2016: The year of the microhospital and emerging service lines

hospital building with a sign that says outpatient
Hospitals continued to operate around the clock in 2016, but they also began to spin off specialty lines designed to serve certain niches of patients.

Hospitals continued to operate around the clock in 2016, but they also began to spin off specialty lines designed to serve certain niches of patients.

Those services are not only more convenient for patients, but they also aim to cut the overhead expenses of hospital operators. For example, it is a lot less expensive to operate a microhospital than a major teaching facility.

And rather than fragmenting services, organizations that offer such specialty service lines also find it helps to blur the lines between acute care and urgent care, the latter being not only more difficult to market but often subject to lower reimbursement rates than typical hospital inpatient rates.

Here's a closer look at the service lines that emerged or have grown in the past year.

The rise of microhospitals 

Perhaps 2016 could be called the year of the microhospital. The facilities have only a few beds and are usually built in an urban or suburban area. Microhospitals have been built or are currently under construction in Indianapolis, Nevada, Kansas City, Texas, Colorado and Arizona.

Microhospitals can answer a variety of challenges to the larger hospitals that commission and operate them. First, a microhospital can be a way for hospitals to sidestep the site neutrality rules prohibiting billing at inpatient rates if a hospital-owned facility is more than 250 feet away from the primary inpatient facility. They are also small enough to accommodate the demand of a particular geographical area that does not need the services of a full-size hospital.

David Sandman

Some industry observers also see them as an alternative to urgent care, a concept that can be more challenging to market to patients than an actual hospital.

Microhospitals are also seen as a potential way to rescue larger, financially troubled facilities. That's the theory in New York state, according to David Sandman, chief executive officer of the New York State Health Foundation. “These hybrid models of care offer a good middle ground that can meet the needs of their patients and residents in a way that’s more prudent and sustainable,” he wrote in a column this summer.

Growth of freestanding ERs

Usually, when patients seek emergency services, they go to the hospital. But how about just going to the emergency room instead? That's the concept of stand-alone emergency rooms.

There are currently about 500 freestanding ERs in the United States, but some observers believe that number could quadruple in the coming years.

The model also represents a service line that could be potentially lucrative to hospitals because they provide services similar to those offered by hospitals but at a lower cost. Moreover, freestanding ERs are often exempt from state certificate of need laws. Freestanding ERs can also alleviate overcrowding at primary hospitals, where waits can often stretch for hours.

The freestanding ER model can also deliver care more efficiently. It is thought that without being part of a hospital, such facilities would actually reduce inappropriate hospital admissions. And if a patient needs to be admitted as the result of cardiac issues or a stroke, the patient can be directed to a specific specialty hospital in order to receive care.

Urgent care centers gain ground

If a hospital's market and patient base is not conducive to a microhospital or a freestanding emergency room, an urgent care center may be another logical service line. Although they may not be as lucrative as some other ways to provide services away from the main campus of a hospital, they still offer much-needed outpatient services. There are currently about 7,000 urgent care centers in the United States, with industry observers forecasting that number will grow 4% to 6% each year.

Interior of entrance to the Dignity Health-GoHealth Urgent Care Center in Castro, California
Interior of entrance to Dignity Health-GoHealth Urgent Care Center in Castro, California

Dignity Health, the San Francisco-based Catholic hospital chain, opened the first of a dozen urgent care centers in the Bay Area earlier this year. It's part of a joint venture between Dignity and GoHealth Urgent Care. Officials from both entities say that the new centers will not only improve population health, but also cut unnecessary health costs by diverting patients away from ERs when they only require basic outpatient care. It also offers an attractive option to patients who seek alternatives to visiting hospital emergency departments in order to reduce their out-of-pocket costs.

Moreover, urgent care clinics are also splintering into specialty areas. For example, some clinics in Orlando, Florida, offer orthopedic and cardiology care. Such services are delivered by physician assistants, who are trained in the particular specialty but are under the direct supervision of a physician.

The growth of urgent care clinics is also having some impact on the time-honored physician-patient relationship. Some patients say they don't see the need for such a close relationship anymore, preferring the quicker and more convenient access provided by an urgent care center.

Bedless hospitals also an option

If a minihospital or standalone ER doesn't cut it, how about a hospital without beds? That's another service line that appeared to take flight in 2016. MetroHealth, for example, opened such a site in the Cleveland area at a cost of about $48 million.

Bedless hospitals provide many of the same services as regular hospitals, including an emergency room, infusion services and sometimes even helipads. But patients do not stay overnight. Experts believe patients at these facilities get similar care to what they would receive at regular hospitals, but with a lower risk of contracting infections. Moreover, such facilities are also closer in line with demands for more care delivered on an outpatient basis.

The bedless hospital model is also seen as a potential salvation for rural hospitals, which have hit on financial hard times, particularly as some states have declined to expand Medicaid eligibility under the Affordable Care Act and there have been cuts to Disproportionate Share Hospital payments under the ACA. A new bedless rural provider, known as the Community Outpatient Hospital, would qualify for the Medicare-Dependent Hospital, Low-Volume Hospital and Critical Access Hospital payment enhancements.