First tiny houses. Now tiny hospitals?

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.”

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.

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.