Venture investors are capitalizing on the lower cost of treatment in urgent-care clinics—or even in the home

February 22, 2019
By Brian Gormley

Entrepreneurs are pushing to move more medical care out of the hospital.

Powered by new technologies, many services that are conventionally delivered in emergency rooms are now possible in lower-cost settings. Venture investors are capitalizing on this by backing new providers of medical services in urgent-care clinics—or even in the home.

Urgent-care sites offer alternatives to emergency rooms for routine illnesses and injuries, and they have grown more popular as consumers have seen them pop up in retail centers. As of November, the number of urgent-care centers in the U.S. stood at 8,774, an 8% increase from 2017, according to the Urgent Care Association, an industry group.

“The public now understands urgent care,” said Lawrence Carter, managing partner of investment bank Global Healthcare Advisors LLC.

Privately owned outpatient facilities such as urgent-care clinics raised $753.6 million in 2018, a record amount, according to VentureSource, an industry tracker owned by Dow Jones & Co.

Urgent care appeals to venture investors because these companies are possible takeover targets for health systems and private-equity firms. Health systems can use urgent-care clinics to reduce emergency-room wait times and present a good “front door” for patients into their practices, said Wyatt Ritchie, a managing director with health-focused investment bank Cain Brothers.

But for startups, the challenge is to expand the scale of these business and attract buyers at a time when patients have more medical-care options than ever.

Entrepreneurs are turning to technology and strategic positioning to compete.

Carbon Health, whose investors include Bullpen Capital, operates primary- and urgent-care clinics in the San Francisco Bay Area. Through technology, the San Francisco company seeks to streamline operations and reduce overhead. Using artificial intelligence, for example, it automates charting for physicians so they spend less time in front of a computer, Chief Executive Eren Bali said.

Another startup, DispatchHealth Holdings Inc., sends clinicians to patients’ homes and can provide services that urgent-care clinics offer. But Mark Prather, the CEO of DispatchHealth, said the company sets itself apart by focusing on sicker people than these clinics normally see.

Innovations such as electrocardiogram, or EKG, machines that are about the size of an iPad enable the company to deliver emergency-level care outside the hospital, Dr. Prather said.

And unlike urgent-care clinics, Denver-based DispatchHealth doesn’t operate physical locations. One benefit to visiting people in their homes is that health-care providers can spot issues, such as a lack of healthful food, that may be contributing to their illnesses, Dr. Prather said.

For startups to compete, they need teams that, like Dr. Prather’s, are well-versed in medical services and technology, an unusual combination, said Alta Partners Managing Director and DispatchHealth investor Pete Hudson.

Adds Dr. Hudson: “There’s a magical blend of talents and experience that are required.”