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Micro-hospitals Can Improve Access to Care AND Enhance Long Term Services and SupportsMicro-hospitals could fill the gap between sub acute-care service delivery environments and sprawling medical campuses by creating more 24/7 access points in the community.

For generations in this country, long-term services and supports were quite simply a part of family life: extended families divvying up caregiving while medicine came to the home through a visiting healer or clinician. The last century’s shift to centralized medical technology and care has created high-cost medical facilities often at considerable physical and financial distance from those who need services.

The snowballing need for LTSS is prompting health systems and insurers to re-visit health service delivery closer to or even back in the home to reduce expenses and avoid hospital admissions. The boom in sub acute-care service delivery environments, from outpatient surgery centers to mini-clinics in retail stores, is a reflection of the drive toward efficiency and cost savings for providers and insurers, as well as satisfying an increasingly on-demand consumer.

Micro-hospitals could fill the gap between these limited-scope units and sprawling medical campuses by creating more 24/7 access points in the community.

Just as the increased popularity of Urgent Care centers among patients compelled many hospitals to extend their services through that healthcare model, large health systems are increasingly prepared to go small by siting satellite Micro-hospitals at least 20 miles from a main campus. Specifically targeted at less acute care in a dramatically smaller footprint, Micro-hospitals started opening over the last decade in medically under-served areas and look to me very much the way the Urgent Care sector did some 20 years ago. The desire to continue diverting patients away from the emergency room is well served when we provide additional access to care while avoiding an admission event. Micro-hospitals are not likely to significantly impact the total volume of hospitals, but they will reduce the need to go to emergency rooms.

The Urgent Care Association of America reports there are currently 7,500+ urgent care centers in the U.S. Micro-hospitals currently number in the dozens, but not a week goes by without news of another hospital system breaking ground or filing a Certificate of Need application to proceed. This is a trend with traction, and is consistent with the diversion away from long term care and rehab facilities. Access to care is the cornerstone of long term services and supports!

The young Micro-hospital sector has little hard data associated with it yet and plenty of anecdotal evidence suggesting they may not be the immediate money-makers their parent systems are hoping for. Dignity Health’s Phoenix facility has helped attract new patients to the system and kept them seeing doctors within the network, but Dignity Health vice president Peggy Sanborn admits to Crain’s that the lean operation has a small monthly operating loss.

The same article quotes Fred Bentley, a vice president at consultancy Avalere Health in Washington, D.C.:”I would imagine a lot of traditional hospital administrators would look at a (micro-hospital) and say, ‘We can’t run that efficiently. ‘There are just basic operating costs that you have to have. You’re not going to bring enough patients in to pay for it.”
The cost of maintaining a 24-hour freestanding emergency department is “a lot more” than an Urgent Care center with extended hours, adds Kaufman Hall consultancy senior vice president Dr. Robert Pryor, a former Texas health system CEO who opened Micro-hospitals there.

Consultant Dr. Tom Davis agrees it’s a challenge to keep Micro-hospital costs in check, explaining to, “Without carved-out regulatory requirements, micro-hospitals do not generate enough value to justify their ongoing operating costs in most cases. Without the benefit of scale, it is simply too expensive to deliver inpatient services through these small hospitals. Add in the liability risk incurred by the limited services provided, and the value generated is in no way worth the costs.”

But these regulatory parameters will likely evolve as CMS and state regulators recognize the gap that Micro-hospitals fill, and as facility support organizations innovate to reduce operating costs.

While Dr. Davis suggests we view the Micro-hospital concept as more of a “loss leader” to feed into a larger health system’s service region and pull patients to more profitable major medical centers, we suggest that locating a Micro-hospital in a rural community (where distance isolates a large population of elderly, disabled, economically disadvantaged and/or medically fragile individuals), would distribute care precisely where it’s most needed. Some per capita savings could be realized by siting them in burgeoning outer suburbs and keeping them focused on lower acuity care while feeding higher acuity cases to the infrastructure-heavy main campus. ECRI’s Top 10 Hospital C-Suite Watch List whitepaper notes the latest Micro-hospitals are designed to be scalable so if population and care needs grow, they can be expanded with additional beds and services. Operators need to keep a weather eye on future needs and possible physician joint ventures.

Overwhelmingly, healthcare administrative expenses take the biggest bite out of the budget. Among eight countries in a study published in Health Affairs, they were highest in the U.S. According to Becker’s Hospital Review, the way to save is by outsourcing everything that isn’t core to what hospitals do — trimming those admin costs through job cuts and contracting third-party vendors for back-office functions.

The opportunity for health systems like Highmark to lead in the innovation cycle is very attractive as they plot their foray into this sector. Consider what AmerisourceBergen could do in the way the drug distributions supports are updated as this segment grows. Similarly, Compass Healthcare can bring resources to these settings, based on the company’s vast experience in hospitals and long term care facilities. Even Amazon is poised to disrupt the medical product marketplace. Working with experienced vendors could yield the economies needed for Micro-hospitals to improve access to care and divert patients away from traditional hospitals and long term care facilities.


Fady Sahhar

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