UnitedHealth's "Urgent" Strategy Is Paying Off

Amid the merger mania among its rival health insurers, UnitedHealth Group is forging ahead with acquisitions of a different variety -- investing in the fast-growing urgent-care-center business.

Urgent-care centers are similar to retail health clinics run by CVS Healthand Walgreens Boots Alliancein treating low-acuity episodes such as cuts and scrapes or strep throat. But urgent-care centers offer additional services the retailers don't have, such as X-rays for broken bones and bloodwork, and are generally staffed by a board-certified physician rather than a nurse practitioner.

To that end, a recent investmentin urgent care is already paying off for UnitedHealth, helping boost the insurer's Optum Health business segment revenues 33% in the second quarter to $3.4 billion. The second-quarter disclosure was the first time Optum Health's sales included the new urgent-care revenues following UnitedHealth's acquisition of MedExpress, which closed in April. The 150 MedExpress centers in 11 states brought to 200 the total number of urgent-care centers UnitedHealth has, including those already under the Optum umbrella.

Look for UnitedHealth to buy more urgent-care centers"We are committed to growing as a leading provider of ambulatory care services, recognizing this capability will be increasingly valuable to the consumer and healthcare system overall," Larry Renfro, UnitedHealth Group's vice chairman and chief executive officer ofOptum, told analysts and investors during the company's second-quarter earnings call. "This past quarter, MedExpress joined OptumCare with nearly 150 freestanding neighborhood care centers in 16 local markets,"

When the MedExpress deal closed, Renfro said UnitedHealth would accelerate the urgent-care-center expansion by opening 25 to 30 additional centers this year, in "both new and existing states."

Nationally, the number of urgent-care centers opening grew more than 4% in the first half of the year through June, to 1,562 from 1,496 among independent operators with five or more centers that are tracked by Merchant Medicine, a Minneapolis consulting firm that follows the urgent-care and retail health market.

The firm acknowledges that there are probably thousands more urgent-care centers but that they're difficult to track because the segment is so fragmented. The Merchant Medicine tally also didn't include growth of urgent-care-center openings among hospitals and health systems, and those facilities are likely to number in the thousands,

"Urgent care shows steady growth, predictable margins, and private investment from all sectors: private equity, angel investors, health insurers, and health systems," saidMerchant Medicine founder and CEO Tom Charland.

Urgent care is a low-cost alternative to the ERUnitedHealth's investment fits its strategy of providing low-cost, high-quality care that achieves high patient satisfaction. The MedExpress Centers are convenient and open 8 a.m. to 8 p.m. every day of the week and will help UnitedHealth reduce trips to the more expensive emergency room.

"MedExpress can offer as much as 90% of the care typically delivered in a hospital emergency room at about 90% lower cost," Renfro told analysts on the call.

The push into urgent care is a key way UnitedHealth is setting itself apart from rivals. Aetna said it doesn't operate urgent-care centers, and its merger partner, Humana, sold its Concentra urgent care business for $1 billion earlier this year.

Anthem, meanwhile, said it has a small stake in Physicians Immediate Care, which has more than 30 centers in three states, a fraction of the footprint UnitedHealth Group is developing.

The timing appears to be right for more urgent-care expansion, as the Affordable Care Act emphasizes the need for more low-cost medical care providers. This strategycould benefit the deep pockets and bottom line of UnitedHealth Group, which is great newsfor investors.

The article UnitedHealth's "Urgent" Strategy Is Paying Off originally appeared on Fool.com.

Bruce Japsen has no position in any stocks mentioned. The Motley Fool recommends Anthem, CVS Health, and UnitedHealth Group. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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