Virtual hospitals could offer respite to overwhelmed health systems

A shift to more-accessible, cost-effective virtual-care models could mitigate increases in healthcare service demand, expenditures, and patient dissatisfaction, says a McKinsey & Company report.

Healthcare systems around the world are under pressure. It’s no secret that the combination of aging populations, increased burden of disease, and staffing shortages has left substantial unmet needs when it comes to acute hospital care. Resource constraints are also affecting wait times in many government-run health systems; in Australia and the United Kingdom, for example, it is commonplace for ambulances transporting patients to “ramp” at hospital entrances because bedspace is at capacity.

Covid-19 has compounded these challenges and, in many cases, further overwhelmed the capacity of hospitals and intensive care units worldwide. These pressures have left healthcare staff overworked and exhausted. According to a 2022 McKinsey survey, between 20 and 38 percent of nurse respondents in Australia, France, Japan, Singapore, the United Kingdom, and the United States indicated they were likely to leave their current role in direct patient care within a year.

These pressures are driving administrators to shift toward more accessible, cost-effective models of care. Although the use of telehealth has declined since the peak of the Covid-19 pandemic, it remains more popular than it was prior to the pandemic.

Moreover, as payers, providers, and patients look to more sustainable, patient-centric, safe, and accessible models, a range of virtual-care options have gained increased recognition as viable alternatives to inpatient hospital care.

In contrast to the use of telehealth in outpatient settings that do not require physical examination, some of these virtual hospitals provide an enhanced, digitally enabled at-home alternative to emergency or inpatient acute care. Delivering hospital-grade care to a substantial cohort of high-acuity patients in their homes could unlock hospital beds and improve the patient experience and equitable access to care.

Three advantages of virtual hospitals
Brick-and-mortar hospitals have long been the gold standard of healthcare, given their onsite proximity to medical specialists, surgical services, emergency care, and 24/7 telemetry. But patient capacity pressures, growing costs, and increasingly dissatisfied patients are prompting health systems to examine more accessible, cost-effective models of care. Well-established, in-home nursing services address part of the need, but they don’t usually provide acute care. By comparison, virtual hospitals provide comprehensive and enhanced digitally enabled care–including remote patient monitoring and integrated data analytics–that support remote ward rounds by doctors and in-person nursing visits. This, in turn, could improve patient experience and sustainability of care delivery.

By shifting acute care to the home, virtual hospitals could deliver three key benefits over traditional brick-and-mortar models of care: expanded bed capacity, improved patient satisfaction and outcomes, and cost savings. Many patients also prefer to receive care at home, rather than in a hospital bed.

Expanded bed capacity available through virtual care
By reducing the need for inpatient hospital services, virtual hospitals could flexibly and rapidly scale bed capacity, helping hospitals meet fluctuating healthcare demands. For example, the UK-government-run National Health Service (NHS) recently committed to increasing virtual ward capacity by 40 to 50 virtual beds per 100,000 people by December 2023, which could allow more than 17 percent of total admissions to be treated in virtual hospitals. The time and cost to set up a virtual hospital are also substantially lower than that required to build new hospital infrastructure.

Greater patient satisfaction and outcomes Despite the medical prowess of traditional hospitals, many patients, particularly those suffering from chronic disease and comorbidities, would rather receive care at home.

Patients are also concerned about hospital- acquired infections. In response to these and other concerns, patients and providers are looking to virtual and home-based care alternatives as a way of improving patient experience and satisfaction.

Unlocking bed capacity
Patient preference for virtual care is driving increased openness among physicians to digital alternatives to in-person care.

Beyond convenience and flexibility, an emerging literature base supports the case that virtual and at-home care can be safe and effective. We identified reduced readmission rates, greater improvements in quality-adjusted life years (QALYs), and lower rates of hospital-related complications as reported benefits of acute virtual and at-home care in crucial high-volume indications, such as pulmonary disease and heart failure. The use of virtual emergency services has also reduced the need for ambulance calls and hospital visits.

Lower costs for providers and patients
The high cost of healthcare has long been a major concern for providers and patients. In nearly every OECD country, prepandemic forecasts predicted health spending would outpace GDP growth by the early 2030s. However, virtual hospitals deliver direct cost savings and cost avoidance savings.

This is because virtual hospitals have the advantage of being able to scale up clinician-to- patient ratios.

Where care can be virtually scaled up to a level required to reduce the need to add new hospital beds, additional fixed-cost savings could deliver an average unit cost reduction of approximately USD 1,600. In our analysis of an Australian state model–in which 9,500 patients could be diverted from traditional hospitals to virtual settings–we calculated annual cost avoidance savings of approximately USD 60 million resulting from reductions in expenditure on new hospital wards.

Virtualizing hospitals requires providers to rethink how care is administered but could provide equivalent or better care outcomes as in-patient care. A five-day journey is planned, and the patient is discharged from the virtual hospital, staying in her home for the full duration of her stay.

If delivery of virtual-hospital service reduces the need to build new physical hospital beds, there are additional cost avoidance savings.

Moving from treating acute-care patients in hospitals to treating them virtually is a major shift and despite some indications that physicians and patients are ready to further embrace virtual care, the deeply entrenched belief that sick people belong in a brick-and-mortar hospital will be challenging to overcome. Yet the case for virtual hospitals is too strong to ignore. The prospect of lower costs, better patient outcomes, and respite for overwhelmed health systems will become more appealing as pressures continue to build.

A McKinsey & Company report.