Dissecting Hospital at Home: The Cost Structure Behind the Buzz

CFOs need bold cost restructuring and strategic scale to make Hospital at Home work.

The uncomfortable truth? Hospital-at-Home (HaH) fails under the weight of conventional cost modeling. Lump in fixed hospital overhead, and you’ve doomed your ROI before the first home visit.

To survive, CFOs must dismantle their unit economics and rebuild from the ground up, shedding outdated assumptions and making every dollar serve the model’s unique realities.

There’s a need for detailed financial analysis up front, and many HaH programs go under due to inadequate financial modeling. Traditional cost modeling just doesn’t translate, says Tom Kiesau, the chief innovation officer and leader of digital & technology transformation at Chartis.

Kiesau says understanding the whole financial picture starts with redefining unit-based cost analysis and separating hospital-based overhead from the actual costs of delivering care in the home.

“If you don't break apart your capital and your overhead allocations and build them up from ground zero, you are going to burden your hospital at home infrastructure with unrealistic and inaccurate costs,” Kiesau warns.

Fixed costs like food services, security, or cleaning staff don’t belong in the HaH model, he says, and including them will skew your ROI calculations. Instead, CFOs must build a ground-up business case that includes per-encounter variable costs, right-sized capital investments, and deliberate sequencing of resource deployment.

“You can't lose money on the margin and make it up on volume,” Kiesau says.

Growth of HaH Model and Outcomes

While Kiesau says that most programs fail to mature because they don’t start with clear financial modeling or track their capital release strategy, one CFO has a different perspective.

Mass General Brigham (MGB) has emerged as a national leader in HaH, both in patient volume and financial strategy. According to MGB’s CFO and Treasurer Niyum Gandhi, the business case for HaH evolved not by focusing strictly on profitability, but on long-term sustainability and care quality.

“Our job is not to optimize finances. Our job is to deliver the highest quality care possible in a financially sustainable manner,” he says.

Initially, the costs of delivering care at home were higher due to labor inefficiencies like travel time. But MGB recognized a tipping point.

“At a certain scale point you reach economics such that the underlying cost to deliver the service is less expensive than if you're doing it in the hospital,” he says.

That scale, he explained, comes around the “mid double digits”— roughly 60 to 70 patients per day.

Interestingly, he discourages traditional break-even analyses.

“I refrain from asking [my team] to do the break-even analysis... because it's going to take you hours and hours and hours to do that and the variations in the census numbers – whether they are 30 or 40 or 50 – do not significantly impact our decisions,” he says.

Instead, the focus is on whether the program can operate without major losses, while maintaining or improving care outcomes. And the outcomes are compelling: lower mortality, fewer readmissions, and higher patient satisfaction.

“The ROI on it, it's better outcomes,” he says.

Rather than aiming for highly detailed or “perfect” cost accounting, MGB’s finance team focuses on capturing the key direct costs, such as nurse visits, physician visits, and remote patient monitoring (RPM), at a level that is sufficient to guide strategic decisions, like whether or not to expand the program. Gandhi dismisses over-engineered cost models, especially for new care delivery models, arguing that exhaustive analytics often fail to influence actual decisions.

“I could absolutely deploy an A-Team to go spend three months doing perfect cost accounting for Home Hospital, and with that information we would make no different decisions,” he says. “So, it would actually be a bad use of resources to do that cost accounting.”

This mindset reflects a broader concern that the healthcare industry often over-prioritizes data precision at the expense of practical value. Instead, Gandhi advocates for a “good enough” analysis that balances resource use with insight generation.

“I think at a certain point you do need to start drilling into trying to improve the unity economics of everything, because the better the unit economics of any given service, the more of that service we can provide in a cost-effective way,” Gandhi says. “But I think we get so caught up on wanting to do very detailed financial analysis that we lose track of thinking in the long-term. No advancement in care delivery was ever perfect financially in the first year. It takes time.”

Read the full story here.