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How micro-hospitals impact system strategy

January 5, 2018

    You may have heard of—or even started working with—micro-hospitals, but do you understand how health systems are using these sites to advance their strategic goals?

    What are micro-hospitals?

    Micro-hospitals, also known as neighborhood hospitals, have become a major part of the health care conversation in the last two years.

    In short, they're licensed hospitals that operate 24/7 in a fraction of the space of traditional acute care hospitals. They're equipped to respond to almost any medical issue, including those requiring critical care. While all micro-hospitals have a core set of services, the sites are also highly customizable, which allows organizations to adapt them to their target markets. Several groups, notably Emerus, have partnered with health systems to build these sites, and real estate firms such as Navigant and the Embree Group are also developing micro-hospitals.

    While the long term clinical and economic results of these facilities are still uncertain, it's clear that many providers see promise in micro-hospitals. In our recent on-demand webconference, we reviewed the ability of micro-hospitals and other outpatient sites to help health systems solve their strategic goals. We've collected some thoughts from that presentation and other subsequent research below.

    Micro-hospital service offerings

    Micro hospital service offerings

    Strategic uses

    Ultimately, our exploration of early micro-hospital design and impact suggests that health systems are using these types of facilities to achieve a variety of strategic objectives, such as:

    • Reach new patients: Many organizations have used micro-hospitals to enter a new market without the significant investment needed for a full-scale hospital. For example, SCL Health in Colorado deployed micro-hospitals as its primary means of moving into the high-growth areas of the Denver metro area. The micro-hospital approach allowed SCL Health to develop a care model that was convenient and accessible, while also expanding inpatient services to neighborhoods where demand would not justify a traditional hospital investment.
    • Integrate into the community: Like SCL, Dignity placed micro-hospitals in areas where they had low market share and hoped to reach new patients. But Dignity also placed micro-hospitals strategically in areas where they were already well-established; in these markets, Dignity used its micro-hospitals to integrate further into the community and fend off emerging competition. We profile their strategy more thoroughly in our "Ambulatory Constellation" presentation.
    • Downscaling: In areas with older facilities and too many inpatient beds, health systems can deploy a micro-hospital as a scaled-down replacement hospital. One example of this approach: Saint Alphonsus, a four-hospital system in the mountain west, recently broke ground on a neighborhood hospital in Nampa, Idaho.
    • Anchor an ambulatory village: In contrast to downscaling, many health systems are using a micro-hospital to anchor an extensive ambulatory development, replete with physician offices and other less-acute services. Christus has bought land around one of its micro-hospital developments in Louisiana, indicating its intent to pursue this type of strategy.
    • Exist as a standalone independent facility: You probably haven't heard of Clio Health. That's because the company doesn't currently have an attached hospital or any other health care buildings. Clio is a health services firm funded by venture capital with plans to launch a micro-hospital in Lancaster, Pennsylvania. The $34 million site is scheduled for 2018 completion and will be supported by 25 Clio-employed physicians and automated patient diagnosis booths. It's too early to know for sure whether a freestanding micro-hospital can survive on its own, but it's a story worth following.

    Potential changes to provider-supplier relationships

    Suppliers from across the product and service spectrum can help micro-hospitals achieve major care goals:

    • Medical products: Focus on streamlined surgical events. Micro-hospitals will need to offer efficient, cost-effective, and high-quality surgical events in a new environment. You'll need to be able to offer support in this scaled down environment.
    • Facility planning: Facilitate patient movement. Designers and builders will need to ensure that a mix of patients with surgical and medical needs can be appropriately triaged and housed in a small facility.
    • IT firms: Support coordination with parent hospital. Micro-hospitals will need medication management and IT systems that are efficient and cost-effective enough to use at a smaller facility. Micro-hospitals will rely on information portability and telehealth to ensure proper communication and a high standard of care.
    • Services: Support top of license care. With smaller staffs and less specialization than a traditional inpatient environment, micro-hospitals will rely on staff performing at the top of their license. Your services will be needed to empower micro-hospital staff by minimizing routine and administrative tasks.

    Not mentioned above? Email Matt to get our team's feedback on how you can support micro-hospitals.

    Future outlook

    Micro-hospital growth will ultimately be influenced by regulatory decisions and certificate of need approvals. Ultimately, the new wave of micro-hospitals will need to show they can consistently meet CMS' minimum census requirements. However, the strategic flexibility these sites offer parent systems means their future can be bright. Expect significant growth over the next five years, with the potential for further growth contingent on positive clinical and financial results.


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