Column | Innovation and Disruption

The Future of the Hospital

Column | Innovation and Disruption

The Future of the Hospital

Reduced utilization of hospitals has many calling their future usefulness into question.

The steady movement of patient care beyond the hospital’s walls is calling into question the future of the hospital—and prompting discussion of what the hospital of the future will be.

There must have been something in the air in late February. At the National Payment Innovation Summit, a conference co-hosted by HFMA and the Altarum Center for Value in Health Care, a theme running through the presentations was “alternative sites of care.” Presenters pointed to the steady erosion of inpatient admissions at community hospitals across the country and discussed new payment and care delivery models intended to keep patients out of the hospital or to find less expensive sites for more intensive care, including outpatient surgery centers and new “hospital at home” models.

I flew home from the conference on Friday, Feb. 23. When I looked at the news on Monday morning, Feb. 26, I found two articles published the day before—an article in the Wall Street Journal and an op-ed in the New York Times—that were talking about the future for hospitals. Both articles reiterated themes heard at the conference: lower average occupancy rates, declining numbers of hospitalizations, and payment models that provide incentives for seeking out lower-cost alternatives to hospital stays. But the two pieces had notably different tones: While the New York Times op-ed predicted industry resistance to the changing role of the hospital, the Wall Street Journal article highlighted innovations that health system leaders are making today to build the hospital of the future.

New Directions

For many communities, the hospital has assumed a role well beyond that of a site for care. Hospitals often are the largest employers in their communities. They are places where family histories have unfolded. They often play an important role in the civic life of the community, and in turn are the recipients of philanthropic support by community members. In the event of a disaster or emergency, the hospital takes the lead in treating the injured and getting the community back on its feet. For these reasons and more, the future of the hospital is of significant interest not only to those who work at the hospital, but also to the members of the community that the hospital serves.

At the same time, hospitals face the same pressures for greater efficiency and lower cost that many other industries have faced. A reluctance to embrace change does not mean that change will not occur; instead, it often means that when change does arrive, its impacts are more sudden and severe.

Notwithstanding the headline of the New York Times article (“Are Hospitals Becoming Obsolete?”), it is unlikely that the hospital will become obsolete in the foreseeable future. There will remain a need for places where the most seriously ill and clinically complex patients can receive high-acuity care. The likelihood, however, is that we will need far fewer of these places. Indeed, the number of hospitals in the United States is already declining, especially in smaller towns and rural areas. The question is, What can replace these hospitals to ensure continued access to needed healthcare services?

One innovation highlighted in the Wall Street Journal is the “microhospital” or “neighborhood hospital,” which includes an emergency department and a small number of beds for short-term recovery. In some instances, microhospitals will anchor a “healthplex,” which may offer additional services such as labor and delivery, some surgical procedures, and labs and radiology. If these additional services are already available within a reasonable distance, a freestanding emergency clinic may be able to take the place of a microhospital.

Another innovation that continues to gain traction is the use of telehealth and other digital technologies to extend the reach of hospitals that provide more highly specialized services. In certain respects, this innovation is simply using technology to expand the tertiary and quaternary hospital’s traditional role as the “hub” for a full range of healthcare services. On the receiving end, however, in communities that are struggling simply to support needed healthcare services, this expansion could bring new expertise and capabilities that these communities could never easily access before.

Open Questions

Even as health system leaders start to build innovative models for the future, questions remain about how these models will replace the role of hospitals in their communities today.

One is the question of the hospital’s role as an economic driver for its community. People will still need healthcare services, and there will still be plenty of jobs for those who help provide those services. The distribution of those jobs, however, might look very different than it does today. As smaller communities see facilities downsize or disappear, or have care delivered from a remote location, they may also see good-paying local jobs disappear. At the same time, more concentrated healthcare “hubs” likely will see job growth. The U.S. population has been shifting from rural to urban locations for many years; the shift in healthcare jobs may further accelerate the trend.

Another issue is access. Digital technologies keep improving, but for the foreseeable future, remote delivery will not be possible for all healthcare services. There must be a way for communities to access the services they need, such as emergency care, labor and delivery, and others. Microhospitals represent one effort to answer the question of what might replace a traditional hospital, but they may not be able to meet the needs of all communities that struggle to support a full-service hospital. If they can’t, people must be able to access services they can’t find locally.

Questions on the future of the hospital are not confined to smaller or rural communities. As care shifts to alternative sites in urban communities, the number of hospital beds available will decrease as well. This reduction may hamper a city’s ability to respond to the needs of the injured should a disaster occur. As one healthcare executive interviewed for the Wall Street Journal article noted, “We can’t build facilities for doomsday.” But there is an underlying issue of public health and safety that cannot be taken lightly in today’s world.

The hospital has felt the pressure of innovation, but it is becoming a site for innovation as well as the hospital of the future takes shape. Ultimately, the success of our healthcare system in this future will depend on our ability to find new ways to meet the many needs that hospitals serve today.

About the Author

James H. Landman, JD, PhD,

is director of healthcare finance policy, perspectives and analysis, for HFMA.

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