Nationwide, health systems have adopted freestanding emergency rooms, urgent care centers, and retail clinics to both supplement larger, acute care facilities burdened by overcrowding, and to cater to on-demand patient needs. With the dawn of value-based payment models (whether federal or private), healthcare players are exploring new patient access avenues to improve population health management and, ultimately, lower the financial burden of chronic disease and preventable illness.

Enter micro-hospitals, the much-touted middle ground between a convenient care center and a full hospital. These facilities, often termed neighborhood or community hospitals by health systems to promote a patient-focused level of care, offer a wide spectrum of services from emergency treatment to diagnostics at a fraction of the cost, thanks to a small footprint and inpatient capacity (generally eight to fifteen beds). As these include inpatient beds, health systems can market these facilities as a seamless extension of services and competitively apply them toward their total market share.

These micro-hospitals, by the way, should not be considered a threat to retail clinics or urgent care centers, as the patient-as-consumer model continues to encourage prominent health systems such as Vanderbilt Health in Nashville and Piedmont Healthcare in Atlanta to invest in retail clinics as an outpatient growth strategy.

Nearly two years ago, DRG principal analyst Mark Cherry predicted an increase in strategically placed micro-hospitals to help integrated delivery networks achieve in-network status and favorable rates with prominent payers. The trend of micro-hospitals has indeed accelerated since then, and in the last year alone, more than 10 micro-hospital applications have been filed or approved among players like Dignity Health, Mercyhealth, and Franciscan Health.

The following list of micro-hospitals that are proposed, under construction, or newly opened, suggests IDNs increasingly see micro-hospitals as a strategy to curb patient wait times and increase primary and acute care accessibility in heavily populated markets. Time will tell whether these micro-hospitals can effectively improve patient outcomes and drive down costs in a value-based reimbursement environment.

  1. Baton Rouge General: Plans to build a 10-bed micro-hospital in Baton Rouge, Louisiana.
  2. CHRISTUS Southeast Texas Health: Plans to develop a micro-hospital on the campus of its newly opened outpatient center in Port Arthur, Texas.
  3. Dignity Health: Opened the first of four planned eight-bed micro-hospitals in June 2017 at the Saint Rose-Dominican North Las Vegas campus in partnership with Emerus, the nation’s largest operator of micro-hospitals.
  4. Franciscan Health: Broke ground on a three story, eight-bed micro-hospital in June 2017 in Greenwood, Indiana, featuring lab services, a diagnostic imaging center, primary and specialty care, and rehab services, among others.
  5. Mercyhealth: Received approval in June 2017, despite strong opposition from area providers, to build a 13-bed micro-hospital in Crystal Lake, Illinois.
  6. MetroHealth: Converting two of its emergency facilities in Cleveland Heights and Parma, Ohio, to 12- and 16-bed micro-hospitals, respectively.
  7. Ochsner Health System: Plans to build a 10-bed micro-hospital with surgical services in Baton Rouge, Louisiana.
  8. Saint Luke’s Health System: Is in the process of building an eight-bed micro-hospital with Level IV emergency services in Overland Park, Kansas.
  9. Vincent Health System: Unveiled the first of four, four-bed micro-hospitals with seven emergency rooms in Noblesville, Indiana, in July 2017.
  10. The Hospitals of Providence (Tenet): Opened El Paso, Texas’ first eight-bed micro-hospital in September 2017 in partnership with Emerus, the nation’s largest operator of micro-hospitals.


For more information on many of the IDNs listed above, explore DRG’s new IDN Analyzer, and follow @mlavoneDRG for convenient care trends and developments.



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DRG’s Health Plan Analysis explores pharmacy benefit, provider contracting, and product trends through actionable industry insight and key enrollment data across the United States, including Commercial, Exchanges, Medicare, and Medicaid markets. Find out more: Health Plan Analysis.

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