7 Reasons Micro-Hospitals are Poised for Big Growth

Health insurers want to shrink costs and get the chain of acuity away from traditional hospitals. Advances in outpatient technology and eager investors are carving out a niche for tiny hospitals.

Micro-hospitals are about to take off in a big way, if you believe Eric Johnson.

He says that the ability to deliver new facilities quickly compared to full-service hospitals, along with the low overhead required to operate them, make micro-hospitals very attractive to healthcare leadership teams.

Johnson is the national director of healthcare advisory services at Transwestern, a national commercial real estate firm.

Perhaps best of all, he says, unlike many other capital projects, these small facilities aren't as vulnerable to the whims of government legislation as their full-size counterparts.

Micro-hospitals: Sometimes Tiny Is Just The Right Size

"The goal of insurers is still to get the chain of acuity away from the hospitals and out to the constituents at a lower cost, which is exactly what micro-hospitals do," says Johnson. "No legislation passed will negatively impact this niche."

With advances in technology adding to the practicality of moving procedures out of the hospital, the outpatient environment is poised for growth, while inpatient may stagnate.

Poised for Growth

Johnson expects growth at an accelerated pace for seven reasons:

1. Investment: More than one billion dollarsis currently invested in various stages of micro-hospital development in 15 states
2. Demographics: Micro-hospitals target communities with a population mix that does not support a full-service hospital.
3. Site Selection: Investors identify locations for development using "hot spot" data mapping that highlights areas with the right demographic mix and underserved healthcare options
4. Services: Micro-hospitals fill the gap between freestanding emergency centers and full-scale hospitals by providing 24-hour access to care, little to no waiting for patients as well as inpatient and surgical options. Most are associated with not-for-profit systems and align with major hospital values
5. Design: On average, facilities are 30,000 to 40,000 square feet and licensed for 10 to 20 beds.
6. Care: Typically micro-hospitals are low-trauma facilities (level 4 or 5) with advanced surgical capabilities and high nurse-to-patient ratio.
7. Outcomes: Their small size and low complexity often helps micro-hospitals beat the national average of infection, mortality, and CAUTI rates compared to large hospitals.

Part of the growth strategy at CHI-St. Luke's, a six-hospital health system in Houston, TX, involves combining inpatient and outpatient services into micro-hospitals, which are smaller, more scalable, and less capital-intensive than traditional hospitals.

Getting the Value Out of Postacute Care

CHI St. Luke's opened its first such four-bed facility, Springwoods Village Hospital, in January, and David Argueta, its president, calls it an "innovative solution to get clinically appropriate high-quality care in a low-cost environment."

Speed-to-Market is Key

Argueta, who is president of CHI's Woodlands-area facilities, which includes the micro-hospital as well as the 242-bed The Woodlands Hospital and 30-bed Lakeside Hospital, views micro-hospitals as one of the ways the health system is able to expand its access points in a thoughtful manner.

"It really brings value-added services together in a more cost-effective manner than a big hospital or individual clinics," he says.

Spingwoods Village Hospital features four inpatient beds, 10 ED bays, four operating suites, two endoscopy suites, imaging, labs, and pharmacy and dietary departments.

It has everything a hospital has; it's just scaled appropriately, says Kevin Harney, a principal and architect with Earl Swensson Associates, the Nashville-based architecture firm that designed Springwoods Village Hospital.

"Some owners see this concept as a way to establish their brand and identity within a community and have even planned these micro-hospitals for growth to become a larger tertiary hospital," he says.

Springwoods Village is its first such facility, but Harney says the niche will grow, and the firm has several other such facilities in various stages of design.