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To Grow Your Hospital, Think Micro

Source: The Advisory Board

As hospitals and health systems consider growth opportunities, we’ve increasingly heard from our members that traditional facility options such as ambulatory centers, urgent care sites, and freestanding EDs are not always sufficient. Most ambulatory centers don’t offer a complete breadth of services while full-scale hospitals often offer more than the community needs. Micro-hospitals are emerging as a middle ground.

Micro-hospitals are 24/7, small-scale inpatient facilities—around 15,000 to 50,000 square feet—with between eight and ten inpatient beds for observation and short-stay use. No two micro-hospitals are exactly the same in their design or service mix, but one trend is becoming clear. Most health systems are using them as entry points into markets where demand would not be able to support a full-scale hospital.

Here are answers to questions we get frequently asked about investing in a micro-hospital.

Where should I build a micro-hospital?

Micro-hospitals work best in markets that have service gaps, but do not have enough demand to support a full-service facility. Even though micro-hospitals can treat some high-acuity needs when necessary, locating the micro-hospital within 18 to 20 miles of a full-service hospital is a good rule of thumb to ensure a seamless transfer process for high-acuity needs to a larger facility.

Also, systems should assess the state’s certificate of need processes as these can determine whether or not you can build a micro-hospital. At this time, micro-hospitals have only been developed in states without certificate of need laws.

What services should be in a micro-hospital?

The goal of a micro-hospital is not to be “all-things-to-all-people.” System leaders implementing these facilities are aiming to meet up to 90% of the care needs of the community it serves. Hospital stays longer than 48 hours are sent to higher-acuity settings. While the ancillary services vary, each micro-hospital has a set of core services including the emergency department, pharmacy, lab, and imaging. The rest of the services depend on the needs of the community, but common examples include primary care, dietary services, women’s services, and low-acuity outpatient surgeries.

With such a variety of services, there is no standard way to staff a micro-hospital. In general, micro-hospitals avoid overstaffing the site with high-acuity employees who are more appropriate for larger sites. One of the health systems we spoke with, SCL Health, staffs their micro-hospitals with board-certified emergency physicians and nurses.

How much does a micro-hospital cost?

Typically, micro-hospitals are located in retail or similarly easily accessible locations, as they are aimed at providing at a better consumer experience. Land in these spaces can be expensive. Although the cost varies depending on the number and type of ancillary services offered, building a micro-hospital costs between $7M and $30M.

How do I get started?

Providers can either choose to partner with an existing micro-hospital developer or choose to build these using existing internal facility development capabilities. SCL Health, Baylor Scott & White, and Dignity Health have all chosen to work with an external partner. However, independently building a micro-hospital can save capital and give the organization more flexibility to align the micro-hospital with the organization’s unique priorities. CHRISTUS Health plans to build a micro-hospital with its own resources to fill service gaps in an area rich in outpatient services, but lacking inpatient facilities.