More on Strategic Planning

Are micro-hospitals the answer for systems looking for low-cost expansions? They might be

Model allows a system to expand their presence without making major capital commitments, or having to locate huge parcels of land.

Beth Jones Sanborn, Managing Editor

As access to care issues plague many communities, more hospital systems are turning to a micro-hospital model to expand their footprints where services are needed without having to make the big financial commitments tied to mergers or full-size facility construction.

The idea is especially taking root as political uncertainty makes systems wary of major capital projects like building a traditional large hospital.

For Emerus, micro-hospitals are all they do, said Senior Director of Strategy and Development Daniel Probasco. The company's model focuses on joint ventures with established health systems and has facilities spread out across the western United States. San Antonio and Dallas, Texas are their most mature markets, and plans for micros in other Lone Star communities are in the works. Denver, Colorado will soon be home to an Emerus-Sisters of Charity of Leavenworth joint venture micro-hospital, and a joint venture with Dignity Health in Nevada will yield four new micros by the end of 2017.

"We think that, in terms of serving the market and the patient base, it's better to be aligned with a system partner within the market to help them better fill in the entire healthcare continuum rather than completely disrupt the market as a sort of straight-line competitor," Probasco said.

[Also: Emerus, Memorial Hermann partner on micro hospitals to expand network, access to care]

Micro-hospitals, which like their name implies, are small facilities with few beds and a focus on emergency or middle to medium high acuity care, higher than urgent care, but lower acuity than a trauma center. They have everything needed to operate an emergency department: imaging equipment, lab services, everything except an ICU and MRIs. They fall more in line with community hospitals and allow a system to serve that portion of the healthcare continuum in localized settings with a small footprint. In other words, it allows them to "have their front door right next to their patient's front door," Probasco said. They can expand their presence without having major capital commitments and having to locate huge parcels of land.

Probasco also said contrary to competitors who cherry pick the richer parts of town with a better payer mix, they take the opposite approach and go for areas with the higher volume and where access is a challenge. That's because driving volume is key.

"There's a massive halo effect that the system benefits from. Just because someone is on Medicaid, doesn't mean their whole family and all their friends are. And when you take someone in in an area where they didn't previously have healthcare and do a good job, they're going to tell their friends and relatives and you'll benefit from that."

Each micro-hospital will see 30 to 60 patients a day in the ED, and some will be admitted for short stays while others are transferred to a major system or facility. They encourage their joint venture partners to incorporate primary care in their micro-hospitals, as it helps the ED siphon off non-emergency cases and keeps costs lower for patients by providing a lower-cost treatment option where appropriate.

"Our strategy is when patients present in the facility to get them to the right setting at the right cost."

[Also: Dignity Health-St. Rose Dominican opens new neighborhood hospital, with 3 more to come]

More face-time, less burnout

The lower patient count and smaller setting make micro-hospitals an attractive option for some doctors too, according to 52-year-old James Nichols, medical director of Baylor Emergency Medical Center in Aubrey, Texas, part of the Dallas division of Emerus.

After years in traditional large hospital settings seeing tens of thousands of patients a year, Nichols found him himself suffering from a serious case of burnout, and looking for the door.

"You just lose your soul after a while, especially in emergency medicine. So the need to reconnect with people and actually be a doctor and not just a technician is what led me to where I am now."

He said finding a place at a smaller facility allowed him to slow down and saved his career. Now, even though he works 24-hour shifts and on his busiest day might still see 40-50 patients in one day, the average is 30 a shift. He says he gets more quality time with patients, and feels like a better doctor.

"I feel like I am actually contributing more to society in seeing less patients. People remember how you treat them and how you make them feel more than anything else."

There is also less waiting time for patients than in a larger hospital ED, Nichols said, which can endanger patients in some cases. He also says he doesn't see, or have to take part in, the tug-of-war that often occurs in larger systems between clinicians and administrators. There is more open communication and a far less adversarial rapport between the two.

[Also: Integris to build 4 micro hospitals around Oklahoma City]

Boosting access to care

Three years ago, Dignity Health took a serious look at micro-hospitals as a way to expand their footprint without a significant amount of capital or the long-term design and build process of a larger facility. Now they have two micro-hospitals in Arizona, and by the end of 2017 will have four in Nevada, a state long suffering from poor access to care and a shortage of doctors.

"As we looked at micros, we said these can serve a very effective purpose in underserved communities from an access to care perspective and reach a geography where we have population accountability but we don't have a physical presence," said Peggy Sanborn, vice-president of strategic growth for Dignity Health.

By stretching out into neighborhood hospitals, Dignity is reaching into communities where patients live and providing access to the services they most frequently need.

The Dignity/Emerus design generally involves a first floor that is a hospital with 10 beds per facility with some outpatient capabilities, and then the 2nd floor is ambulatory services like primary care, some imaging, and others. The goal is to create mini neighborhood campuses, Sanborn said, and find ways to create access to care without overspending. In other words, they aim to right-size their investment to meet demand.

Each micro-hospital costs roughly $25 to $50 million to build, depending on the size of facility and cost of land. With joint ventures, no one entity is responsible for all the capital.

"If you're short on acute access if you're short on your geographic presence to serve your population around urgent or emergent services as it relates to access to care you might look at this as a very complementary strategy to your existing footprint," Sanborn said.

Both Probasco and Sanborn said there is a learning curve when it comes to the micro-hospital model. For starters, Sanborn said it is crucial to make sure the micro facilities are fully integrated into the larger system and other assets. Patient experience and quality need to be consistent to ensure continued positive brand recognition.

"That happens best when everyone is well-connected and on the same page."

Probasco said their partners can sometimes let their vision run away with them, something he calls "scope creep." Keeping the "micro" in micro hospital is key. Also, another hypothetical challenge is regulatory. The certificate of need process in most states is usually a multi-year, highly difficult legal process, though those states are mostly on East Coast. And since it's a state-based regulation, you'd have to fight the battle in every state you expand to.

Still, he'd like to see them try and be a part of fixing the critical access hospital situation. He said so many have closed, and their model would be beneficial in rural settings.

Developing regional support structure would be challenging, but he would like to be part of that solution.

"From the micro standpoint, the cost to enter a market is a fraction of a fraction of what it would be to enter with a larger campus. The way we structure our regions is very capital efficient. It's a low-cost entry to the market."

Twitter: @BethJSanborn