Planning For Greater Value
Industry uncertainty remains in this era of reform and recession, while the demand for healthcare services continues to grow as the population ages and medical advancements prolong life. Consequently, healthcare organizations are faced with a dilemma: how to address the need to expand, improve, and build new facilities in this environment. The answer is found in planning with a different perspective in mind.
Archimedes said: “Give me a place to stand and with a lever I will move the world.” The essence of leveraging is that a relatively small element, when properly applied, can have a huge and lasting impact.
While the planning and design of a healthcare facility represents only a small part of the overall cost of a building during its lifetime, if properly leveraged, these tasks offer an outstanding opportunity to move an organization into a better business-centered position. The key is to know where and how to place certain “levers” that can be beneficial to the trajectory of the healthcare system and prove profitable—even in a constantly changing environment.
Most would agree that proper planning has a beneficial impact on construction costs, but many may not realize that its impact extends much further. In most healthcare facilities, staffing, operations, and maintenance account for 75 percent of costs for the life of the facility; construction, equipment, and furnishings account for about 23 percent; and planning and design make up the remaining 2 percent.
When you figure that a project with a $25 million construction estimate actually costs a healthcare organization $100 million throughout its lifetime, then creating planning and design solutions that can maximize the value of staffing, operations, and maintenance becomes paramount. This seemingly small 2 percent can have enormous impact and added value over the lifetime of the facility.
During planning and design, the following seven levers should be used to move a facility in a direction to provide greater value.
1. Demand lever
The United States is filled with new facilities that have been overbuilt due to unrealistic growth assumptions, while others are undersized. Using demand modeling analysis during the planning and design process provides an objective evaluation of the market to develop future scenarios and project potential demand based on three factors. The first is population: Is the population growing or declining?
The second factor is “use rates,” or what volume of services is expected for a given incremental population. Use rates are affected by aging and changes in culture, economics, and technology. Third, the market share for each service is evaluated for potential change. Market share can be influenced by many factors, such as targeted new services and physician recruitment strategies. By trending these variables and modeling multiple scenarios, realistic projections for future demand can be identified.
2. Operational lever
Even with the right demand for services projected, operational factors have a significant impact on the appropriate size for facilities. For example, it may seem that a certain number of treatment rooms are needed to accommodate future demand for emergency services, but a closer look may reveal that the reason additional rooms are needed is because patients are “backing up” in the ED, there are bottlenecks in the radiology department or lab, or inpatient beds aren’t available to admit someone. In the last example, perhaps beds are available--but a housekeeper isn’t able to clean the room. By hiring an additional housekeeper, substantial capital dollars can be saved by making an operational change instead of a structural change.
3. Program lever
With this planning lever, the right amount of space for each program component is identified, assuring that facility development is done in a way that’s incremental and scalable. By using best practice metrics as a goal and creatively programming staff, supply, and equipment needs, significant space savings can be achieved. On a recent project where budgetary limitations required reducing square footage of a new ED, this approach resulted in a project that was 10,000 square feet smaller than hospitals with the same number of treatment rooms. This effort resulted in nearly $6 million in savings over the life of the facility.
4. Plan lever
This strategy moves a facility toward the most efficient Lean processes to eliminate waste, increase efficiency, and maximize quality. With the proper configuration of program components, significant building area can be eliminated, allowing less space to serve the same demand and in a more efficient manner. A recent analysis by Trinity Health Group showed that more than 30 percent of nursing staff time is spent walking. Creating decentralized support areas that bring staff and supplies closer to the patient helps reduce the time spent walking and increases the amount of time caregivers can spend with patients.
5. Design lever
To leverage design details, ask questions, such as, “Will a nurse server be employed and how should it be configured? Where are medications staged? What is the targeted maximum travel distance that staff should walk to support patient care? How is electronic charting accomplished?” Proper use of design can move a facility a long way toward maximizing long-term operational efficiency, adaptability, and expandability.
6. Systems lever
Use the systems lever to move toward greater energy efficiency. Efficiently designed mechanical and electrical systems will minimize energy costs, improve infection control, provide a healthier space for staff and patients, and preserve the environment.
7. Materials lever
Use finishes that wear well, resist microbes, and improve infection control. Reduce maintenance costs by installing wall, corner, and frame protection finishes at the outset. A recent project analysis by Turner Construction Co. studied the lifetime cost of flooring materials and found that when maintenance and replacement costs are factored into flooring options, terrazzo was found to be the highest value and overall lowest cost material. While first-time construction budgets may not provide the opportunity to invest in all such options, knowing how to evaluate such options will benefit the lifetime value of the facilities.
Three important words
Healthcare planning must go beyond designing good buildings and, instead, should touch all aspects of the operational model. Future planning strategies can be summed up in three important words: incremental, scalable, and sustainable.
Planning should be performed to allow buildings to evolve as an organization’s services and community needs evolve. Plans should be scalable and incremental—if demand increases, the hospital can easily expand; but if it doesn’t, the hospital isn’t overbuilt. There are organizations struggling to sustain themselves because they’ve invested substantial capital dollars in the wrong place and they’re saddled with long-term debt that has little chance of a return. With the proper use of planning levers, organizations can not only better sustain themselves in the long-term, but also grow and thrive.
SIDEBAR: The “seven levers” in practice
Recently, a hospital requested Trinity Health Group’s consultation on a preliminary design, after interviewing the staff and asking an architect to create a design based on the facility program
provided. The project was a one-story expansion, and the architect explained that that plan could save $2 million, which was a hefty chunk of the hospital’s $10 million budget. A one-story facility is cheaper to build and would save on initial construction costs—but what about the operational costs for the lifetime of that facility? What about the cost of staff, maintenance, or opportunities for growth?
The problem with the one-story slab on-grade expansion, was that it created a series of other issues that had longer and more lasting impact on the hospital. The design required a larger footprint, which not only used up precious real estate, precluding opportunities for future expansion, but also created many operational inefficiencies. For instance, the nursing units were placed on the ground floor, isolating them from the rest of the nursing areas upstairs. This also meant duplication of support areas and long walking distances (including a flight of stairs) for the nurses.
Additionally, the original design would be difficult to stage, and thus created a longer construction schedule. Of course, the sooner a hospital is open for business, the sooner it can start collecting revenue.
After evaluating and redesigning the expansion from a business-centered approach using the seven levers, more than $8 million was saved over the next 10 years by designing a two-story addition:
• More than $1 million of staffing costs was saved due to a more efficient nursing unit
• More than $200,000 was saved in reduced building area
• Using more maintainable materials and an energy-efficient design saved $40,000
• $2 million was saved by avoiding “domino moves” for future expansion
• Another $4 million was realized in costs related to a reduced schedule, resulting in both construction savings (general conditions, etc.) and an expedited time to market in which the hospital could start seeing patients sooner.
The final estimated savings due to the revised project design over the next 10 years was $8.2 million, more than the total cost of the new addition.