CareCenter cuts hospital building costs by 30 percent or more
| Aging physical plants, an aging and more demanding patient population and rapidly evolving medical technology are creating unprecedented demand for new and replacement healthcare facilities. But reimbursement trends will not support the $1.2 million to $2.5 million per-bed costs typical of recently built community hospital projects. Lillibridge worked together with a top team of multidisciplinary healthcare experts, including HKS, Inc., to address this challenge and we call the concept CareCenterSM. An integrated design and development approach together with a new way of thinking about facility planning can hold costs to about $900,000 per bed - without sacrificing outcomes and at the same time improving patient satisfaction. It addresses many common deficiencies in the facility development and design process that not only have pushed construction costs to unsustainable levels, but also often produce facilities that generate marginal, if not negative, enterprise returns. A major problem with hospital projects is they often begin as a "napkin sketch" at the department level. The project is then shoehorned into existing structures, resulting in topsy-turvy growth that is inefficient and expensive. The design - and its costs - are largely dictated by existing structures. The CareCenterSM process instead starts with the numbers. A detailed financial model for service lines is developed that establishes parameters for building size and cost based on achieving "hurdle rate" metrics for operating margin, days cash on hand, FTEs per adjusted occupied bed and an "all-in" allowable cost per patient bed. Spaces are designed to support effective and efficient delivery of care and be financially sustainable under the assumptions of this model. Developments also must meet market needs for convenience, further system strategic objectives such as physician alignment and service line growth, and be flexible enough to meet future clinical programming needs. The CareCenterSM integrated development model and facility prototype uses advanced design, construction and program management concepts to hold down costs. It consists of an inpatient tower, diagnostic and procedure building and a medical office building that can be built in modules as service demand matures, and places all departments in the most economically appropriate space. For example, operating rooms and diagnostic equipment are in a one-story concrete building with large bays that can economically be expanded horizontally, rather than paying for the heavy supports that would be needed to expand vertically or with inpatient rooms requiring smaller bays and lower floor loads. Similarly, hospital back office and administration are in the medical office building, which is less expensive. Costs are also held down using lean management of stakeholder input, design, construction and facility launch and shakeout to cut project cycle time by 12 months or more, which reduces carrying costs and generates cash flow from new services sooner. Efficient design and limiting hospital size to 100 to 200 beds also allows development on smaller lots. So instead of buying 65 acres on the assumption that it will be needed in 10 years, a 25 acre lot can be developed in 3-5 years followed by a separate facility in a nearby area when population and service growth warrant it. Applying this development and prototype template to an actual recently completed 100-bed community hospital would have yielded significant savings. All-in project costs could have been held to about $900,000 per bed, or nearly 30 percent from the observed $1.27 million for this facility. It could also reduce facility operating costs by 30 percent and raise revenue per square foot by 30 percent without compromising patient care. These and other benefits, including reduced maintenance staffing levels, would improve stabilized (five year) operating margins by 70 percent. Improved clinical efficiency due to floor plans that reduce steps for nurses and other staff may also generate significant savings on clinical staffing. In addition, the prototype and process support a variety of physician alignment and collaborative outpatient strategies. They can be implemented over time in stages and scaled up to meet changing market conditions. The savings could enable a system to launch two location instead of one, capturing a larger market area sooner. The local, "one-stop-shopping" nature of such integrated centers also makes them very attractive to patients, particularly those with chronic needs. For systems looking to create sustainable integrated delivery networks the CareCenterSM approach can generate a significant strategic advantage. | Tags: CareCenter, |
