the famous "Welcome to Fabulous Las Vegas" lit up at night

Dignity Health is increasing competition in Las Vegas by going small and broad, ushering in a model to compete with freestanding emergency room locations, urgent-care centers, and hospital giants alike.

If successful, it’s a model that could transfer to almost any market in the country.

Dignity Health’s St. Rose Dominican Hospitals will build four “neighborhood hospitals” in medically underserved parts of the Las Vegas market by 2017. For this initiative, the nonprofit health system partnered with Emerus, a hospital management firm that has been involved in the micro-hospital movement in Texas.

Each hospital will cost $25 million, a fraction of the expanse for a full-blown acute-care hospital. The hospitals are to include six to eight inpatient beds, an emergency room, and primary-care facilities. Typically, hospitals of that size are rare outside rural areas. But the combination of ER, inpatients beds, and primary-care offices could make the model work in a more urban setting.

The hospitals are no bigger than a critical-access hospital but offer more than a standalone ER or an urgent-care center. The smaller hospital could blunt the proliferation of standalone ERs and give Dignity Health a leg up on urgent-care and retail clinics. Dignity Health can simply refer or transport more complex and critical patients to its larger facilities.

With more health systems looking to treat patients across the whole continuum of care, smaller hospitals could create a better position for health systems with smaller buildings downstream of their larger hospitals.

It’s a highly competitive move, too. Las Vegas has just emerged from the Great Recession, and hospital construction and expansion has started anew. Having new facilities across the Las Vegas market greatly expands St. Rose Dominican Hospitals’ geographic strength as competing health systems also expand.

Health systems must innovate if they want to slug it out for market share, especially smaller health systems that lack the capital to confront business threats by building a large hospital.

Until St. Rose Dominican Hospitals’ neighborhood hospitals open their doors, any impact from the new hospital model will be hard to gauge. But it’s a good bet that Las Vegas will not be the last market to see this model. Dignity is almost certain to adapt it elsewhere, and other systems won’t stand pat if these hospitals nibble away at market share.

Bill Melville is a senior analyst at DRG and a National Health Insurance Exchange expert. Follower him on Twitter at @BillMelvilleDRG

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