Getting top value out of your building program
By
hfm magazine, November 2009
At the end of 2008, 56 percent of hospitals were considering or were
already holding off on renovations or plans to increase capacity. This
construction slowdown came as little surprise given the industry’s
financial picture at the time: the credit crunch, drop in total
margins, decrease in overall admissions, and rise in uncompensated care.
Although
economic pressures continue, many hospitals today are reaching a point
where further delay is no longer a viable option. Investing in
infrastructure often is vital if organizations are to strengthen
competitive edge, replace outmoded equipment and facilities, and
demonstrate their ability to serve an aging population.
Instead of asking whether to build, many hospital executives these days are more
interested in learning how to get the most value out of their building
program. Interviews with some of the top names in the business suggest
the way forward is to align projects with current trends designed to:
- Recognize utilization shifts
-
Boost quality
-
Promote care coordination
- Create a healing environment
-
Adapt to the new economic reality
Recognizing Utilization Shifts
HFMA research confirms what many hospitals know anecdotally: It’s
particularly important right now to stay on top of utilization patterns
as volatility in patient volumes is throwing off established demand
projections. Most hospitals are seeing a decline in inpatient volume
and a corresponding increase in outpatient volume. Yet they also
anticipate outpatient volume growth will be modest, and many hospitals
continue to project growth in inpatient volume in cardiac services.
What this means is that those ready to reactivate building projects
that were put on hold when the economy collapsed need to give increased
attention to the planning process moving forward.
For the most part, organizations already have removed service line
costs and attacked their sacred cows, and the result has been a
strategic plan that focuses on two or three key areas. Now it’s time to
look at individual projects and make sure they reflect those
initiatives, notes Joyce Durham, RN, AIA, principal and director,
facility planning practice, Health Strategies & Solutions.
Also, leadership should re-examine projects within the context of
reform. “We don’t know how healthcare reform will turn out, but we know
it’s going to be an ongoing process for probably the next decade,” she
says. “At a minimum, it’s going to be about efficiency - doing more and
better with less. It’s also going to be about shifting people away from
the ED (emergency department) and other high-cost settings if they
don’t belong there.”
Durham points out that just five areas occupy 70 percent of the
space in a typical hospital: inpatient beds, surgery, obstetrics,
emergency, and imaging. “If you do a detailed assessment of workload
volume and projected needs for just these areas, you’ll be answering a
lot of questions,” she says.
Of course, many of the projects that have been put on hold are well
into the planning stages, with organizations often having invested
$100,000 to $200,000 or more already. It’s hard to stop and reevaluate
projects now, she says, leading some hospitals to consider
across-the-board cuts of a certain percentage.
Reducing costs
with such a broad brush may be a quick way to scale budget, but it’s
incredibly short-sighted. Consider, for example, a hospital that was
planning an operating room (OR) on its second floor and a very large
atrium/lobby space on the first floor. “Reduce the lobby by 20 percent
and no one will even notice, but scaling back the OR is cutting into a
very high revenue-generating space,” Durham says. “To reduce square
footage, it’s probably better to prioritize your revenue-generating or
strategic spaces, one to four, and then focus on numbers five to 10:
Can you take those out, or put them in alternate locations?”
The take-home message: Do your planning homework and really pin
down projected volumes. After translating workload volumes into major
room and space requirements, stop. Don’t be tempted to add more space
to outdo a competitor, satisfy a vocal clinician, or plan for a major
catastrophe. With healthcare facilities, Durham says, there is no
competitive advantage to overbuilding.
Building with Quality in Mind
Another issue at the forefront of many building projects is quality.
Private payers are expected to follow Medicare’s suit in refusing to
pay for some of the 28 serious reportable events (never events)
identified by the National Quality Forum, and the issue “is starting to
gain legs and generate some litigation,” according to Bob Gesing, AIA,
principal, Trinity Health Group. Although there is probably not a lot a
hospital can do from a facilities standpoint to keep a surgeon from
operating on the wrong body part, it can make sure the facility doesn’t
hinder staff in trying to prevent or mitigate that event.
Promoting quality through operational process improvement and
responsive space planning requires a particular mind-set, notes Gesing.
“We advocate using a never events checklist as you go through each
stage of the design process - from planning to schematics to design
development - to make sure you’ve addressed all the events. For example,
does your design allow a visitor to leave a patient room with a newborn
infant or a patient with dementia to leave a unit and get out of the
facility without crossing a control point? Do you have or are you
creating blind spots?
When it comes to medication errors, says Gesing, the solution may
be as simple as figuring out how many linear feet of countertop space
in your pharmacy or medication rooms you need to accommodate the volume
of prescriptions that staff may be processing at any one time. “Because
if you don’t have enough room, the scripts may be packed so close
together that things start to cross over. Often these support areas are
overlooked or reduced in size to cut costs without consideration of
potential errors and the consequences that could result.”
This kind of scrutiny isn’t just for new construction. Gesing
recommends that hospitals triage their facilities to identify trouble
spots, and then put together a task force (facilities management, risk
management, infection control, safety officers, clinical leaders) to
develop an action plan for incorporating the necessary fixes into the
organization’s capital program over time. “You can prioritize the
problem areas in terms of the probability or extent of the identified
risk. Maybe 20 percent of the things on the list - the low-hanging
fruit - can be handled quickly and cheaply, another 20 percent will need
to wait for a major new facility project, and the rest can be done
through renovation.
“For the things that have to wait, see what can be done
operationally in the meantime,” he says. For example, if there is a
small medication room where six nurses need to cram in to get meds out
by 10 a.m., then maybe the hospital can set up a cart outside the room
and require those nurses picking up scripts to move out there to check
them - twice - before taking them to patients.
Of course, sometimes there is a space and design solution for a
quality problem, and sometimes there isn’t. The key is to know the
difference, says Gary M. Burk, AIA, NCARB, principal of the
architectural firm Ratcliff.
One area where design often can be the right solution is reduction
of noise from central nurse stations, which today also have to
accommodate dietitians, therapists, social workers, case managers, and
other staff who need access to the patient chart.
Ratcliff’s Terry L. Kurrasch, FACHE, senior strategist/planner, describes one project in
which the hospital decentralized the nurses’ station: “For a unit of 30
to 35 beds, there would be one larger station that functions as a
reception point and then three to four smaller stations. And we’ve also
decentralized the supply area, which increased space slightly but put
the supplies closer to the nurses and the nurses closer to the
patients.”
The more time nurses spend as hunter-gatherers, Kurrasch points out, the less time they have to spend on patient care. Often, the only way to determine whether more space is the answer
is to do an operations analysis, which involves gathering and analyzing
quantifiable measures of how a department operates.
Promoting Care Coordination
Care coordination is another important consideration, as global or
bundled payment methods continue to gain steam. Many organizations are
looking for ways that their space planning can better accommodate the
patient experience along the continuum of care.
Admittedly, the concept of patient-centered care led to an overuse
of centralization in the 1980s. “It turned out that bringing things
like ancillary services to the patient bed was a very expensive thing
to do and also inefficient in terms of staff utilization,” notes Burk.
Still, the best parts of the approach can be used in current
construction projects, he says, noting that Sutter Health is doing just
that by incorporating what it calls “cellular care” into its prototype
hospital.
The cells are designed to expand and contract operationally to
manage comprehensive functions, such as intake, which would include a
single registration process coupled with exam and even some treatment
processes. These units would be adjacent to imaging and interventional
services to take care of all preadmission testing and, at another time,
procedural prep and step-down recovery. This area could also be
adjacent to and configured much like the ED, so that as the ED gets
busy, it can potentially expand into those exam/treatment rooms.
The man behind this evolving concept is Sutter’s David F. Chambers,
director, planning and architecture, facility planning, and
development. Chambers believes that hospitals and health systems have
worked hard to optimize the wrong things, that is, clinical cost
centers or departments - virtually none of which are connected to a
specific outcome. Cellular care brings interdisciplinary teams together
in production groups to produce three general patient outcomes for
acute care: a completed care plan; successful completion of a
procedure, if one is indicated, that ends in either discharge or
admission to the appropriate inpatient unit; and a successful medical
outcome.
Fewer hand-offs in patient flow mean fewer opportunities for errors
and a greater likelihood of producing a better quality deliverable. “In
a conventional facility, for a typical protocol of preadmission tests,
for example, patients may move through 15 to 20 discrete steps,
compared with six to eight in a cellular model,” explains Chambers. There
are cost benefits as well. “Having reduced the discrete steps in the
care process, you’re not going to need all the space currently required
for all those queues and hand-offs that no longer exist; in general, we
anticipate that we may will need 30 percent less space. And because
throughput is greatly increased, you don’t necessarily need as many
units as in a conventional model, where the units are less efficient.”
Creating a Healing Environment
Mark Scott, partner, Starizon design consultancy, believes keeping
focus on creating a healing environment for patients and caregivers is
key to getting the most from a facility investment. Having been
president and CEO of Oregon’s Mid-Columbia Medical Center, which was
the first in the nation to take the Planetree model system-wide, Scott
says designing for experiences probably costs a bit more in the
beginning. “But in the end, you save so much money if you do it the
right way and only have to do it once.”
Fifteen years down the road, Mid-Columbia’s design continues to
hold up wonderfully, says Scott, noting that people are still coming
from all over the world to see it. “Often when I go into a brand-new
hospital, I find that all they’ve done is to stick the same old play in
a new theater. They spend millions of dollars on these wonderful new
cathedrals that have been designed in some CEO’s or architects’ office
without any input from care providers. Eighteen months later, they’re
scratching their heads, trying to figure out why performance is the
same, outcomes haven’t changed, patient complaints haven’t subsided.
It’s because they haven’t designed new spaces for new experiences to
happen.”
For example, Scott points to the typical nursing station: loud,
crowded, with lots of materials stacked up to the ceiling and everybody
hoarding. “If you want a nursing station open to the public - and
patients and families have a right to participate with staff in their
care - you really need a number of offstage areas in your design.” Every patient room, he says, should have big windows and beautiful vistas and
a place for family members to spend the night. Hallways should be
elegant.
“It’s where patients take their first steps toward
recovery: They shouldn’t have to serpentine down hallways that are
filled with IV stands, gurneys, trash bags, laundry bags, pharmacy
carts, wheelchairs, dietary carts, etc.”
Adapting to the New Economic Reality
As projects become active again, hospital leaders need to be sure
they’ve adapted appropriately to the new economic conditions. In the
past year, many hospitals have lost a third of their investment
portfolios. And of course, the bond markets are making it extremely
difficult for them to access tax-exempt debt.
“We believe the underwriting criteria for all investment grade
offerings are going to be scrutinized much more closely going forward
than they were two to three years ago,” says Richard Galling, president
and COO of Hammes Company.
On the other hand, says Todd Kibler, partner, CFO, and senior vice
president of finance and investments, “If you were working on a project
before the economic crisis, then the demand for it is probably still
there.” So the question becomes, how can you rethink the project so
that it’s still financially feasible?
“Strategically, you’re probably still going in the right
direction,” he says. “But you may need to approach that legacy project
in a smaller, slower, or more spread-out fashion.”
As an example, Kibler cites an organization that decides it wants
to establish a greenfield hospital in a growth market. “Historically,
the organization’s leaders may have been more aggressive in their
assumptions about that market. Today, they may decide to back down on
it, to do 40 beds instead of 80 beds and decide whether to expand
later. They can do the base project, design the expansion at the same
time, and build it incrementally.”
It’s not that there’s more financial risk, says Kibler, but that
there’s a greater sensitivity to taking on that risk. “Obviously,
financial ratios are different now. Also, finance committees, as they
begin to thaw, are starting to ask a lot more critical questions about
development budgets, so your project had better be truly viable
financially.
“Regional or national systems with multiple hospitals are putting
more emphasis on allocation planning and on consistency in terms of
reviewing and allocating capital; they’re imposing a more formal
discipline. Typically they’re still doing a five-year capital plan, but
they may need to rethink which hospitals will get how much capital.”
Also, many people assume that this is a great time to buy out a
project - to get bids, negotiate, and sign contracts with the
construction manager, so he can buy out the subcontractors and
suppliers and everyone is under agreement - and Galling agrees. “But
there’s also a significant amount of additional risk with the
construction industry right now. Contractors and suppliers are having
problems maintaining and renewing their own lines of credit. So you
don’t necessarily want to take all the savings that you achieve by
buying out the project now and put them right back into the project - you
need to set aside more contingency that you would have before.”
What about other ways to acquire capital outside the bond market?
Galling and Kibler say that monetization of non-core assets continues
and there are still portfolios of medical office buildings for sale,
but the price is different than it was a year ago, and so is the
ability of the developer to secure favorable financing. So expectations
have to be recalibrated.
They’re also seeing some hospitals and systems explore the
possibilities of having a third party own the acute care components of
their campuses, which is new. In many cases, says Galling, this is a
short-term strategy for getting a new campus up and running until they
can go back to the bond market.
“In fact, much of what we’re doing for clients these days is
providing a bridge, helping them tap into the taxable market through
developers to get transactions done in the interim.”
hfm magazine can be located on the Web at
www.hfma.org.