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Kenan Insight
Oct 27, 2021

Could Colocation of Healthcare Services Improve Patient Outcomes?

In Healthcare, the ‘Where’ Matters

In the U.S., where you go for healthcare can depend on a dizzying array of factors such as what type of insurance you have, where you live, where you work and even your income. Each medical visit can mean navigating a new set of systems, people and logistics. Barring a wholesale overhaul, can anything be done to make things easier on patients?

A new study1 by Professor Bradley Staats, director of the UNC Kenan-Flagler Center for the Business of Health, and colleagues Vishal Ahuja and Carlos Alvarez suggests it’s possible to reap big gains for patient health and care efficiency through a relatively simple change: delivering mental and physical care services at the same location.

The findings align with previous research indicating that colocation can improve efficiency in a variety of environments, from manufacturing to software development. Going further, the research offers insights on the tradeoffs involved to help healthcare organizations decide when colocating services is worth higher operational costs.

“We’re seeing an increasing focus on care teams, and with that comes a greater appreciation that physical location matters,” Staats said. “Our study shows that colocation of services has meaningful impacts on health and on expenditures.”

A Fragmented System

Some of the challenges in America’s healthcare system actually arise from some of its strengths. For example, the opportunity to get highly specialized care or benefit from the latest technological innovation means that not every service can be offered at every clinic. As a result, the U.S. offers cutting-edge, world-class care, but it can be hard for people to take advantage of it.

“One of the big criticisms of U.S. healthcare is how fragmented it is,” Staats said. “In many cases there are good reasons for that fragmentation. But the question is, how can we lower the barriers it creates? How can we architect systems to make it easier to get the care you need?”

A Mental Health Crisis

Having to navigate multiple clinics can create particular barriers when it comes to mental health care. Primary care providers are typically the main conduit for mental health referrals, but the onus is on the patient to establish a relationship with a new clinician and figure out how to get to appointments. Better coordination among providers can keep patients from slipping through the cracks, and reducing the number of different clinics a patient must visit can make the patient’s life easier, too.

“If we’re really going to provide integrated care, that means we need to be looking not only at the physical needs but also the mental health needs, and coordinating between them,” Staats said. “We were interested in the role of colocation in helping to improve that coordination and lead to better outcomes.”

It’s a timely question. According to public health experts, we are in the midst of a major mental health crisis. The COVID-19 pandemic exacerbated many existing issues and a recent study found that 4 in 10 American adults now experience mental illness each year.2 Mental health affects physical health and undertreatment can lead to personal suffering, disability and death, with significant socioeconomic costs.

A Home Run for Improving Outcomes

For the study, researchers analyzed health records of more than 300,000 patients who were treated for both diabetes and mental illness in the Department of Veterans Affairs (VA) health system between 2002 and 2013. They compared four key health outcomes among patients who received mental healthcare at a different location from the primary care or specialty clinics they visited and those who visited the same facility for mental and physical health services.

Their analysis showed that colocation of services was associated with substantial improvements across all four outcomes. Patients who visited the same clinic for mental health services and either primary or specialty care had significantly fewer hospitalizations, shorter hospitalizations, lower rates of 30-day hospital readmissions and lower rates of suicidal behavior.

In addition to the obvious health benefits for patients, these differences have implications for the healthcare bottom line. Based on the trends observed in the study cohort, the researchers estimate that colocating mental and physical care could result in an average annual savings of approximately $35.7 million across the entire VA health system in inpatient days alone.

Reducing Friction

Why does colocation make such a big difference? According to the study, two factors seem to contribute to these benefits: Patients with colocated health services are more likely to show up for mental health appointments and they are more likely to get the medication they need by filling their prescriptions. 

A lot of the discussion around improving U.S. healthcare focuses on access. Staats underscores that to benefit from healthcare, a patient needs to not only get an appointment with the right provider, but also show up and adhere to their treatment. To the degree that we can reduce areas of friction in any of those steps, we can help to translate healthcare access into true health benefits.

“This work sits between operations and behavioral science,” Staats said. “We’re trying to intelligently design our systems by focusing on how to make it as easy as possible to make the healthy choice, rather than the problematic one. With colocated services, you’re just more likely to come in. You’re not worrying about figuring out the bus route. It reduces the stigma of seeking mental healthcare. All of these things point to getting the care you need.”

Prioritizing Investments

Of course, there are costs associated with colocating services, especially if this requires changes to existing facilities. How can organizations know if the benefits outweigh the costs? It may depend on the type of patients you’re serving. The researchers found that patients with more severe mental illness received the greatest benefit from colocated services. So, healthcare systems serving populations that are more severely ill are likely to see more benefits while those serving less severely ill populations may see less of a difference.

In addition, the researchers looked at the interaction between colocation of services and continuity of care, or the likelihood that a patient sees the same provider consistently over time. They hypothesized that the two factors might be additive, with patients benefitting the most when both factors are present, but this turned out not to be the case. Rather, colocation seems to substitute for continuity of care, meaning that colocation is especially beneficial for patients whose care is more fragmented.

While colocating mental and physical health services is not possible in every case, the study suggests it’s worth considering in efforts to redesign systems of care to improve outcomes, particularly as health organizations strive to close the gap on mental health.

“With a little bit of advance planning, there may be some easy ways to get improvements,” Staats said. “Especially as you’re rolling out new facilities, you can look at how the care will be delivered and design for coordination. It potentially makes patients’ lives better, in addition to making the system better.”


1 Ahuja V., Alvarez C. A. & Staats, B. R. (2021) How and in what ways does colocation of services matter? Empirical evidence from a large healthcare setting. Kenan Institute of Private Enterprise Research Paper No. 2021-06, Available at SSRN: http://dx.doi.org/10.2139/ssrn.3901491.

2 Nirmita P., et al. The implications of COVID-19 for mental health and substance use, February 2021. URL https://www.kff.org/coronavirus-covid-19/issue-brief/ the-implications-of-covid-19-for-mental-health-and-substance-use.


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