Urgent Message: As some municipalities have considered placing—or have already placed—restrictions on the opening of new urgent care centers in their communities, urgent care developers should understand the legality and business impact of such local moratoria.
Alan A. Ayers, MBA, MAcc is Vice President of Strategic Initiatives for Practice Velocity, LLC and is Practice Management Editor for The Journal of Urgent Care Medicine.
Recently, after much consideration, the Manhattan Beach (CA) City Council rejected a zoning ordinance that would have extended a ban on healthcare uses on one of its main avenues. Instead, they opted for a modified ordinance that requires an expanded review for all proposed healthcare projects on the street.1 The decision includes medical offices, urgent care centers, senior living facilities, and other similar facilities. Now these businesses must obtain a conditional use permit before they begin operations.2
These developments are not uncommon. Urgent care centers are a retail delivery channel for unscheduled, episodic healthcare services, and are most successful when they are placed in high-population density areas with more affluent demographics, close to groceries, restaurants, drugstores, and other retail. Because urgent care owners are seeking desirable spots—like many other businesses—the consumer markets in some cities have become oversaturated with urgent care centers. At the same time, historically underserved rural and urban areas continue to go without services.
In many states, the term “urgent care center” can entail everything from a physician’s office with evening hours to accommodate walk-in patients to a fully staffed clinic that’s run like a freestanding emergency room,3 which is another reason that local and state governments are taking an interest in regulating them. For example, under current Connecticut law, urgent care centers are regulated as physician’s practices; however, many offer a level of medical care that goes beyond what most doctor’s offices can provide.3
Because of political, financial, and economic pressures, some municipalities have considered placing, or have placed, restrictions on the opening of new urgent care centers in their communities. Some cite the availability of prescription medications at urgent care centers, harsh lighting, long hours, and traffic congestion as some of the reasons to avoid allowing them to operate in a location. Others say a moratorium gives them the time to analyze how they will regulate these businesses.
For example, the City of Pompano Beach, FL enacted a temporary moratorium on all healthcare uses in 2015 that was designed to:
“…allow sufficient time to study the provision of these uses for the citizens of Pompano Beach and to create a long-term strategy to ensure adequate access to such services is provided” as well as to “not result in an overconcentration of these uses that will result in the blighting or downgrading of the surrounding neighborhood….”4
Restricting Business and Restraint of Trade
One of the first questions that arises in this discussion is, “Can they really do that?” That is, does a municipality have the legal authority to restrict a certain type of business—and if so, isn’t this restraint of trade?
Restraint of trade is defined as “any activity that prevents another party from conducting business as they normally would without such a restraint.”5 However, the courts have determined that some restraints of trade are, in fact, legal—provided that they are deemed to be “reasonable.” To pass muster, a restraint of trade must serve a legitimate interest, be limited to that particular interest, and not contrary to the public interest.5 This gets to the heart of the issue. Municipalities seek to land businesses that generate tax revenue. And while there are taxes on the salaries of the urgent care staff, typically medical services are not subject to sales tax. If an urgent care facility is wanted, a municipality may deem it to serve a legitimate interest and grant a variance to its zoning ordinances. When such a medical business is not desired, zoning restrictions and moratoria are enacted.6
A deepening conflict is present with urgent care centers. Many are owned by physicians, and the moratoria impact their ability to freely practice their trade. Arguably, it’s a restriction on their professional license to practice medicine based on the environment in which they work. However, legal research shows little in the way of guidance in this matter. Most decisions across the U.S. focus on noncompete cases, where a physician contracts to refrain from practicing medicine within a specific location or for a specific time. These employment agreements typically have been held to be valid and not in restraint of trade. The restraint isn’t greater than the protection required, and isn’t injurious to the public’s interest.7
|An urgent care developer was interested in opening a center on an outlet parcel of a re-developed K-Mart site. The city’s planning representative told the developer, frankly, he would rather see a cigarette outlet or porn shop—because “at least those businesses pay sales taxes.”|
Criteria for Moratoria
Few municipalities have detailed the criteria they use to make determinations about permitting urgent care centers in a community. One exception is Pompano Beach, which in 2015 provided an analysis of the factors involved with its consideration of a moratorium on urgent care facilities. To analyze the amount, location, and types of healthcare uses in Pompano Beach, the city reviewed its business tax receipts, along with statistics from the Florida Department of Children and Families, the Department of Health, and the state healthcare administration. The city also looked at the intensity, or the degree to which land is occupied. A particular use may be more intense due to one or more factors, such as the traffic generated; the number of employees; and nuisance (eg, pollution, noise, and light).7 Urgent care centers were deemed to be in this category.
Time will tell if the rapid expansion of the urgent care industry will be regulated based on tax revenue, traffic, and convenience, or if public policy will win out and the greater good of the community will not limit access to healthcare. Perhaps the focus on the Affordable Care Act, Medicaid, an aging and increasingly unhealthy population—with federal and state governments struggle to increase primary care access—will bring the benefits of urgent care centers to the forefront.
- With eye on Sepulveda’s future, Manhattan beach council declines health care ban. Easy Reader News (September 22, 2017). Available at: https://www.easyreadernews.com/eye-sepulvedas-future-manhattan-beach-council-declines-health-care-ban/. Accessed October 20, 2018.
- Mackel T. Talk begins of moratorium on Jefferson Parish health care. WDSU News. Available at: http://www.wdsu.com/article/talks-begin-of-moratorium-on-jefferson-parish-health-care-1/3368482. Accessed October 20, 2018.
- Altimari D. Lawmakers renew push to regulate urgent care centers. Hartford Courant (August 25, 2017). Available at: http://www.courant.com/politics/hc-pol-urgent-care-20170824-story.html. Accessed October 20, 2017.
- The right use in the right location: health care uses. City of Pompano Beach, FL (November 2015). Available at: http://pompanobeachfl.gov/assets/docs/pages/planning_zoning/CompleteReport%20-%20Health%20Care%20Uses.pdf. Accessed October 20, 2017.
- Restraint of trade. FindLaw. Available at: http://smallbusiness.findlaw.com/business-laws-and-regulations/restraint-of-trade.html. Accessed October 20, 2018.
- Sisters of St. Francis Health Services v. Morgan County, 397 F. Supp. 2d 1032 (D.Ind. November 2, 2005) (case examined whether a county government in Indiana could impose on its own a new requirement for county approval of hospital construction or expansion).
- Gordon v. Mansfield, 84 Mo. App. 367 (Mo. Ct. App. 1900). See Friendship Preservation Group v. Zoning Board of Adjustment of the City of Pittsburgh, 47 A.3d 1284 (Pa.Cwlth. 2012) (urgent care center was a medical office/clinic facility pursuant to § 911-2 of the Pittsburgh Zoning Code).