Micro-Hospital Real Estate: Six Key Considerations

Written by: Victor McConnell & Anne McGinn

1. What is a micro-hospital?: A micro-hospital is broadly defined as a fully-licensed, semi-acute inpatient facility with anywhere from 15,000 to 50,000 square feet and five to fifteen inpatient beds which provides typical “core services” including an emergency department, an inpatient pharmacy and lab, and imaging. Other additional services include women’s services, dietary services, primary care and surgical services. Micro-hospitals seek to provide services at a lower cost to patients as compared to similar services performed at a larger hospital facility. Additionally, these services are provided 24 hours a day, seven days a week.

2. History, Current Supply & Key Players: Emerus is the nation’s first and largest operator of micro-hospitals, with 28 micro-hospitals currently in operation nationwide and 20+ new facilities under development through joint-venture (“JV”) partnerships. Emerus’ JV partners include Baptist Health System, Baylor Scott & White, SCL Health, Dignity Health, the Hospitals of Providence, Saint Alphonsus, Integris, Allegheny Health Network, Memorial Hermann and Baylor Health Care System.

Although Emerus was the first, many operators and developers have since entered the micro-hospital sector. An overview of some recently developed micro-hospitals is discussed below:

  • Baptist Health runs six micro-hospitals out of San Antonio;
  • Baylor Scott & White opened its eighth location (Summer 2017) in Grand Prairie, Texas“Baylor Scott & White and Emerus officials have worked with Duke Realty to develop and open six other emergency medical centers between 2014 and 2015 in the Texas cities of Keller, Murphy, Rockwall, Burleson, Colleyville and Mansfield.”Their seventh location in Colleyville, Texas comprises a 20,000-square-foot facility with seven emergency department (“ED”) beds and eight inpatient beds.
  • CHRISTUS Health opened Louisiana’s first micro-hospital in 2017, with CHRISTUS Health Shreveport-Bossier’s CEO, Isaac Palmer, quoted as saying “The days of us building 200,000-square-foot hospitals are over.”
  • Dignity Health has one micro-hospital in Phoenix with another on the way and four “neighborhood”/micro-hospitals opening by Q2 of 2018 in Las Vegas.
  • The Franciscan Alliance (headquartered out of Indianapolis, Indiana) recently constructed a 20,000-square-foot facility for $12 million. The facility features 12 emergency exam rooms and eight inpatient beds, along with a full-service pharmacy and lab, with CT and MRI imaging.
  • Hospitals of Providence opened a 40,000-square-foot micro-hospital in Horizon City, Texas (outside of El Paso) on September 6, 2017 through a joint-venture partnership with Emerus Holdings;
  • Integris Health reportedly plans to open at least four micro-hospitals in Oklahoma City (far west OKC, northwest OKC and Del City) over the next two years with each facility featuring eight to ten emergency treatment bays and eight to ten inpatient beds. Integris’s Moore micro-hospital will be 50,000 square feet and is set for a completion date of January 2019;
  • SCL Health has developed four “community hospitals”/micro-hospitals in Denver with their typical size being approximately 38,000 square feet (their Southwest Facility opened in May and features two operating rooms).
  • St. Luke’s Health System is planning to supplement its existing hospitals with four plus micro-hospitals featuring eight to ten beds.
  • St. Vincent Health has plans to build four micro-hospitals with “seven private emergency rooms, including one for trauma patients and four in-patient rooms for as many as eight overnight patients” per facility.

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