Franciscan Health making a big bet on small hospital

When it breaks ground Thursday on a new micro-hospital and outpatient pavilion in Greenwood, Franciscan Health will be taking a $50 million bet that going smaller can pay off big.

The Catholic hospital system in Indiana plans to build a 20,000-square-foot hospital with eight inpatient rooms and an emergency room near U.S. 135 and Stones Crossing Road, a fast-growing area of Johnson County.

That will be just a fraction of the size of a traditional full-service hospital, which can often encompass more than 500,000 square feet.

Also on the site, Franciscan is building an 85,000-square-foot outpatient and specialty care pavilion, which will connect to the micro-hospital. It will provide a wide range of services, including diagnostic imaging, rehabilitation, mammography, orthopedics and dermatology. It will include laboratories, physicians’ offices, a spa and a conference center.

Micro-hospitals, which are springing up in Indianapolis and other cities, make up one of the latest trends in hospital construction. They can treat a range of illnesses and injuries, from heart attacks and strokes to twisted ankles and minor burns.

St. Vincent announced last summer it will open eight small hospitals where patients can be treated for medical conditions that aren’t life-threatening. The first four hospitals will be in Noblesville, Plainfield, Avon and the Castleton area of Indianapolis.

Franciscan officials say the primary reason for building a small hospital is providing convenient access to their patients in booming Johnson County who don’t want or need to travel to a traditional full-service hospital. The system’s Indianapolis campus is about 12 miles northeast of the planned site, while the Mooresville campus is about 12 miles southwest.

Meanwhile, Greenwood residents have plenty of options for hospital care, including Community Hospital South and Kindred Hospital Indianapolis South.

“There’s a gap in Franciscan locations between our Mooresville campus and our Indianapolis campus,” said Christopher DiGiusto, Franciscan’s vice president of ambulatory services. “We knew as we were growing in this area, we wanted something that was pretty robust and was going to be able to capture more of the growing market.”

But it’s more than just an access issue. It’s also a financial issue. Micro-hospitals are less expensive to build than traditional hospitals—often $10 million to $30 million, according to the Advisory Boards Co., a health care consulting firm based in Washington, D.C., compared with hundreds of millions for their full-service counterparts.

Franciscan is spending $12 million on its new micro-hospital and more than $30 million on the outpatient pavilion, bring the cost close to $50 million, DiGiusto said.

And while the small hospitals are less expensive to build, they can often fetch higher reimbursements than urgent care centers or medical clinics for a wide assortment of related services. Under recent rule changes by the Centers for Medicare and Medicaid Services, micro-hospitals can qualify for hospital-level reimbursement rates because they have inpatient beds and are licensed as general hospitals, rather than outpatient clinics.

Some hospital experts have said they wouldn’t be surprised to see 20 to 30 micro-hospitals pop up in central Indiana over the next five years.

Franciscan said plans to charge patients similar prices for services at the micro-hospital as at its large hospitals.

So, with lower costs and higher reimbursements, the tiny hospitals could rake in decent sized profits.

Franciscan also operates a micro-hospital in Chesterton, in northern Indiana. It said it will decide on whether to build more, depending on how the new micro-hospital fares.

“We have property to do it in other parts of the state, DiGiusto said. “But we haven’t decided if we’re going to do more of these or not. “We’re going to see how this one works first.”