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Capital Project Solutions – April 2013 Better Planning Leads to Better Implementation: Scenario Strategic Master Facilities Planning – A Rapid Response Approach

Curtis Skolnick, Vice President

There are many facets to the strategic master facilities planning (SMFP) process. Many decisions need to be made and questions answered by today’s progressive and future thinking healthcare leaders. For instance, how should my organization add services on the core hospital campus while also investing in off-campus ambulatory settings? Should we renovate an aging plant or replace it altogether in a “Greenfield” approach? What services and technologies do we plan to invest in now, when we are uncertain as to what exactly the future holds? How do we spend the appropriate amount of time and funds answering these questions and not over-extend and waste limited institutional resources? As Robert Burns famously penned “The best laid schemes of mice and men often go awry…”. Sound familiar? So how can you keep those plans on track? To answer these questions (and myriad others) an organization must first define what it seeks to achieve. For instance, when studying whether to renovate or replace a facility, infrastructure and site issues are no doubt of great importance, but they are not the only factors to consider. The discussion really begins with a deeper understanding of what the organization is trying to improve upon and achieve with either type of development. When strategic master planning for the future, discussions should not just focus on the physical plant but should also include other topics such as: 

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Desired operational (clinical and support) improvement and care delivery model enhancements Targeted improved efficiencies of delivering clinical care and support services Potential impact of system synergies if the organization is part of an integrated delivery system


Capital Project Solutions – April 2013     

Creating a new environment to allow for market and volume growth Potential regulatory considerations and impacts that might affect planning and implementation Community and local/regional business interactions and impacts Disposition and potential of adaptive re-use options for the existing sites and resources Understanding of the strategic and facilities vision - what are the "Conditions of Satisfaction" of any plan and have all key constituents associated with the SMFP initiative aligned to assist with analysis and pursuit of an optimal solution

Addressing these issues requires engagement of organizational leadership and dedication of time. Stating the obvious, today’s healthcare leaders are stretched to the breaking point. Making good informed decisions requires focus and an approach that values an organization’s, as well as it leader’s, precious resources and time. An Approach for Today’s Leaders Prior to any major capital investment, it is wise to conduct a comprehensive, multi-year, living strategic master facilities plan. Sometimes, however, there could be a pre-cursor step when a long-duration strategic master facilities plan is, as they say in golf, “too much club for the shot”. There is an alternative approach to help set direction for the healthcare enterprise. This type of study, before moving into more detailed planning, is an eight (8) to twelve (12) week “rapid response” analysis conducted to create a development road-map along with high-level facility scenarios. Rather than engage in a detailed master plan exercise with broad parameters and wide guardrails, organizations should develop a strategic and facilities investment plan with options that identify pros and cons, strategic and physical sequencing of investments and “order of magnitude” total project cost opinions. This would help the organizational


Capital Project Solutions – April 2013 planning team narrow down options to a few palatable and realistic scenarios to present to their Executive and Board Leadership. These groups, charged with stewardship of organizational and community resources, could then make informed decisions and set narrower planning and development guardrails prior to developing more detailed plans. This approach will ensure that the planning team has a laser focus on options that will satisfactorily meet institutional goals. During this type of scenario planning approach, it is recommended to breakdown the study into simple phases (Note, phases may overlap given the rapid nature of the study). Initiation and Discovery (~2-4 weeks) •Project organization •Data, information, and previous plan review •Facility / site tour •Key stakeholder interviews • Key issues identification •Project success factors & conditions of satisfaction • Facility Planning team meeting

Figure A: The Scenario Planning Approach

Visioning and Initial Option Development

Option Refinement and Recommendation

(~4 weeks)

(~4 weeks)

•Visioning • Scope of development confirmation (e.g. number of beds, services, square footages, etc.) •Initial broad options discussion •Pros / cons and other cosiderations • Initial cost modeling discussions •Facility Planning team meeting

• Refinement of options • Refinement of cost models • Pros / cons and other considerations refinement • Selection of option(s) for presentation to leadership • Leadership presentations and refinement • Option recommendation

Phase I – Project Initiation and Discovery (~2-4 weeks) During this phase the following will occur:  

Organize a facility planning committee that will set direction and make decisions Request and review data, information, and any previous plans developed (master plan, facility condition analyses, market planning documents, etc.) Conduct a detailed tour of the current facilities and site


Capital Project Solutions – April 2013   

Interview key stakeholders and leaders Identify key issues and rationale for proposed planning concepts Conduct an initial facility planning committee meeting to review preliminary findings

Phase II – Visioning and Initial Option Development (~4 weeks) During this phase, the following will occur: 

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Conduct a Visioning Session with hospital/organizational leaders and the facility planning committee Confirm a potential scope of development (e.g. beds, square footage, services, synergies with the system, etc.) Identify initial broad options, pros/cons and other considerations Conduct initial total project cost modeling Hold Facility Planning Committee (FPC) meeting to discuss findings and options

As the team develops these scenarios for consideration that include projected costs, cash flow modeling and schedule it is important to take the regulatory environment into consideration (e.g. zoning, Certificate of Need, etc.). Having internal and/or external team members on board with experience in these regulatory issues that are well versed in understanding local and state approval processes can help mitigate the impact these regulations can have on overall project timelines. Phase III – Option Refinement and Recommendation (~4 weeks): During the phase, the following will occur: 

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Option and cost model refinement based on feedback from leadership and the FPC - pros, cons and other considerations Selection of option(s) for further consideration by leadership Leadership presentation Adjustments Option recommendation


Capital Project Solutions – April 2013 Case Studies & Sample Projects So how have other visionary healthcare leaders employed this approach? Two organizations recently completed studies, both focusing on renovate and replace analyses, that led them towards making decisions and eventually focusing on a couple of options for further study. Cited below are case studies (the organizations have not been identified in order to protect confidentiality). “Progressive Healthcare System (PHS)” Eastern United States 

Background/Challenge: Progressive Healthcare System (PHS) was in the final stages of securing a partnership agreement with “Visionary General Hospital (VGH)”. With the addition of VGH to the PHS system, exciting new opportunities surfaced. The addition of VGH required an analysis of current facilities and locations of services across the system/region and a determination of the highest and best use of all properties PHS owns and occupies. One major element was to determine whether to continue to implement the existing facilities master plan at VGH which called for phased additions and renovations to bring facilities to current standards. An alternative option was to replace the hospital on another site altogether. With some physical plant areas dating back more than 100 years, VGH is licensed for 300+ beds and operates approximately 250+ beds in about 300,000 square feet of space. Numerous additions have been added over the years that have caused differences in conditions, variations in nursing unit size and condition, fragmentation of functions, and wayfinding/flow problems. Space and infrastructure issues are numerous. The site is landlocked on about 12 acres in a downtown area


Capital Project Solutions – April 2013 surrounded by development.




Process: The master plan for VGH was reviewed and assessed. Preferred stacking and organizational scenarios and cost models were updated. The plan was scrutinized to determine how it would meet key issue criteria (e.g. operational deficiencies, unit bed size, maintaining operations during expansion and renovation, cost, unforeseen issues, lack of additional growth potential on site, etc.). In addition, KLMK and the team developed order of magnitude cost models around scenarios for a potential replacement to VGH. These scenarios included facility options for relocating services amongst VGH, PHS Asset A, and PHS Asset B and took into account current conditions at each, along with realities of the regulatory environment both locally and at the state level.

Results/Recommendations: Ultimately, options were narrowed to three which involved either replacement or renovation to VGH and the other two existing PHS entities studied. Pros and cons of each were discussed on a variety of evaluation criteria. PHS and VGH leadership presented the information to their Boards which allowed for informed decisions to be made as to whether to move forward with more detailed planning on a particular scenario. Leadership and the Board are now focusing on these options as part of a broader SMFP.


Capital Project Solutions – April 2013 “Mountain and Valley Medical System (MVMS)” Mid-Atlantic/Southeastern United States 

Background/Challenge: MVMS, an affiliate of Multisite Health System (MHS), is a small multi-facility health system composed of several hospital and ambulatory campuses. MVMS’ existing main campus was replaced approximately 15-20 years ago. Main Campus Hospital (MCH) is the specialty hub and, given recent development and expansion on campus, is quickly running out of space for additional facilities and functions. Aging Plant Hospital (APH) is a landlocked facility in a downtown, residential and commercial district. APH is operating 150 beds but was built to operate about more than 300 beds. A few former patient care areas have been converted to non-inpatient clinical and support/administrative functions. Portions of the facility date back more than 70 years, and like the VGH example above, has many space, infrastructure, flow, and operating issues. Heights on the lower floors are very shallow, at less than 10 feet, making renovation for modern equipment extremely challenging.

Process: KLMK was engaged to lead a multidisciplinary team in studying the possibility of expansion and renovation of the APH campus and compare the cost and end result to that of a replacement facility. Many options were created and over the course of study, it was determined that the cost to fully upgrade, modernize, and expand the existing APH would be close to the cost of a new replacement facility. Even though renovation and expansion would be somewhat cheaper on a “first-cost” basis, this solution was still suboptimal when compared to the market, growth, and operating efficiency/savings


Capital Project Solutions – April 2013 potential of a replacement facility. A new facility would better allow for a re-structuring of the APH business and operating model that is required in the new post Patient Protection and Affordable Care Act national healthcare reform market. 

Results/Recommendations: The result was a set of recommendations to MVMS leadership. While many options were developed for replacement and renovation, KLMK ultimately recommended vacating the existing APH and building a new replacement facility. MVMS decided to purchase land strategically located near the center of the APH market for the new hospital. A sufficient amount of land was purchased to allow for the development of complementary healthcare and retail buildings (e.g. MOBs, pharmacy, etc.) resulting in potential non-operating revenue for the System. Initial planning is currently ongoing.

Conclusion Healthcare CEO’s are under immense pressure to address changing market dynamics quickly and effectively. Leaders do not have the time or resources to take the better part of a year to conduct “just another study”. Consider a deliberate scenario planning approach to strategic master facilities planning as a lead-in to more detailed planning. We have found these “rapid response” studies to be cost effective and beneficial and allow for better long-term decisions and implementation. Your best laid schemes need not go awry.