In this short video, Daniel Carter will discuss the evolution of microhospitals as he highlights two examples.
I’m Daniel Carter. I want to talk a little bit today about the evolution of microhospitals as it pertains to regulations. To do that I want to talk about a couple of specific states. First of all, I want to start with Pennsylvania. In Pennsylvania about 18 months ago, there was an ambulatory surgery center that added four inpatient beds and contacted the Commonwealth of Pennsylvania to ask to be certified as a licensed hospital. The state surveyors came out, surveyed the site, and determined that the ambulatory surgery center, now hospital, met the conditions of participation, and as such, recommended that CMS certify it as a hospital.
When CMS started looking into this they decided that the ambulatory surgery center was not a hospital because it did not meet the definition of a hospital, which is primarily providing care to inpatients. As a matter of fact, CMS and the regulators that were looking at this ambulatory surgery center thought that it was more about trying to get better reimbursement and being reimbursed as a hospital outpatient department, as opposed to a freestanding ambulatory surgery center.
Although there are a lot of litigations that have taken place around this particular case, what I want to talk about are the two key takeaways from this situation in the state of Pennsylvania. First of all, I think strategy and need should drive the decision around developing a microhospital. This is not a reimbursement play. It should not be something that is all about trying to get hospital-based reimbursement as opposed to freestanding. If the particular market that you are assessing really needs an outpatient facility, whether that is an ambulatory surgery center or an IDTF, that should be the facility that is developed, not necessarily a microhospital.
The second takeaway, I think, is that even though CMS ruled against this facility being a hospital, that does not mean that CMS is trying to treat all microhospitals as outpatient facilities and not allowing them to be developed. Certainly, CMS has approved microhospitals all across the country and this was a single example of CMS denying the application to become a hospital.
The next state that we will look at is the state of Georgia, which, as I’m recording this, is actually awaiting the governor’s signature on a bill that would, for the first time in that state, define what microhospitals are. In particular there are three ways in which a hospital can be defined as a microhospital. First, it would need to have at least two, but no more than seven, inpatient beds. It has to be located in a rural county, which for the purposes of this definition, are counties with 50,000 or fewer residents. It has to provide emergency services on a 24/7 basis.
It is important to understand the reasons behind this definition and regulatory change in Georgia. In particular, it should be understood that Georgia is fairly unique in the number of counties that it has, and the number of rural counties that it has. Georgia, a state of about 10 million, has 159 counties. About three-fourths of those would have populations of less than 50,000. Those counties would qualify as rural under this bill.
I think it is important to understand that this really is a regulatory definition only, and the purpose behind the bill is not so much to define microhospitals for licensing perspective, but to define microhospitals because those that qualify under the definition of this bill would be exempt from going through the CON process. That is really the reason behind it. This is about trying to preserve rural health and make sure that hospitals can be sustained in very small rural counties. It is not about a typical microhospital as we might define it, particularly those that would be more useful in a suburban or urban market.
So, although these are two examples of what a microhospital may be, I would urge you to continue thinking about microhospitals as we’ve defined them before. Really useful in a suburban or growing urban market and particularly useful for your strategy if it is an area of your market that is underserved by inpatient capacity and you do not want to build a full-service or full-size hospital.