The New Kid on the Block: The Technological Environment of Micro-Hospitals

The prior four installments of this Health Capital Topics series on micro-hospitals have introduced the micro-hospital concept, and discussed its evolution within the existing regulatory; reimbursement; and, competitive healthcare environments. The fifth and final installment of this series will explore how various healthcare technologies have supported the expansion of micro-hospitals, and how it may contribute to the sustained success of this novel provider.

Technology has a broad meaning when applied to healthcare. It can range from the tangible tools and software that providers use during the provision of clinical services and the management of patient records to the procedures that constitute the standardized course of care. The advancement of healthcare technology (both clinical and information technology) is one of the leading reasons for the growth of micro-hospitals, along with the expansion of other outpatient services and providers, e.g., retail clinics and ambulatory surgery centers (ASCs).  This general shift from inpatient to outpatient care has been observed for several years; the number of inpatient stays decreased by 6.6% from 2005 to 2014, with reductions in almost all service types, e.g., surgical (12% decrease), medical (5.3% decrease), and maternal and neonatal (9.1% and 7.8% decrease, respectively).1 While the number of patient days has decreased, the average cost per stay has increased by an average of 12.7% over the same timeframe.2 The increasing costs of inpatient stays, coupled with advances in clinical technology such as minimally invasive surgery, have incentivized hospitals to increasingly shift toward outpatient care models in an effort to stay competitive.3 As a result, many hospitals and health systems have decreased their inpatient bed volume or closed outright.4 In essence, micro-hospitals have simply fast-tracked this trend by creating facilities with a much smaller bed capacity, allowing them to capitalize on the revenue generated by technologically-driven outpatient and ambulatory services to support a small number of inpatient beds.

One area in particular upon which some micro-hospitals have capitalized is the decrease in cost (and therefore, the increase in revenue), associated with providing certain minimally invasive surgical procedures, e.g., knee replacements, in an outpatient setting.5 While this shift to outpatient care is not new to surgical specialties (the majority of eye and ear surgeries are being performed in outpatient facilities), some specialty procedures, e.g., joint replacements, have lagged behind other orthopedic procedures and surgical specialties, with only 4.2% and 4.6% of hip replacements and knee arthroplasty procedures, respectively, being performed in an ambulatory setting in 2014.6 However, in the 2018 Outpatient Prospective Payment System Final Rule, the Centers for Medicare & Medicaid Services (CMS) finalized the removal of the Total Knee Arthroplasty procedure from the Inpatient Only (IPO) list, effectively allowing providers to be reimbursed for performing these procedures for Medicare beneficiaries in the inpatient or outpatient setting.7 As more clinical evidence is collected indicating that these types of procedures can be safely and effectively performed in outpatient settings at lower costs, it is expected that this trend will continue as reimbursement and regulatory reforms align. Micro-hospitals, like ASCs, will likely benefit from this trend.

The advent of virtual medicine, e.g., remote reading of imaging studies; virtual specialist consultations; remote physician and nursing support for staffing; and, telehealth suites, may also positively impact a micro-hospital’s efficiency and patient access.8  Telehealth and remote monitoring utilization was predicted to continue expanding in 2017 and 2018,9 and the use of remote consultation services and telehealth technology could be used to provide appropriate and convenient outpatient follow-up for micro-hospital patients.10 In addition, the utilization of remote specialist and consultant services is particularly useful for support of ancillary services, such as radiology and diagnostics, in order to reduce overhead and space.11 Micro-hospitals can also reduce costs associated with staffing by making use of remote patient monitoring and taking advantage of remote specialist consultations (versus in-house staffing) for emergent cases that require stabilization before transport to a tertiary facility, e.g., cardiac or stroke care.12  The utilization of telehealth in healthcare, while still expanding, is likely to continue garnering support; indicatively, during the Medicare Payment Advisory Commission (MedPAC) April 2018 public meeting, one of the commissioners noted that he felt that the government was “underinvesting” in telehealth, and that it was an issue that should be discussed further in future meetings.13

While the growth in clinical technology has fueled the movement toward outpatient care, the adoption and growth of healthcare information technology such as electronic health records (EHR) and associated information sharing and cooperation among providers support the development of “hub and spoke” style micro-hospital operation in concert with larger hospitals and health systems.14  In addition, on April 24, 2018, CMS announced an initiative to “improve patients’ access to their electronic health records” by updating the meaningful use program to “promote interoperability” between patients and providers.15  EHRs, information systems, and associated technology advances, e.g., app-enabled patient portals and alternative avenues for communication with patients (such as text messaging and social media) are poised to become more ubiquitous and, consequently, more intuitive and accessible for patients.16

The continuing growth and innovation related to healthcare technology appear to be beneficial to the sustained progress of micro-hospitals. By taking advantage of small inpatient bed size and resultant limited overhead costs; capitalizing on the ability to create revenue from outpatient procedures; and, efficiently utilizing telehealth and virtual technologies to support these aims, micro-hospitals could continue to flourish so long as regulatory and reimbursement barriers do not impede their projected progress. Micro-hospitals have rapidly evolved in the U.S. healthcare industry based on a combination of factors from the regulatory; reimbursement; competitive; and, technological environments. It is not yet certain, however, whether the current micro-hospital prototype will be able to continue making effectual use of technological advancements to solidify their niche market spot and withstand the unceasing changes under healthcare reform and expected downward reimbursement pressures and regulatory hurdles. As the Greek philosopher Heraclitus noted, and as the healthcare industry has seen time and time again, “The only thing that is constant is change.”17

“Trends in Hospital Inpatient Stays in the United States, 2005-2014” By Kimberly W. McDermott, Anne Elixhauser, and Ruirui Sun, Healthcare Cost and Utilization Project, Statistical Brief No. 225, June 2017, (Accessed 4/25/18).


“The Great Migration: Moving More Care from Inpatient to Outpatient Settings is a Transformative Trend for Hospitals” By Rebecca Vesely, Hospitals & Health Networks, March 11, 2014, (Accessed 4/25/18); “Outpatient Care Takes the Inside Track” By Beth Kutscher, Modern Healthcare, August 4, 2012, (Accessed 4/25/18).

“Hospitals Face Closures as ‘A New Day in Healthcare’ Dawns” By Melanie Evans, Modern Healthcare, February 21, 2015, (Accessed 4/25/18).

“Replacing Joints Faster, Cheaper and Better?” By Harris Meyer, June 4, 2016, Modern Healthcare, (Accessed 4/26/18).

“Surgeries in Hospital-Based Ambulatory Surgery and Hospital Inpatient Settings, 2014” By Claudia A. Steiner et al., Agency for Healthcare Research and Quality, HCUP Statistical Brief #223, (Accessed 4/26/18), p. 5, 12.

“Medicare Program: Hospital Outpatient Prospective Payment and Ambulatory Surgical Center Payment Systems and Quality Reporting Programs: Final Rule with Comment Period” Federal Register, Vol. 82, No. 239 (December 14, 2017), p. 59382-59385; “News Alert: CMS Says OK to Admit Total Knee Replacements as Inpatient” By Ronald Hirsch, RAC Monitor, January 10, 2018, (Accessed 4/26/18).


“Are Micro-Hospitals Part of Your Network Development Strategy?” Navigant, 2016, (Accessed 4/19/18), p. 3.

“Healthcare Forecast 2017: Top Trends Driving Board Strategic Priorities” By Steven T. Valentine and Guy M. Masters, NRC Health, January 30, 2017, (Accessed 4/25/18).

Navigant, 2016.



“Public Meeting” Medicare Payment Advisory Commission, April 5, 2018, (Accessed 4/26/18), p. 48-49.

Navigant, 2016, p. 2.

“CMS Proposes Changes to Empower Patients and Reduce Administrative Burden” Centers for Medicare & Medicaid Services, April 24, 2018, (Accessed 4/25/18).

Valentine and Masters, January 30, 2017; “Healthcare Forecast 2018: 10 Trends (and Implications) Board Leaders Need to Know” By Steven T. Valentine and Guy M. Masters, NRC Health E-Briefings, Vol. 15, No. 1, January 2018, (Accessed 4/25/18), p. 1.

“Change is the Only Constant” By Gina Tabone, Team Health Medical Call Center, (Accessed 4/26/18).

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