Health care delivery systems are constantly evolving. These systems are very complex organisms that are influenced by public policy, patient expectations, quality of physicians, societal demands, and payer systems. Health care systems such as hospitals are at the tip of the sword when it comes to meeting the demands of this fickle industry. They must act as a community sensitive force, while evolving and pioneering new concepts to stay materially relevant.
Enter the micro-hospital. Ranging in size from 30,000 to 60,000 square feet, the micro-hospital is designed to bring health care services to the patients, where they exist. According to Vic Schmerbeck, executive vice president of strategy and business development at Emerus, the idea is “to deliver a lot of the pre-acute care in a given neighborhood in a place where people work, live and play, and to bring a higher level of service than what you would find with just a retail clinic or urgent care,” Mr. Schmerbeck said.
The concept of a micro-hospital is to stay small and versatile. The footprint required is much smaller, which makes them a suitable product in urban and dense suburban settings. The key for hospital systems in getting this choice right is carefully assessing the market fundamentals across the continuum of care so other hospital assets are not replicated. Understanding the demographics and patient needs in a defined geographic area is critical in getting the location and size right as well as delivering the right services to the patients.
From an investment perspective, micro-hospitals can also be very stable long term investments. The strength of that investment is largely based on the credit quality of that particular health care system. Moody’s and S&P both cover this industry and can provide a grade to determine the health of the hospital system. For example, Moody’s uses nine symbols as shown below to designate least credit risk to that denoting greatest credit risk: Aaa Aa A Baa Ba B Caa Ca C.
As health care changes, hospitals continue to be the pioneers in our constantly evolving society. With the help of technology, and innovation, micro-hospitals can continue to provide pinpointed quality care as well as steady cash flow to real estate investors.