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Micro-Hospitals Fuel Growth Strategy at a Texas Health System

Analysis  |  By Philip Betbeze  
   March 02, 2017

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Part of CHI St. Luke's growth strategy involves combining inpatient and outpatient services into a smaller, more scalable and less capital-intensive facility model: the micro-hospital.

Health systems used to depend on high-dollar inpatient care for growth. Not anymore.

With health plans and Medicare seeking to move care to lower-acuity, and thus lower-cost, sites, and with advances in technology adding to the practicality of moving procedures out of the hospital, the outpatient environment is poised for growth, while inpatient may stagnate.

CHI St. Luke's Health, a six-hospital health system in Houston, is like many health systems that responded to HealthLeaders' recently released annual Industry survey. It is looking outside the traditional hospital environment by adding physician practices and other outpatient sites of care.

But part of its growth strategy involves combining inpatient and outpatient services into a smaller, more scalable and less capital-intensive facility model, the micro-hospital.

CHI St. Luke's opened its first four-bed micro-hospital, Springwoods Village Hospital, in January 2016. David Argueta, its president, calls the facility an "innovative solution to get clinically appropriate high-quality care in a low-cost environment."

Speed to Market
Argueta, who is president of CHI's Woodlands-area facilities, which includes the micro-hospital as well as the 242-bed The Woodlands Hospital and 30-bed Lakeside Hospital, says he views micro-hospitals in general as one of the ways the health system is able to grow access points in a thoughtful manner.

"It really brings value-added services together in a more cost-effective manner than a big hospital or individual clinics," he says.

What also made this micro-hospital a particularly attractive opportunity is that it allowed CHI St. Luke's to negotiate an exclusive deal within the master planned community of Springwoods, in suburban Houston, 10 miles away from The Woodlands Hospital.

"We had an opportunity that a lot of people don't, which is to grow with the community," says Argueta, who adds that the hospital is scalable. The micro-hospital features four inpatient beds, 10 ED bays, four operating suites, two endoscopy suites, imaging, labs, and pharmacy and dietary departments.

'Scaled Appropriately'
It has everything a hospital has, it's just scaled appropriately, says Kevin Harney, a principal and architect with Earl Swensson Associates, the Nashville-based architecture firm that designed Springwoods Village Hospital.

"Some owners see this concept as a way to establish their brand and identity within a community and have even planned these micro-hospitals for growth to become a larger tertiary hospital," he says.

Earl Swensson Associates sees the niche as a growth opportunity as well. Springwoods Village is its first such facility, but Harney says the niche will grow, and the firm has several other such facilities in various stages of design.

According to The Advisory Board, most micro-hospitals are between 15,000 and 50,000 square feet average eight to 10 inpatient beds and are usually within 18-20 miles of a major hospital. In that sense, Springwoods Village is smaller than most and closer to a main hospital than many.

"We chose four beds," says Argueta. "I've seen some with more, but unless you have a real need to hold patients over for observation, you really don't need more than that."

"Micro hospitals, sometimes called an 'emergency hospital,' become, in essence, a matter of creating accessible, convenient care," says Harney.

Establishing a Presence and Raising All Boats
In theory, a micro hospital establishes a presence in a growing market, capturing market share for a larger hospital system. Patient stays in these facilities are short, usually 24 to 48 hours, and patients who need longer lengths of stay or more specialized care can be transferred to a larger hospital within the system.

"A lot of the patients we see are outpatient surgical-type patients who may come through the ER and we may need to hold them overnight for surgery in the morning," says Argueta. "If they need higher level care, we're 10 miles away from the Woodlands Hospital."

CHI St. Luke's is bringing another micro-hospital online over the course of this year. That facility was received as part of an acquisition, and two others are in various states of planning.

Executive leaders serve across the local campuses as does Argueta.

"Springwoods Village complements the services we offer at our larger hospitals," he says, adding that the service area is experiencing annual growth of around 14% in surgeries and imaging, and the Springwoods Village option has helped eliminate wait times in imaging, and has allowed more time for surgeries.

"It's raised all boats for our North Houston campus," says Argueta. "Twenty-five years ago we were three access points in north Houston. Now we're at over 40 access points: 37 clinics and three hospitals."

Through clinical research, strategic partnerships, early adoption of innovations and highly-specialized clinical programs, one Silicon Valley hospital is changing its role. Check out this live HealthLeaders Media webcast,
Redefining What it Means to be a Community Hospital: Innovation at El Camino Hospital on March 17.

Philip Betbeze is the senior leadership editor at HealthLeaders.

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