CHS Subsidiary To Acquire 10 Urgent Care Centers

Dive Brief:

• Community Health Systems’ Northwest Urgent Care has signed a definitive agreement to purchase 10 Arizona urgent care centers from Carbon Health for an undisclosed price, according to a press release this week.
• The acquisition, which is expected to close in the fourth quarter, will grow CHS’ integrated health network to more than 80 care sites in the Tucson, Arizona region, according to CHS.
• The acquisition is a reversal from CHS’ recent string of hospital divestitures, which have been integral to helping the operator deleverage its portfolio.

Dive Insight:

In recent quarters, financially struggling CHS has staked part of its recovery on increased revenue from outpatient services. The operator reported strong patient volumes across outpatient services during the second quarter, including at its urgent care facilities.

“We expect to carry this momentum into the second half of the year,” said CEO Tim Hingtgen during the company’s second quarter earnings call in July. “Much of our growth is attributable to the strategic investments made in our markets, which include ongoing physician recruitment and capital investments to expand access and capacity.”

CHS’ interest in acquiring urgent care facilities contrasts with its desire to offload certain hospitals in its portfolio.  Executives are targeting $1 billion in divestitures this year and plan to use the funds to pay down the health system’s debt.

In July, analysts from Jefferies called the hospital divestitures “integral” to CHS’ recovery. The health system has recently announced plans to offload hospitals in Pennsylvania, Florida and Tennessee. More deals could close within the calendar year, according to comments from CFO Kevin Hammons during the company’s most recent earnings call.

However, Hammons also said during a conference this month that CHS is open to acquisitions under favorable terms. 

The urgent care market might qualify as an attractive buy, given high levels of demand for services.

Urgent care utilization has exploded in the U.S. in recent years, driven by an higher demand for accessible care, an aging population and an expansion of insurance coverage for urgent services. The number of open centers has increased in turn, rising 20% nationwide between 2020 and 2024, according to data from the Urgent Care Association. 

The cost of acquiring urgent care centers is also comparatively low, according to analysts.

“There’s been a gradual movement towards providing care in the least cost setting and that continues,” Matt Cahill, credit analyst at Moody’s Ratings, told Healthcare Dive this summer. “There’s been this shift of thinking around that with regards to well, can we reduce the number of beds that we actually need, reducing capital expenditures away from these very large projects towards more of these ambulatory projects… and a sort of diversified approach that encompasses a lot of different care models.” 

The value of urgent care facilities is expected to further climb as the decade rolls on. Analysts from Global Market Insights predict the U.S. urgent care market will be valued at $143.4 billion by 2032. 

CHS is not the only health system vying for a piece of the pie. The health system’s more profitable peers, including HCA Healthcare and Tenet Healthcare, have already been building their portfolios.

HCA has steadily been acquiring urgent care facilities in recent years. During an investor day last November, executives described growing outpatient services — including freestanding emergency rooms and urgent care clinics — as critical to expanding HCA’s market share by the end of the decade.

As of the second quarter this year, HCA operated about 2,600 outpatient facilities and clinics across its portfolio — up 5% from the same time last year, CEO Sam Hazen said during the company’s earnings call.

Meanwhile, Tenet acquired a 55% ownership interest in Arizona-based urgent care provider NextCare in December 2023. The deal offers Tenet a controlling interest in 41 urgent care clinics and a telehealth center in the state, and a noncontrolling interest in 15 additional urgent care facilities, according to a securities filing.