Health Systems Find Large Opportunity in Microhospitals

Since 2013, microhospitals have continued to pop up across the country. Leading organizations, such as Baylor Scott & White Health, SCL Health and Dignity Health, have built microhospitals to expand their footprint. Just this month, St Vincent Health in Indiana announced its plans to open 4 microhospitals in the Indianapolis area. Likewise, Saint Joseph Mercy Health System in Ann Arbor, MI, is planning to open a microhospital concept that will forgo inpatient beds and feature 24/7 emergency and observation care by late 2017. The continued development of these facilities is pushing other organizations to wonder, “Should we consider building a microhospital?”

What Is a Microhospital?
Microhospitals are fully licensed, semi-acute facilities that co-locate inpatient and/or outpatient observation beds and other ambulatory services, including emergency services. They are considered “micro” because they do not provide the full complement of acute inpatient services, however the care provided is more substantial than that of outpatient or emergency care. 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.

Why Now? Value-Based Care and Rise in Consumerism Create Sweet Spot for Microhospitals

  1. Shift to Value: As the health care environment continues to shift from a fee-for-service model to value-based care, new care models are beginning to evolve. Microhospitals are an innovative solution to changing care needs, enabling the provision of clinically appropriate care in a low-cost, highly efficient setting.
  2. Rise of Consumerism: High-deductible health plans continue to grow, driving patients to “shop” for health care services. These consumers are looking for providers to meet them where they are in terms of time, location and cost. Microhospitals provide a consumer-friendly access point, offering appropriate care in a more efficient environment than a full-service hospital.
  3. Market Positioning: Microhospitals allow providers to create footprints in attractive markets without having to build full-scale inpatient facilities.
  4. Rise of Virtual Health: Advances in virtual health reimbursement and technology have alleviated some staffing and workforce barriers, enabling innovative care models like microhospitals to take shape.

Integrate Microhospitals Into Your System of CARE
While microhospitals may not work for every provider or in every market, Sg2 believes that they can provide another access point along the System of CARE that, if fully integrated with other access points, can provide value to the patient and provider (both physician and hospital).

Home: Patients seeking emergent services should be able to access the microhospital through emergency services, including an access line and walking in through the microhospital’s ED.

Physician Clinic: Physicians who see patients in a clinic setting should be able to directly admit patients to the microhospital for specific services and/or testing.

Urgent Care Center: Providers within an urgent care setting should be able to directly admit patients to the microhospital if their needs exceed the urgent care center’s capabilities.

Hospital: Patients who are admitted to the microhospital and in need of specialty consults should be able to connect with an acute care facility, typically through telemedicine. For patients with acute needs exceeding the capabilities of the microhospital, there should be a direct transfer/admittance mechanism with an acute care facility (inpatient hospital).

Post-Acute Care: Microhospitals should be able to discharge patients in accordance to need to the appropriate post-acute care site. Conversely, there is opportunity for the microhospital to work with various post-acute sites (eg, skilled nursing facilities) to provide specific services for their niche patient population, especially as they relate to the exacerbation of chronic conditions.

Innovative Care Models Address Your Gaps, Pain Points
In order to assess the need for and develop a microhospital care model, you must understand your (and your patients’) current pain points and gaps along your System of CARE. For example, does your hospital have a high rate of 30-day readmissions or potentially avoidable admissions? Are you trying to serve a remote rural population? Are you admitting chronic disease patients to inpatient units? Whatever your specific pain points are, it is critical that your microhospital care model is built to address them, rather than to try to cover the broad spectrum of health care needs for an entire population. Service offerings at your microhospital should then be tailored to meet the needs of this targeted patient population.

As health care continues its shift from volume to value and incentives place greater emphasis on delivering high-quality care in a lower-cost environment, microhospitals will continue to emerge. Sg2 believes that these mini-hospitals can provide value to health systems if they are part of a carefully considered care delivery model, target a specific patient population, offer a specific set of services and diagnostics, and are integrated with other nodes along the System of CARE.

Sg2 has a comprehensive framework for assessing microhospital feasibility. For more information about this consulting offering, please reach out  to schedule some time with one of our Sg2 Consulting leads. And tune in later this year for our second installment, where we will share how Sg2 helped one organization build the case for the development of a microhospital.

Sources: Sg2 Analysis, 2016; Wyman S and DiSanto L. Freestanding Observation Care. Presented at 2016 SHSMD Connections. September 11–14, 2016, Chicago, IL.

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As of February 11, 2016, Vizient, Inc. has completed its purchase of MedAssets Sg2 and spend and clinical resource management segments from Pamplona Capital Management, LLC. MedAssets revenue cycle business will continue to operate as a wholly-owned subsidiary of Pamplona Capital Management LLP.

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