Healthcare moving out of hospitals has been forecasted for the past decade with the certainty of death and taxes. But it's brick-and-mortar infrastructure that continues to raise big questions and pivots for health system strategy, at least for now.
If one isn't careful, the futuristic outlook for hospital at home and telehealth can gradually diminish the strategic importance of brick-and-mortar hospital infrastructure, making inpatient buildings out to be the industry version of Blockbusters save for complex surgeries and specialized acute care. This is an error. It is easy to get swept up in what the next 10 years hold without first accounting for the next three.
There are about 920,000 staffed beds across U.S. hospitals. Home care volumes are projected by Sg2 to rocket by 20 percent over the next 10 years, while inpatient hospital volumes are set to increase by 2 percent in the same time frame. Sg2 notes that the case mix index — reflecting patient severity — is up 5 percent since 2019 while the average length of stay for patients admitted to a hospital has risen 10 percent.
In conversation, hospital leaders express frustration with the split position they find themselves in — they know healthcare delivery will increasingly move out of the hospital but there is need for more staffed beds today. This, combined with paused capital projects, financial recovery and post-pandemic strategic planning, only raises the stakes on an already significant investment.
It doesn't help when global companies outside of healthcare seen as exemplars of digital business and strategy look to brick-and-mortar strategy. Look at Netflix, for example. Streaming disrupted traditional content gatekeepers of movie studios and TV networks, much like home care could disrupt the traditional care gatekeepers of health system contracting and networks. There are all types of solutions, services and businesses that describe themselves as the "Netflix of healthcare," leveraging technology to give patients more access points with greater convenience and lower cost.
Last week Netflix announced it would open brick-and-mortar stores in 2025 — Netflix Houses, they're ironically called. The locations sound like mini-malls, as one executive described them to Bloomberg, with retail, dining and live entertainment that builds upon its streamed content. Netflix building malls? Everything old is new again.
Unlike Blockbuster, acute-care hospitals are nowhere near the point where one would consider them "old" as it relates to relevance. Closures of hospitals or the stoppage of inpatient care are universally met with community pushback and resistance, a regular reminder for any health system leader that business needs and community conscience are two different things.
But is hospital infrastructure old in years? Yes, and it's one thing that keeps Mayo Clinic President and CEO Gianrico Farrugia, MD, up at night.
"Interestingly, even as we all push hard as we should to move towards a fully digital healthcare system with all the advantages it has for everybody, we cannot forget that patients will still get sick and will still require hospitals," Dr. Farrugia told Becker's this summer. "And one thing that I would like to point out is that our healthcare physical infrastructure is really old globally — not only in this country, but certainly in this country. Age of plant, which is one way of describing the age of physical infrastructure, is the oldest it's ever been and we haven't had any infrastructure bills in healthcare for over 50 years."
In 2022, the average age of plant was 11.2 years for AA-rated hospitals per S&P and 12.9 years for BBB-rated hospitals. Hospital infrastructure far exceeds these S&P averages in many major metropolitan areas in the U.S., according to data from Definitive Healthcare. In the Utica–Rome metro of New York, the average age of infrastructure (based on seven hospitals) was 27.5 years in 2022. It's 27 years in Bangor, Maine; 26.5 years for 11 hospitals in the Stockton, Calif., area, and 26.2 years for 34 hospitals in the Hampton Roads region of Virginia.
"There are hospitals that if they were a hotel, you probably would not book to stay in," Dr. Farrugia said. "We need with urgency to renovate the physical infrastructure of healthcare in this country and globally in order for us to properly do digital healthcare, because the future is really a seamless integration of digital and physical. You can't do one without the other."
Last year, Mayo added five floors to its hospital in Florida and this summer unveiled a series of multibillion-dollar capital expansion projects expected to begin in 2024 on its Rochester, Minn., campus. Mayo Clinic is also the centerpiece of Destination Medical Center, a public-private 20-year economic development initiative. At $5.6 billion, the plan aims to transform Mayo's headquarters of Rochester, Minn., into a healthcare hub via investments in hotel space, cultural arts, housing, transportation and other community assets.
In one week alone, two different systems shared firmer plans for their different approaches — buy and build — to increase hospital capacity. UC San Diego Health is acquiring Alvarado Hospital Medical Center from Prime Healthcare for $200 million.
"We've got to solve a lot of capacity problems, and we can't afford to wait that long," Patty Maysent, CEO of UC San Diego Health, told the San Diego Union-Tribune, noting that the cost of buying Alvarado Hospital at less than $1 million per bed is a "massive" cost difference from building new.
Across the country in Boston, Dana-Farber Cancer Institute is building new. It recently issued an estimate that the freestanding cancer hospital it will construct in partnership with Beth Israel Deaconess Medical Center in Boston will cost $1.68 billion. The hospital will have 300 beds and connect to Dana-Farber's existing facility.
For as much attention as care outside of the hospital may draw among industry stakeholders, a standalone, inpatient cancer hospital is what broke the longtime partnership between oncology heavyweights Dana-Farber and Brigham and Women's Hospital in Boston. Affiliated since 1997, Dana-Farber will end the partnership in 2028 and link up with Boston's Beth Israel Deaconess to carry out its vision for a brick-and-mortar cancer hospital in the city.
"Building a cancer-only hospital was our priority," Dana-Farber President and CEO Laurie Glimcher, MD, told the Boston Globe in a recent interview. "However, after many discussions over the course of many years, it became increasingly, increasingly clear that our visions for the future of cancer care did not align with the Brigham."
Editor's note: This article was updated Nov. 2 at 8:30 a.m. CT.