What the Hospitals of the Future Look Like

The days of the hospital as we know it may be numbered. In a shift away from their traditional inpatient facilities, health-care providers are investing in outpatient clinics, same-day surgery centers, free-standing emergency rooms and micro hospitals, which offer as few as eight beds for overnight stays. They are setting up programs that monitor people 24/7 in their own homes. And they are turning to digital technology to treat and keep tabs on patients remotely from a high-tech hub.

For the most part, the investments in outside treatment are driven by simple economics: Traditional hospital care is too costly and inefficient for many medical issues. Inpatient pneumonia treatment, for example, can cost 15 to 25 times more, yet many low-risk patients who could be safely treated as outpatients are hospitalized, studies have shown.

And being hospitalized carries its own risks: With the rise in antibiotic-resistant bacteria, at any given time one in 25 patients in the U.S. is battling an infection acquired in the hospital, according to the Centers for Disease Control and Prevention—at a cost of $10 billion annually for the five most common infections.

But patient preferences for how they get care and a national focus on more prevention and wellness are also driving the new models.

“We should be investing in people and processes, not hospitals,” says David Feinberg, president and chief executive of Geisinger Health System, which is based in Danville, Pa., and has 13 hospitals in New Jersey and Pennsylvania and a health-insurance plan. His goal: to put his own hospitals “out of business” by keeping patients healthier and engaging them in improving their own well-being. But, be aware Mr. Feinberg is also investing in those latest recommendations above that will be the new norm.

Already, the U.S. has more hospital beds than it needs in most markets, suggests a March 2017 report by Medpac, an independent analysis group reporting to Congress. The average hospital-occupancy rate was just 62% in 2015. There were also more hospital closings than openings over the four years ending in 2015, with nearly half of those converting to outpatient-only facilities. Hospitals have continued to close their doors, especially in rural areas, and a spate of mergers will speed consolidation. Also investments in community health care centers should be increasing if those hospitals are being removed from rural areas.

“If technological and reimbursement trends continue—including large cuts to Medicare—it is likely that the country would need fewer hospitals,” says Ken Kaufman, chairman of health-care advisory firm Kaufman Hall.

Hospitals could also be squeezed as large employers band together to reduce health-care costs, such as the recent announcement that Amazon.com Inc., Berkshire Hathaway Inc. and JP Morgan Chase & Co. are forming a company to provide less-expensive heath care for their employees.

To be sure, there will always be a need for modern full-service hospitals to care for the sickest patients, perform complex and risky procedures and deal with trauma cases.

“Hospitals aren’t going away anytime soon, nor should they,” says Jennifer Wiler, executive director of the Care Innovation Center at UCHealth, a Colorado-based health-care system, and vice chairwoman of emergency medicine at the University of Colorado School of Medicine. “But the traditional model of a hospital as the hub of care with a single facility providing every facet of treatment is changing.”

Bruce Leff, a geriatrician and professor at Johns Hopkins University School of Medicine predicts, “Hospitals will start to evolve into large intensive-care units, where you go to get highly specialized, highly technical or serious critical care.”

Payment models for shifting care out of hospitals are being worked out, but Medicare and private insurers are weighing various reimbursement approaches such as bundled payments, which provide a single sum for 30 days of services, regardless of where they are delivered.

Next Article: We look at some of the changes coming to the traditional hospital model.