By Craig Beam and Bill Eveloff
At Petra, we are transforming the future of healthcare by aligning industry trends with strategic intent to deliver creative solutions that will be sustainable for years to come. This means paying attention to the rise of new ideas in the marketplace and, in some cases, the fall of those ideas, too. The COVID-19 pandemic has caused a lot of us to re-think our physical spaces, but this is especially true in the healthcare industry when it comes to Microhospitals.
The idea of the Microhospital was born in the early 2010s, mostly out of the need to bring more acute services to underserved communities without the financial commitment of building a full-sized hospital. The concept itself was groundbreaking – smaller facilities with a smaller footprint delivering more dedicated healthcare solutions in areas that otherwise had none.
The execution was promising too, especially with the collaboration between developers and operators, simplifying the system and insurance process to bring in commercial rates.
So why is it then, by 2020, have many all of these facilities entirely shut down? The pandemic certainly had a lot to do with it, but our team’s experts have also identified a few key insights from watching the arc of this short-lived trend that can help us better transform the future of healthcare.
LESSON 1: A New Idea Can’t Fix the Whole System.
In other words, thinking outside the box doesn’t mean the box itself will cease to exist.
Bringing new ideas into the healthcare marketplace is critically important in moving us forward towards finding better solutions for our physicians and the patients they serve. But it is equally important to recognize those healthcare systems in place in order to be able to understand how your new idea can acclimate within them or bypass them altogether. In the case with Microhospitals, the idea looked great on paper and the execution was smart – but neither of those factors fundamentally changed the cost structure system in which Microhospitals needed to thrive. Perhaps if there had been more time to garner loyalty and demand, the finances would have balanced out on a macro level. But this was unfortunately not the case, because as soon as the COVID-19 pandemic arrived in America and all elective surgeries had to be put on hold or cancelled, it was a done deal.
LESSON 2: A Smaller Hospital Doesn’t Mean Smaller Costs
Despite their smaller size, Microhospitals came into the market being held to the same regulatory standards as most licensed acute care facilities and bigger campus hospitals. So, while their fixed-cost remained high, the smaller size of the facility ironically made it even more difficult to cover those fixed expenses. Regulations require maintaining “essential services” like laboratory, food service and pharmacy – but even on lower volumes, these added to the fixed costs because these Microhospitals had less of an ability to flex staff with smaller volumes. To put it simply, half of the beds would bring in half of the revenue, so without new regulations to accompany this different type of facility, the existing hospital cost structures would make it extremely difficult to become profitable from the start.
LESSON 3: Know the Community Needs
Adjusting to a smaller format hospital comes with the systemic financial challenges discussed above, but there’s also something to be said about the barriers that come with the physical challenges, as well. This is true for physicians and patients alike. See, while the idea of plopping a beautiful “micro” facility in a community sounds great in theory, you would still need a crystal-clear understanding of the actual needs (ie. demand) of the people in that area before successfully proceeding. And on top of that, you’d need to find a way to incentivize physicians (ie. supply) to work there. One of the fundamental flaws of this model was leading with a set number of beds rather than the actual ambulatory needs of the community, and this just further proved that there really is no one-size-fits-all solution when it comes to healthcare The concept of creaming only the most profitable procedures proved more difficult than originally thought especially when these were placed into already overbedded markets.
Creating a Better Future
Whether it’s with capital planning or construction management, at Petra, we are all about creating better. We identify the key insights behind what’s trending in healthcare and find ways to transform those insights into tangible, strategic and sustainable solutions for our clients. Part of this process includes re-visiting the ways to work within our existing systemic and cultural structures, or perhaps, outside of them altogether.
When it comes to re-thinking our physical spaces amidst a global pandemic, we can see a great opportunity in creatively repurposing what’s left of these Microhospitals. The facilities could potentially accommodate overflow COVID-19 patients, or even be converted into post-acute and ambulatory services. There’s even a possibility that if repurposed to be utilized in a demand-first, supply-second way, these Microhospital facilities might just be able to thrive again someday. Until then, we’ll be keeping an eye out.
Contact our team to learn more about how your next facility project can benefit from the lessons we’ve learned from Microhospitals amid a global pandemic. We are ready to transform the future of healthcare by helping you create a better environment, experience and outcome for your physicians and the patients they serve.