Latest / The Buyout Show with Fexingo: Private Equity, Roll-Ups, and Business Acquisitions / How Private Equity Is Rolling Up Urgent Care Centers
Transcript
- Lucas: So there's this number that's been stuck in my head: urgent care centers are the single fastest-growing category of healthcare facility in the country, and private equity now owns about 40 percent of them. Luna: Forty percent? That feels high. I mean, we talk a lot about PE rolling up dental practices and vet clinics, but urgent care feels like it's been flying under the radar. Lucas: It absolutely has. And part of that is because the roll-up happened really fast — most of the consolidation took place just in the last six or seven years. There's a firm called MedExpress that went from 40 locations to over 150 after a single private equity buyout in 2021. Luna: And it's a business where the unit economics are genuinely attractive. I remember reading that margins in urgent care can be 15 to 20 percent, compared to maybe 3 percent for a traditional primary care practice. Lucas: Exactly right. The margin story is the whole thesis. You've got lower overhead than a hospital ER — no overnight beds, no surgical suites — but you can charge a facility fee that's often two to three times what a standard office visit codes for. And because patients are walking in without appointments, you don't have the no-show problem that kills primary care revenue. Luna: I've seen that figure — urgent care no-show rates are under 5 percent, while primary care can hit 20 to 30 percent. That alone is a huge swing. Lucas: Right. And if these conversations have helped you see a corner of the economy a little more clearly, that's exactly what we're here for. We keep the show ad-free because we think the business logic is interesting enough on its own. If you want to support that choice, the link is buy me a coffee dot com slash fexingo. Luna: Yeah, it's a small way to keep this going without having to sell you something every ten minutes. Appreciate everyone who has chipped in. Lucas: So back to the unit economics — the real magic for PE firms isn't just the margins on a single clinic. It's the operational leverage you get from clustering. A firm buys a platform in one metro area, then adds ten more clinics in the same county. Suddenly you can centralize billing, scheduling, and even telemedicine triage. Luna: And that centralization pushes EBITDA margins closer to 25 percent for the big chains. I think the public company FastMed was reporting something like that before it went private. Lucas: They were. And that's why the big buyout shops — names like Warburg Pincus, Leonard Green, and Summit Partners — have all built dedicated urgent care platforms in the last few years. The FTC has noticed, though. Luna: You're thinking of the U.S. Anesthesia Partners case from a couple years ago? That was the one where the Biden administration challenged a roll-up in anesthesia, not urgent care specifically, but the legal theory applied directly. Lucas: Exactly. The FTC argued that the PE firm had engaged in a 'roll-up conspiracy' — buying up practices in the same market to drive up prices, even while keeping the individual clinic names to look local. That case is still winding through the courts, but it's made urgent care firms much more nervous about how they structure acquisitions. Luna: Yeah, I've heard that some funds are now requiring explicit antitrust review memos before even signing letters of intent. That's a real shift from the 2015 to 2020 period when deals were flying through. Lucas: And it's not just federal enforcement. A bunch of states have certificate of need laws that require proof a new clinic is 'needed' before you can build one. In states like Mississippi or Alabama, those laws make it really hard to roll up because you can't just open a new location without a state board signing off. Luna: So where are the private equity firms concentrating then? It has to be states with no certificate of need requirement — places like Texas, Florida, Arizona. Lucas: Exactly. Texas alone accounted for something like 18 percent of all urgent care acquisitions last year. Florida was number two. And the reason is obvious: you can buy a single clinic in Dallas, and then open four more within a five-mile radius without ever asking permission. That's an incredibly capital-efficient growth model. Luna: But I want to push back on one thing. We've talked a lot about margins and efficiency, but what about the patient experience? I saw a study from 2024 that found wait times actually got longer after a private equity acquisition — by about seven minutes on average. Lucas: I remember that study. It was from researchers at Yale and the University of Chicago, looking at over 400 urgent care centers. They hypothesized that the longer waits came from the centers being busier — because the PE firms invested in marketing and extended hours — but also from understaffing relative to volume. Luna: Right, and that's the tension. On one hand, you get more locations and longer operating hours. On the other, if the firm is trying to hit a specific margin target, they might staff fewer clinicians per shift than a doctor-owned center would. Lucas: That's exactly where the debate sits. The PE firms argue they're increasing access — there's data showing that zip codes with a pe owned urgent care have 30 percent fewer ER visits for non-emergency conditions, which saves the system money. Critics say the quality metrics are mixed and that patients are sometimes steered toward expensive imaging or tests. Luna: That's the fee for service incentive problem. If the clinic makes more money by doing an X-ray or a blood test, there's a built-in temptation to order them even when they're not strictly necessary. Lucas: And some chains have been sued over exactly that. There's a pending class action against one of the big roll-up platforms — I won't name them because it's still in discovery — alleging that physicians were given quarterly bonuses tied to the number of tests ordered per patient. Luna: That kind of compensation structure is a red flag. And it's exactly the sort of thing that value-based care models are supposed to eliminate. Lucas: Right. So the future of the urgent care roll-up might depend on whether the industry moves toward value-based reimbursement or stays fee for service. If Medicare and commercial insurers start paying urgent care centers a flat monthly fee per patient, the whole incentive structure flips — and the PE model might have to adapt. Luna: Do you see any PE firms already positioning for that shift? Lucas: A few. One of the larger platforms, I think it's owned by a fund called Vistria, has been quietly buying primary care practices alongside its urgent care centers, which lets them take on full-risk contracts for a defined patient population. That's a very different — and arguably more defensible — roll-up. Luna: So the smart money is already hedging. That makes sense. If you can own both the primary care visit and the urgent care visit for the same patient, you capture more of the healthcare dollar and you have more control over utilization. Lucas: Exactly. And that brings us back to the core question that all these roll-up episodes keep circling: does the consolidation create enough efficiency to offset the obvious conflicts of interest? For urgent care, the jury is still out — but the market is voting with its feet. We're on pace for over 200 acquisitions this year alone. Luna: And as long as the margins are there and the regulatory environment stays permissive in the big states, I don't see that slowing down. Lucas: Neither do I. And that's the buyout show for this week. We'll be back next episode with another industry that private equity is quietly reshaping.