broadcast on WKTV. We’re also sponsoring the Heart Run & Walk … I’m a big believer in social media, so our focus going forward will shift more to the Internet. The center surveys every patient who visits, and the results in the first 30 days have been very positive. Patients are sharing their experiences with family and friends, and this is helping to drive traffic. Upstate Providers has also invested [heavily] in Primary Urgent Care’s website to ensure that it is both intuitive and easy to navigate.”

Executive backgrounds/goals
Enck, 38, graduated from Oneonta High School, and, in 1991, earned a bachelor’s degree in sports medicine from Mansfield University of Pennsylvania. He joined Fortus in February 2007 as an account executive/recruiting specialist and was promoted to marketing director in February 2009. Maurizio promoted him to VP of sales in January 2012 and then to the position of president and CEO in February 2016.

Maurizio, 58, who grew up on Utica’s south side, was a division manager for Whitehall Laboratories from 1982 to 1987. In 1988, he entered the world of placement with the Boston office of Carter/MacKay. The south-side native joined Management Recruiters International as a franchisee in December 1993 and shortly thereafter became independent. Fortus specializes in dialysis recruiting and added a travel-nurse division in 2006.

“My short-term goal is to make the Primary Urgent Care center a model of convenient care,” notes Enck. “Before creating more centers, I want to be sure we deliver quality clinical care efficiently. That means that we respond to our patients’ concerns, and we invest wisely. For example, Primary Urgent Care now has a digital-health-systems interface that connects with the patients’ electronic-medical records, medical laboratories, immunization databases, primary-care physicians, and so on … Our IT expense was substantial and so was our investment in a new X-ray machine that cost $70,000.

“Also, we need to watch carefully the growth of competition, regulatory oversight, and changing customer preferences,” he continues. “Things are changing rapidly in this industry, but one of the advantages of being independent is that we can move quickly to meet these changes … What’s [abundantly] clear are the trends: more visits to the emergency room under the Affordable Care Act (ACA), fewer primary doctors, declining reimbursements, spiraling health-care costs, large [urgent-care] operators gobbling up smaller ones, an aging population demanding more health care, and a population poised to expand because of the coming high-tech growth in the region. (A 2015 study by the American College of Emergency Physicians reported that 75 percent of the responding physicians indicated that, under the ACA, emergency-room usage had increased since Jan. 1, 2014.) Primary Urgent Care is well positioned to benefit from the trends. Expanding to a chain of five to 10 centers will help to spread the administrative overhead and make the centers more profitable.”

“Doc in the box” has shed its early image. Health-care systems have finally realized that urgent care is not going away; it’s competing directly with primary care and with emergency rooms. As the pressure on the primary-care model and the overuse of emergency-care departments grows, urgent care may well replace primary care. Placing “Primary” on the name of the new, Genesee Street center anticipates the possibility. “I’m very optimistic,’ intones Enck. “Upstate Providers has a management team that’s innovative and thrives on competition. We think and act like entrepreneurs. We’re also totally consumer-driven focused on building lasting relationships with the patients.”

Contact Poltenson at npoltenson@cnybj.com