Just over a year after the historic signing of the Affordable Care Act, the healthcare reform law remains as controversial as ever. Whether you are for or against it, one thing is certain: Hospitals and healthcare organizations will be affected. The question is, by how much and in what way?

One medium-size health system conducted its own analysis, taking into consideration the possible new reimbursement deductions for Medicare. The outcome estimated that the system could lose $12-13 million a year in reimbursements. With razor-thin margins already, how will they make ends meet?

This scenario is not unique. Many hospitals, already under pressure due to a lingering recession and credit crisis, are teetering on the brink of closure. So if the 4,686 U.S. hospitals providing patients with Medicare1 wish to survive, they will need to boost their productivity.

Seeking avenues to cut costs is one way hospitals are coping, but it is not enough. Healthcare systems cannot downsize as manufacturers do; their workforce is too labor-intensive, and their nurses and surgeons cannot be replaced by equipment. Yet hospital systems are now expected to improve quality while decreasing expenses. Furthermore, the government—and the general public—is looking for a higher level of accountability and documented results. Soon, especially in order to receive government incentives, hospital systems will have to do better with less.


Life in the new normal

Healthcare reform and the current stagnant economy have altered life as we know it. Healthcare systems now exist in a "new normal." What does this mean? Capital resources are limited as never before. Hospitals are operating on extremely thin margins, and they have to make do with far less while increasing quality. To top it all off, 30-40 million more people are planned to be incorporated into the system. The U.S. healthcare system consists of 5,800 hospitals, 950,000 beds, and $730 billion in annual operating expenses2, and now with the possibility of Accountable Care Organizations (ACOs), processes will be scrutinized for increased quality and efficiency.

The creation of ACOs is covered in just seven pages of the massive new healthcare law, yet it has become one of the most talked about provisions. An ACO is a network of doctors and hospitals that shares responsibility for providing care to patients. In the new law, an ACO would agree to manage all of the healthcare needs of a minimum of 5,000 Medicare beneficiaries for at least three years.

It offers doctors and hospitals financial incentives to provide good quality care to Medicare beneficiaries while keeping costs down. The ACO initiative is scheduled to launch in January 2012. While ACO structures and needs have not yet been clearly defined, healthcare organizations are compelled to form their own structure. One thing is certain, with so many unknowns and challenges, healthcare organizations can no longer continue with their current process of planning.


It is time to change how we plan

For the average hospital system across America, planning has become a precursor to architecture. Typically, a need is identified and then all aspects of master planning are built up around solving this need. There is nothing inherently wrong with this foundation unless the true needs of the organization are inaccurately identified or not readily seen.

Most often, these needs are determined by interviewing clinical staff members who may or may not have a full understanding of how to project future needs or the intricacies of healthcare finance. As a result, needs can, in actuality, represent wants of clinical staff and may not necessarily reflect what is in the long-term, best interest of the organization. Furthermore, clinical staff needs can often be solved through operational improvements rather than facility expansion.

When using a traditional planning approach, the full picture is not clearly seen. This linear nature of traditional planning creates a result without a full understanding of the cost and almost always without an understanding of the economic implications, or return on investment. 


Five keys to planning for the new normal

Change your approach from being need-solution-oriented to developing planning strategies with the future in mind.

Develop a "master process," not a "master plan."

Most hospitals are familiar with the term "master plan." The very term characterizes a perspective and approach that has become obsolete. Facility master plans tend to be facility-centric and usually take on a linear approach. The plans tend to be grandiose in nature and very specific in terms of expansion strategies.

The problem is that when something unexpected happens, these master plans often become obsolete. The bookshelves of many hospital administrators are lined with past master plans that no longer are relevant because something unexpected happened. To respond to the uncertainties of healthcare, organizations should focus on developing a process that is business-centric and looks at facilities from a systems perspective: evaluating how systems work together concurrently, from an operational, financial, and service demand standpoint.

The key is not to create a plan, but rather to create a capital development and asset management framework that accommodates the variability and uncertainty of the new normal.

Let data drive your decisions.

In traditional planning, needs are often being identified by medical staff impressions, rather than data and analysis. The solutions are then determined by needs instead of economic impact or capital viability. In this way, financial analysis is evaluated after solutions are completed that result in rework if a program is not affordable.

With the advent of ACOs, greater risk and the need to understand and be accountable for outcomes is expected. Hospitals tend to be data rich but information poor. The culture and processes of many organizations need to change so the outcomes data is not only available but integrated into daily operations and future projections.

Fix the process before you plan.

More often than not, facility expansion and/or renovation is always the first line of defense when confronting problems in a department. It also is often the most expensive solution. Many times there are operational fixes that need to take place, not facility upgrades. Correcting operational issues will help you see clearly to define future operational goals and to alter your organizational culture to one of stewardship and resourcefulness. 

Model the future.

Consider "what if" scenarios. If there was ever a phrase that could characterize healthcare today, it would be "what if?" While there are certainties in healthcare (patients are surviving longer, resulting in greater healthcare service needs), the extent and form of expected changes in technology and economics remain unknown. This uncertainty has to be addressed. Facility development is too expensive and inflexible, and capital is too limited to create obsolete facilities. Planning must consider "what if" scenario development.

Under this process, story lines are developed around a wide variety of sentinel events, plotting out the impact of such events in our culture, economics, and technology on healthcare needs and services. By comparing these "what if" story lines and plots, we can evaluate what development strategies have the highest probability of supporting various scenarios. Those that have high probability can be planned with a higher level of certainty, while those with less certainty should be planned as a potential framework. 

Leap to the ideal.

Architects and healthcare providers have one thing in common: They are both trained to fix problems. In healthcare, this is essential and the process cannot, and should not, change. For effective planning in the new normal, though, fixing the current problem can at times be the worst prescription. If the focus of your efforts is only to define the current problems and find corrective solutions, innovation can be lost. Do not be myopic in trying to correct your situation. First, leap to the ideal and consider what the organization needs to become. This leaping separates you from the present. It will invariably result in a solution that may not appear to be realistic or achievable. But, by adjusting to accommodate present reality, the ultimate plan is far more innovative than if you allow yourself to be tethered to the anchor of existing conditions.

The past three years of economic and credit limitations have resulted in decreased facility development activity. However, facilities need to grow and modernize to accommodate increased demand and replace aging infrastructure. Healthcare organizations are starting to feel the need to invest again in facility planning and development.

It might be safe to assume the only certainty in healthcare over the next decade is uncertainty. The question is whether organizations can risk using old techniques to plan and develop facilities in this new world of healthcare reform. HCD

Bob Gesing, AIA, is the cofounder and principal of Trinity Health Group. He can be reached at bgesing@trinityhealthgroup.com.


1. Hartigan, J. Obama’s health care reform is unhealthy for hospitals. Retrieved from http://www.baltimoresun.com/news/opinion/oped/bs-ed-hospitals-20110319,0,3796608.story

2. American Hospital Association. Fast Facts on US hospitals. Retrieved from http://www.aha.org/aha/resource-center/Statistics-and-Studies/fast-facts.html