The rural town of Cave Creek, located about 10 miles north of Phoenix has long attracted motorcycle enthusiasts, genuine cowboys and folks who enjoy living off the land. But this rugged lifestyle comes with hazards, and until recently, when residents would experience broken bones, snake bites or other serious injuries, they would have to be transported to Scottsdale or Phoenix to receive treatment.

In July, Cave Creek welcomed its first full-service medical facility — and, even though the town prides itself on its old-timey appeal, entered into a new era of healthcare services: the rise of the micro-hospital.

According to a report by the University of Southern California Sol Price School of Public Policy, micro-hospitals are small-scale inpatient facilities, typically between 20,000 square feet and 50,000 square feet and with three to 25 beds, in small community settings.   

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“A micro-hospital is what we like to call a neighborhood hospital,” says Naman Mahajan, CEO of Abrazo Scottsdale Campus and its new Cave Creek facility, Abrazo Cave Creek Hospital. “It has an ER service, operating room and inpatient beds. It is licensed as a full-service hospital — just on a smaller scale. Typically it partners with a larger full-service acute care hospital.”

Abrazo Cave Creek Hospital offers eight inpatient beds, a 13-bed emergency department (ED), an operating room, a pharmacy, a laboratory and a full-range of imaging services. “Just about anything you would go to an acute care hospital for, we offer it at our Cave Creek location,” Mahajan explains. “If a patient needs a more advanced level of care, such as stroke intervention or a cardiac catheterization, we can medically stabilize them within their community and safely transport them to one of our larger suburban hospitals for specialized treatment.”

Community growth

Micro-hospitals are a recent addition to Greater Phoenix. The region’s first such facility, Dignity Health Arizona General Hospital, opened its doors in Laveen in 2015. Part of the Southwest’s Dignity Health system, the 39,000-square-feet hospital features 16 inpatient and 10 ED beds, two operating rooms and much more.

Phoenix ER & Medical Hospital, debuted in Chandler in March 2019. The 14,000-square-foot state-of-the-art independent facility (developed by Texas-based Nutex Health, it is not part of any Valley healthcare system) offers three private inpatient rooms and a full-service ED.

Abrazo soon followed with its first micro-hospital in Mesa in October 2019, and it opened Abrazo Surprise Hospital one year later, in October 2020.

“Micro-hospitals often are part of larger health systems, but not always,” notes Jane Hanson, president and CEO of Dignity Health Arizona General Hospital. “Either way, the No. 1 thing about them is that they can quickly stand up in rural underserved areas that need health care services.”

In addition to shorter construction times, the financial investment required to develop a micro-hospital is much smaller than what is needed to build a large-scale facility. “It takes a lot of time and a lot of money for health systems to open up 400-, 500-, 600-bed hospitals. It’s a big ordeal,” Hanson points out.

Many health systems are adopting what Hanson refers to as “modular construction” of micro-hospitals. “You start with an ED with maybe eight beds attached to it,” she explains. “But you construct the facility with the capability of adding operating rooms, additional floors or more inpatient beds as community needs increase.”

Mahajan notes that all three of Abrazo’s micro-hospitals are similar in size and operations. “That is intentional,” he says. “Our model starts with a good footprint, but it provides us with the ability at each of our facilities to expand as the community grows, whether that be on the ED side or the patient side, or even adding a professional or medical office building.”

Trisha Talbot, managing principal of Doc Properties, a real estate advisory firm that specializes in healthcare facilities, notes that most micro-hospitals, both independent and system-owned, own the land on which they’re built, as well as the actual structure itself.

“It doesn’t make economic sense for a micro-hospital to lease space. The cost of the tenant improvements alone to build out such specialized requirements would be too expensive,” she says. “Depending on the size of the hospital, they want about 3 to 5 acres on which to build, and that works here because we have such urban sprawl.”

Easing the Burden

In the few short months since it opened, Abrazo Cave Creek Hospital handled more than 2,500 patient cases. Of those, 90% would have had to come into one of the larger urban facilities had the micro-hospital not been available. 

“We’re already having challenges accommodating the number of people coming into our acute care hospitals because of the COVID-19 pandemic,” Mahajan says. “If patients can stay within their communities and receive emergency and inpatient care, it allows our larger facilities to focus on the patients in their own communities, and it alleviates the burden on our already taxed ERs.”

Talbot agrees. “In general, hospitals need to focus on trauma and acute care,” she says. “Micro-hospitals pride themselves on providing aid quickly and being transparent in their pricing. If a patient don’t need a specialized treatment, it makes sense for both the health system and the patient to have a lower-cost option for care.”

As Greater Phoenix continues to grow in size and population, the development of micro-hospitals will continue. Nutex hints at a new facility to be announced later this year, and both Abrazo and Dignity Health continue to look for future opportunities as our borders expand farther west and north.

“Micro-hospitals are demand-driven and mission-critical,” Talbot states. “They’re one facet of commercial real estate sector that is going to remain strong.”