Here's why microhospitals are poised for growth


This new hospital model offers an opportunity to attract new patients in an efficient, cost-effective setting.

Microhospitals are small-scale, fully licensed inpatient hospital facilities open 24/7. They typically house between eight and 10 inpatient beds for observation and short-stay use, and include a similar number of emergency treatment and triage rooms, along with primary care and specialty care physicians, and diagnostic and other outpatient clinic services, says Jason Lisovicz, senior vice president of marketing and communications of Emerus, a microhospital developer.


These facilities are considered “micro” because they tend to have a smaller footprint in terms of facility size and number of inpatient beds, and do not provide the full complement of acute services of a typical hospital. “However, their care is far more substantial than that of outpatient or emergency care,” says Lisa DiSanto, senior director, Sg2, a healthcare and hospital system consultancy. “While microhospitals can accommodate an overnight stay, they were developed to rapidly assess and treat lower-acuity conditions in a more efficient, cost-effective setting.”

Meeting a need

From an economic perspective, microhospitals allow health systems to create footprints in attractive markets without having to build full-scale inpatient facilities. “If executed well, this can represent a significant opportunity to attract new patients at a lower cost and increase market presence,” DiSanto says.


Market trends are influencing the emergence of this new hospital model. Over the next 10 years, Sg2’s market projections show a 2% decline in adult inpatient discharges across the United States. That’s compared to a 15% increase in outpatient volumes during this same time period. Furthermore, as the healthcare environment continues to shift from a fee-for-service model to value-based care, existing care models are also evolving.

Advances in virtual health technologies and a more favorable reimbursement environment for these services have also helped to alleviate some of the staffing and workforce barriers associated with care at this scale, DiSanto continues.

Finally, patients themselves are driving this trend forward. With more patients opting for high-deductible health plans, they are shopping for healthcare services in a new way. “These consumers are looking for providers to meet them where they are in terms of time, location, and cost,” DiSanto says. “Microhospitals provide a consumer-friendly access point, offering appropriate care in a more efficient environment than a full-service hospital.”

Next: Filling a void



Filling a void

Microhospitals operate in areas where there aren’t enough hospitals to meet demand. Health systems are using them to establish themselves in desirable markets that have insufficient demand for full-size hospitals. “They appear to be filling a niche that is not covered by urgent care centers or freestanding emergency departments, neither of which offers inpatient facilities,” Lisovicz says.


Many hospitals-particularly older community hospitals-are in need of significant capital investment. Oftentimes these facilities are at or beyond their useful lives, and may be located in suboptimal geographic locations, e.g., landlocked in residential neighborhoods, in urban areas where the population has migrated away, or far from a freeway, says Zach Hafner, national partner, Consulting, Advisory. Microhospitals can be a smart alternative to revamping outdated facilities, bringing modern facilities and capabilities to communities that wouldn’t have them otherwise.

Often, microhospitals are closer to where patients live and work, allowing them to be readily accessed in the event of an emergency or other semi-acute need. “Because they are located within the communities they serve, microhospitals are also able to tailor their services to meet a community’s needs in a specific way,” DiSanto says. For example, some may include chronic disease management programs or certain types of surgical suites and procedure rooms, dependent on need and nearby access to a larger facility.

Advantages for patients

Beyond convenience, microhospitals can be an effective way to extend patient access to comprehensive care services in underserved communities, DiSanto says. Often, microhospitals can work with post-acute sites, such as skilled-nursing facilities, to provide tailored services for niche patient populations.


Microhospital proponents also cite a bigger focus on patient-centered care as an advantage. “They argue that because microhospitals treat a much smaller patient volume, they can focus more on individual patients and optimize their experience,” says Russell Davis, executive director, Research, Advisory Board.

Because microhospitals are typically part of a larger network, patients also have access to the system’s network of providers and care sites if they require additional services, says TJ Grassetti, vice president, Strategic Partnerships, SCL Health, a Broomfield, Colorado-based health system with 11 hospitals in Colorado, Kansas, and Montana. Currently, it has three microhospitals and one emergency center.

How health systems benefit

When compared to full-scale, full-service hospital facilities, microhospitals are smaller and typically require less capital investment. “Microhospitals can also help health systems reduce utilization of inpatient services for lower acuity patients, which represents a major cost and capacity burden for hospitals and health plans,” DiSanto says.

For health leaders considering building such a facility, it’s important to first assess the need for the facility and to develop a microhospital care model informed by current pain points and gaps in the delivery of care.


Because microhospitals are typically located within a reasonable distance of an affiliated full-scale hospital, it’s easy to arrange transfer for patients requiring more complex care or a longer stay. “Although not typically the main goal of opening a microhospital, this can drive utilization at the main facility,” Davis says. “Furthermore, microhospital operators believe that the positive patient experience provided in the microhospital setting has downstream implications for how patients view the health system as a whole, contributing to patient loyalty.”

How health insurers might benefit

Health plans are also adjusting to changing market forces. The shift toward value-based care, especially in Medicare, has created incentives to shift more care toward lower-acuity, lower-cost settings. “Microhospitals offer a more tailored tier of care delivery that helps ensure that health plan members receive the right care, at the right time, and in the most appropriate care setting,” DiSanto says.

Insurers are monitoring the growth of microhospitals, and hope that they will be able to better manage population health. “Specifically, because the microhospital is a lower cost site of care compared with a full-scale hospital, insurers would like to see patients use these sites to the highest possibly acuity level to avoid higher-cost trips to full-scale hospitals,” Davis says.

However, some insurers are concerned that microhospitals will end up adding another layer of high cost sites to the healthcare system, as they are more expensive to operate than lower-acuity ambulatory sites of care, Davis concludes.


Karen Appold is a medical writer in Lehigh Valley, Pennsylvania.

Related Videos
Related Content
© 2024 MJH Life Sciences

All rights reserved.