Microhospitals Have Become Part of the North Texas Healthcare Equation, But Will Some Feel The Heat from A CMS Survey Change?

Toward the end of February, Cook Children’s announced that it would close Cook Children’s Northeast Hospital and turn it into an ambulatory surgical center. The system determined that, as it’s currently operating, the Hurst-based facility would no longer meet the definition of a hospital under the tweaked guidance issued by the Centers for Medicare and Medicaid Services late last year.

The guidance says that to be defined as a hospital—more precisely, to get a foot in the door so that CMS can evaluate your merits by various other criteria—a facility must have an average daily overnight census of at least two patients. Cook Children’s Northeast admits almost no patients overnight, registering an average daily census of just 0.11 last year and zero so far this year. Hence the change.

Especially small community hospitals, or “microhospitals,” as many have taken to calling them, are a growing trend. As outpatient revenue comprises a larger portion of the equation for hospital systems, and as technology enables more and more home health care, some healthcare leaders say smaller operations make sense in the right communities. The subjective cutoff generally falls somewhere between five and 15 hospital beds.

After the announcement, I got curious about whether other systems might find themselves in the same predicament as Cook Children’s. Toward that end, the Texas Department of State Health Services sent me data providing the average daily census of every acute care hospital in the state in 2016.

Weeding out the surgical centers, we see that in Dallas County, based on the 2016 data, there are a few hospitals that are small, but wouldn’t necessarily meet the definition of a microhospital. Crescent Medical Center Lancaster has 23 beds and an average daily census of 3.9, Baylor Medical Center at Uptown has 24 beds and an average daily census of 5.7, and Pine Creek Medical Center has 15 beds and an average daily census of 9.

None are approaching the two-patient threshold that puts them at risk under the new CMS survey requirements. The surrounding areas present some interesting cases, however. In the 16-county North Texas region, here are the facilities I found with an average daily census of five or fewer. Again, these are counts from 2016:

  • Baylor Emergency Medical Center in Aubrey (32 beds; avg. daily census of 0.9)
  • Baylor Emergency Medical Center in Rockwall (8; 0.3)
  • Baylor Emergency Medical Center in Burleson (16; 0.4)
  • Glen Rose Medical Center (10; 4.4)
  • Texas General Hospital in Grand Prairie (41; 3.6)

(For what it’s worth, the data has Cook Children’s Northeast at just three beds and an average daily census of zero.)

In an emailed statement from Baylor Scott & White Health, the system told me it has eight microhospitals in all. In addition to the three above, it counts its emergency facilities in the following cities as microhospitals: Murphy, Keller, Colleyville, Grand Prairie, and Mansfield. Some of them have opened since 2016.

“The facilities offer patients initial emergency care, observation, and short-stay admissions closer to home, while still being connected to our larger system of care with the same electronic medical record,” reads the statement from Baylor Scott & White Health.

It says that the system is “monitoring closely the impact of all new CMS guidelines, including those related to microhospitals.”

The update to CMS’ survey criteria is consistent with CMS’ efforts to limit providers from obtaining higher hospital reimbursement rates for facilities and services that more closely resemble freestanding providers or services, says Keith Dugger, an attorney at downtown Dallas-based health law firm Hall Render. As Dugger told me, some systems have been pushing the envelope in defining facilities as hospitals in order to obtain a higher reimbursement.

But microhospitals can temper overhead costs enough to improve health care access in communities that need it (the Wall Street Journal recently took an interesting look at the hospitals of the future), and Dugger says that some well-intentioned hospitals could end up the unfortunate casualties of CMS survey updates.

A few days after Baylor Scott & White’s statement came in, I had the chance to sit down with BSWH CEO Jim Hinton. I asked him about his view of microhospitals. He said that hospitals have “reduced in quantity and increased in acuity”—meaning people who end up in physical hospitals are sick. Although there will continue to be a need for traditional hospitals like Baylor University Medical Center for things like intensive care, surgery, and delivering babies, he says, microhospitals could continue to play a role in the shifting landscape.

“Microhospitals have emergency services, imaging, and they can stabilize certain types of patients and keep them there and discharge them from there, or they can transfer them to a higher level of care if they need it,” Hinton says. “So, that is part of the solution.”

Executives from Texas Health Resources and Methodist Health System echoed the idea that microhospitals could play an increasing role.

Texas Health has facilities in the 15- to 20-bed range, including 17-bed Texas Health Southlake (average daily census: 6.6). Aaron Bujnowski, the system’s chief strategy officer, says smaller hospitals allow the ability to personalize the care to the community.

“These communities often have very specific needs,” he says.

As the community grows, a system will need to monitor to see if it could stand up a larger hospital. That’s an idea that Methodist CEO Stephen Mansfield, who endorses the idea of the microhospital given the right circumstances, knows well.

The system opened one of the first microhospitals in the area in Richardson about a decade ago, and then built on as the community needed it. More recently, Methodist scrapped initial plans for an eight- to 10-bed microhospital in Midlothian in favor of a 40-bed facility. That change occurred after a more intensive analysis of the community’s demographics.

As with each of the three, Mansfield made a strong connection between microhospitals and the overarching trend toward outpatient care. At the first system at which Mansfield worked, 88 percent of the revenue came from in-patient treatment. Currently within Methodist, it’s nearly half and half: 51 percent outpatient versus 49 percent in-patient.

“That shift has been true for most everyone,” he says. “The micro hospital is a small piece of an overall movement to more and more care—particularly  chronic care—taking place in a setting other than the hospital.”