Latest / The Buyout Show with Fexingo: Private Equity, Roll-Ups, and Business Acquisitions / How Private Equity Is Buying Up Urgent Care Centers
Transcript
- Lucas: So urgent care centers — those storefront clinics you see on every other corner with names like CityMD, GoHealth, MedExpress — private equity has been quietly buying them up at a pace that's hard to miss if you've been paying attention. Luna: I've definitely noticed. It feels like every strip mall in my neighborhood has one now. But I didn't realize PE was behind it. Lucas: Yeah, it's one of the hottest roll-up plays right now. The urgent care market in the US hit about $30 billion in 2025, and it's growing at roughly 8 percent a year. pe backed chains now control over 40 percent of all locations. Luna: That's a lot. What's the appeal for private equity? Is it just the growth? Lucas: Growth is part of it, but the real draw is the fragmentation. Most urgent cares are still independently owned — one doctor, one clinic. That's a classic roll-up opportunity. You buy a dozen small operators, centralize billing, procurement, marketing, and suddenly you've got economies of scale that a solo doc can't touch. Lucas: Plus the reimbursement model is pretty stable. Patients come in with a sore throat or a sprained ankle, insurance pays a flat fee per visit — typically $150 to $300. It's not as lucrative as a hospital ER visit, but it's predictable. Luna: And it's cheaper for the patient too. I think the average urgent care copay is like $50 versus hundreds in the ER. So there's a consumer push as well. Lucas: Exactly. Insurers love it because it keeps people out of the ER. That's why they're willing to contract with these chains. And the big pe backed operators — like CityMD, which is backed by Warburg Pincus, or GoHealth, backed by Summit Partners — they've been on buying sprees. Lucas: CityMD alone has over 150 locations in the New York area. GoHealth has more than 250 across the country. And they're not stopping. Luna: So how does the actual deal work? Do they buy one clinic at a time, or are they acquiring regional chains? Lucas: Both. The typical play is to start with a platform — a mid-sized regional chain with maybe 20 to 30 clinics. Then you add on smaller operators, sometimes individual practices, sometimes groups of five or ten. The multiples are pretty standard: 6 to 8 times EBITDA for a platform, and you can often buy smaller add-ons at 4 to 5 times. Lucas: Once you've rolled them up, you can negotiate better rates with insurers, reduce supply costs by buying in bulk, and even standardize the EHR system across all locations. The margin expansion is real. Luna: But there's got to be a catch. I mean, healthcare is heavily regulated. And there's the No Surprises Act that kicked in a few years ago — does that affect urgent care pricing? Lucas: Great question. The No Surprises Act mainly targets surprise out-of-network bills from hospitals and air ambulances. Urgent care centers are typically in-network, so it hasn't been a huge issue. But there is a regulatory risk around corporate practice of medicine laws. Lucas: In some states, you can't have a non-physician entity employing doctors directly. So PE firms have to structure the deals carefully — usually by acquiring the non-clinical assets and having the physicians own the clinical side through a professional corporation. Luna: So they're buying the real estate, the brand, the equipment, but not actually employing the doctors? That seems like a workaround. Lucas: It is. And it's common across all healthcare roll-ups — dental, dermatology, eye care. But urgent care has a specific challenge: staffing. The whole model depends on having enough physicians and nurse practitioners to cover extended hours, and that labor pool is tight. Luna: If today was actually useful to you, the way these stay ad-free is listener support — buy me a coffee dot com slash fexingo. Lucas: Yeah, it's a small gesture that makes a big difference for us. Keeps the show independent and free for everyone. Luna: Exactly. And we really appreciate it. So back to the staffing issue — how bad is it? Lucas: It's the biggest headwind. The average urgent care center needs to staff 12-hour shifts, seven days a week. That requires multiple providers. And the turnover rate for nurse practitioners is high — around 20 to 30 percent annually in some markets. Lucas: When labor costs spike, the margins get squeezed. And PE firms are used to levering up these businesses, so a margin compression can quickly become a debt service problem. Luna: Right. So the roll-up works great when the economy is humming and you can pass costs along. But what happens in a recession? Lucas: Historically, urgent care has been somewhat recession-resistant. People still get sick and injured. But if unemployment rises and more people lose insurance, they might skip the visit altogether or go to a community health center. That would hurt volumes. Lucas: There's also the risk of over-saturation. In cities like Houston or Phoenix, you can have five urgent cares within a mile. At some point, they're just cannibalizing each other. Luna: So is there a data point that signals when the market is getting too crowded? Lucas: One metric is visits per location per day. Industry benchmark is around 50 to 60. If a chain's average drops below 40, they're probably in an over-served market. Some pe backed chains are already seeing that in certain zip codes. Luna: That makes me wonder about the patient experience. If you're a private equity firm trying to maximize EBITDA, are you cutting corners on care? Lucas: It's a fair concern. Studies have shown that pe owned urgent cares tend to have higher rates of diagnostic testing — ordering X-rays or lab work more often — because that generates additional revenue. But there's also evidence that they maintain decent wait times and patient satisfaction scores. Lucas: The bigger issue might be continuity of care. If you see a different nurse practitioner every time, there's less relationship building. That matters for chronic conditions that urgent cares are now starting to manage. Luna: So what's the exit strategy for these PE firms? They can't hold forever. Lucas: The typical exit is a sale to a larger platform or a strategic buyer. For example, Walgreens bought a stake in VillageMD, which operates urgent cares. CVS has MinuteClinic. There's also the possibility of an IPO, though healthcare services IPOs have been tough lately. Lucas: Another route is selling to a larger PE firm in a secondary buyout. That's happening more frequently as the top-tier firms look for scaled assets. Luna: So do you think this consolidation is ultimately good for patients? Lucas: I think it's a mixed bag. On the positive side, standardized protocols and better technology can improve quality. On the negative side, profit motives can lead to over-treatment and less personalized care. Lucas: What's undeniable is that urgent care is becoming the front door to the healthcare system for millions of Americans. And private equity is increasingly owning that door. Luna: That's a powerful way to put it. I'll be watching to see if the regulatory environment changes — especially around corporate practice of medicine. Lucas: Yeah, that's the big unknown. Some states are starting to scrutinize these structures. If California or New York tighten the rules, it could slow the whole machine down. Luna: Well, it's a fascinating space. Thanks for walking through it. Lucas: Happy to. Next episode, we'll look at how PE is buying up outpatient surgery centers — same thesis, different setting.