First tiny houses. Now tiny hospitals?
October 31, 2017
Contributor
Michael Myser
Essential Insights contributor, healthcare writer
Featured experts
John Palmer
Director, Media and Public Relations, Ohio Hospital Association
Brett Justice
Senior Vice President, Strategy & System Development, Mount Carmel Health System
Dr. Robert Pretzlaff
Chief Physician Executive and President, Dignity Health Medical Group Nevada
Why micro-hospitals are becoming the next big thing
With the rapidly changing face of health care, health systems are searching for new and innovative ways to expand their offerings and reach more patients with the care they need, in the places they need it. One way they are doing that is with the introduction of micro-hospitals.
“Micro-hospitals really are just a smaller scale version of a hospital, in service offerings, size and costs,” said John Palmer, director of media and public relations for the Ohio Hospital Association. Popping up in metro areas like Denver, Las Vegas, Cleveland, Indianapolis and Columbus, Ohio, Palmer said micro-hospitals typically have just 7–10 beds and give health systems another opportunity to deliver direct care and new services to patients.
According to the Advisory Board, these micro-hospitals typically offer a core range of services like 24-hour emergency departments (EDs), pharmacies, imaging and lab services in a small building footprint of 15,000 to 50,000 square feet (compared to a 200+ bed urban hospital that can be 500,000 square feet or more). In addition to those core services, and depending on local demand, micro-hospitals may offer a range of other care or specialty options like women's health, primary care, orthopedics and even rehabilitation centers.
But most importantly, micro-hospitals are meeting both community and health system needs with their unique offerings. Here are three reasons more health systems are turning to micro-hospitals.
Convenience is king
First, micro-hospitals fill in service gaps across various geographic areas, typically metro areas with growing populations. Whether that's simply cutting the distance potential patients need to travel for services like emergency or overnight acute care, or offering new services that hadn't existed before, health systems are examining markets to determine what exactly they should provide.
SCL Health, for instance, offers “state-of-the-art operating rooms,” CT scans, radiology and other advanced services in their Denver-area “community hospitals.” Other micro-hospitals have traditional medical offices in the same location.
As surgical and medical technology improves and patients demand quicker turnaround, outpatient offerings continue to grow. Palmer said that in Ohio, for instance, 24.9 million outpatient visits took place in 2015, as opposed to just 1.5 million inpatient visits (requiring admission to a hospital).
That means health systems are looking to scale down their in-patient facilities. For patients, these offerings located nearby, and in a smaller, less intimidating, service-oriented micro-hospital setting give them better access to advanced care. Easier parking options can also help attract those patients.
“Smaller, neighborhood-based hospitals are one way health systems are exploring ways to make care more convenient for patients and families,” said Brett Justice, senior vice president, Strategy & System Development, Mount Carmel Health System, which opened the first micro-hospital in Central Ohio along with Fairfield Medical Center. “These smaller facilities allow health systems to provide more services to a community—in the community—than a freestanding emergency room, urgent care or other ambulatory-oriented venue of care.”
Micro-hospitals make financial sense
According to the Advisory Board, micro-hospitals start at 15,000 square feet, whereas a 200+ bed urban hospital can be 500,000 square feet or more. What's more, micro-hospitals get built at a faster pace and reduced cost of $7-30 million.
Second, the smaller footprint and targeted offerings of micro-hospitals allow health systems to expand quickly and more affordably into untapped markets. Without the complexity of a full-scale facility, a micro-hospital can be built for just $7–30 million and at a much faster pace, allowing hospitals to bring in revenue sooner.
“If you've ever seen a hospital under construction, you know it can take years,” said Dr. Robert Pretzlaff, chief physician executive and president of Dignity Health Medical Group Nevada. “Our neighborhood hospitals have gone from groundbreaking to operational in 14 months.”
Dignity Health recently opened three such micro-hospitals, which they've deemed “neighborhood hospitals,” across the Las Vegas Valley, with a fourth to open in November. With eight emergency beds in emergency departments that can each serve 60 to 80 patients a day, and eight in-patient beds for overnight stays, not only are they cheaper and faster to build, they operate efficiently as well.
“The neighborhood hospitals are very small and lean, and they've got the staff pared down to only what's needed,” said Pretzlaff.
Though they operate with a lower overhead, micro-hospitals carry full-service hospital licenses and may charge the same rates, particularly for emergency services. At the same time, other patient services can be delivered at lower cost, yet another draw for new customers.
And the low overhead and smaller investment make it quicker and easier to change the service mix at the typical micro-hospital as community needs change or initial offerings don't work as well as expected.
Less is more for new insurance models
Finally, as providers and payers seek ways to lower healthcare costs, new value-based reimbursement models have arisen where providers are held responsible for total patient care and outcomes, rather than patient volume. In response, micro-hospitals can help provide care in more cost-effective settings.
At Dignity Health, Dr. Pretzlaff said the system is moving toward a population health model to better align with their changing reimbursement agreements.
“The three tenets of a value-based care agreement are access, quality of care, and cost effectiveness,” Pretzlaff said. “With our enhanced footprint with these micro-hospitals, we can go to payers and say we're everywhere in the Las Vegas Valley from an acute and ambulatory perspective.”
Pretzlaff added that sometimes a micro-hospital will serve as a one-stop shop, while other times, services are referred out across the health system once a patient enters the network through the micro-hospital. Their micro-hospitals can treat the vast majority of acute needs, but higher acuity needs such as trauma or stroke need more specialized care.
A big opportunity in a small package
At a fundamental level, the micro-hospital serves as another access point to care, like an urgent care facility, stand-alone emergency department, or specialty health clinic in attracting patients.
However, Pretzlaff said micro-hospitals can help bend the cost curve as they provide access to comprehensive care as part of a broader network and emphasized that they are full-functioning EDs, and not just a “glorified urgent care.”
While Pretzlaff noted there are some challenges in getting payers to come around to this new concept, he thinks they will eventually recognize that health systems are taking cost of the system.
“There is still a lot to learn about micro-hospitals, and as such it remains a concept that we, and the industry, will continue to explore,” Justice added.
With flexibility, convenience, cost savings and the ability to meet community health needs by delivering advanced care in a new and appropriate setting, the micro-hospital trend is becoming the next big thing.