Capital Project Solutions – April 2011
Considering a New Capital Facility Project? The Roadmap for Launching Your Project
Tim Prince, MHA Vice President Strategic success requires the right resources and investment. With the uncertainties in the economy and recent policy changes, many healthcare organizations have been forced to delay strategic initiatives that involve substantial investment. However, we have begun to see signs of change. As the markets begin to loosen and capital becomes more available (albeit at a higher cost), strategic initiatives that were once placed on hold are being reactivated, often with an intense sense of urgency in order to make up for lost time. If you find yourself in such a situation, do yourself a favor – take the time to ensure that you are truly prepared to launch any facility project that may be tied to your strategic initiatives.
Target Your Investment Buildings, in and of themselves, are not strategies, but rather tools used to implement strategies. The proper infrastructure investments are essential to positioning an organization for success. Hospitals are facing uncertainties from healthcare reform and competitive and cooperative re-alignment. In the midst of this, facilities are aging and in need of repair, replacement, or operational re-tooling. Healthcare owners cannot afford to ignore their physical plants and they must be sure that every dollar spent on a facility project receives the maximum return on investment.
Capital investments must be established against the
following criteria: Further specific strategic goals of the organization Improve efficiency of operations Generate a positive return on investment Upgrade critical infrastructure In today’s environment, it is more important than ever to carefully plan and prioritize your capital investments.
Now is the best time to
conduct a Launch Gap Analysis (LGA) to validate how your project addresses the priorities of the organization and sets-up the enterprise to quickly respond as market conditions improve. More importantly, it 1
Capital Project Solutions – April 2011
may even demonstrate that there is no need to invest in a capital facility project at this time.
Planning Strategic planning used to have 5, 10 or even 15 year horizons. However, hospitals and healthcare systems have shifted to 1-year, 18month or even quarterly strategic operating plans. Specific, measurable goals are established and management teams are held accountable to achieving specific targets. This works well for operations, but not so well for long-term capital projects; how can you make a facility investment decision whose implementation timeline is longer than the planning horizon?
Strategic capital investment planning requires a
directional plan tied to key long-term strategic objectives, but the flexibility to make opportunistic decisions within those directional guardrails. When embarking on a large-scale capital construction project, such as a replacement hospital or a major addition or renovation, the strategic context and your ability to implement successfully need to be clear. What is the reason for the project (strategy)? Do you have a structured process that will keep you on track and focus your decisions against your intent? Do you have enough money for expected and unexpected items (budget)? Do you have your internal and external project delivery team defined with roles and responsibilities identified? Do you know how long the project will take (schedule)? In short, are you ready to launch? You may have some answers, but likely not all of them. You may think that you do not have time to consider these questions - and you are not alone! If the thought of addressing each of these areas sends you into a tailspin, do not panic. The capital delivery process is complex and one that cannot be left to chance. Prior to launching into a major facility project, members of the "C-suite" must ask themselves, "Are we ready?" Poor alignment of expectations and goals at the outset can get a project off on the wrong foot, which can cause delays and cost money down the road – possibly even jeopardizing the project. In order to start your capital project off on the right foot, healthcare executives should conduct a LGA prior to launching a major capital construction project. It is the single most
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Capital Project Solutions – April 2011
important thing you can do at the start of the project to guarantee success.
What is LGA? You may have heard the saying "you don't know what you don't know." Sure, this seems obvious, but when millions of dollars are on the line, you cannot afford NOT to know. In today’s economic environment, projects must be prioritized. Invest the capital only if the project furthers the strategic goals of the organization, generates a positive return on investment, or involves critical infrastructure upgrades. Conducting a LGA will ensure that your project addresses the priorities of the organization. Assessing what is currently known and what is unknown, what has been contemplated and what has not is of critical importance.
The LGA involves data and information
gathering, key stakeholder interviews, an intense facilitated one-day work session followed by a series of half-day sessions. The goal is to identify gaps in expectations versus realities, develop a roadmap to follow when bridging these gaps, and to assess a hospital's level of readiness to get a project off the ground. Throughout a LGA, every major issue that might affect the launch will be identified and explored. It is not solely a "visioning" exercise focused on major design and building elements. Instead, the LGA is much broader and more encompassing. The major phases are: •
Direction (History and Intent) – What is the strategic intent of the project and what key guidelines and expectations have been set?
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Discovery (History and Physical) - What activities and steps relative to the proposed project have been taken? What assumptions have been made? This involves initial data gathering and pre-session interviews.
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Gap Analysis (Diagnosis) - Where are the gaps in what is known and unknown? What has been completed? What still remains to be done?
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Implementation Plan (Treatment Plan) - How can we bridge the gaps and align everyone’s expectations so that we are headed down the same path? 3
Capital Project Solutions – April 2011
The LGA will keep you focused on all the elements that affect the “Big 3" of your project -- scope, schedule, and budget.
Much of the time
invested in the LGA will focus on discovery and gap analysis. The graphic below illustrates the topics addressed during the assessment. Strategic Master Facilities Plan Has a Facilities Master Plan been completed and do all constituents agree to the plan? Project Vision & Guiding Principles Is there a common vision and scope for the project? Have facility design guidelines and principles been established? (e.g. Evidence Based Design, Sustainability, flexibility, etc.)? Site Analysis & Land Acquisition Has a thorough investigation and necessary “due diligence” been completed on the site and do you know what that “due diligence” entails? Project Delivery Approach Have you determined the team structure necessary to deliver the project? Project Delivery Team Organization Is your internal team invested, educated, organized, and do you have a structured and logical approach for external team member selection? Alternative Financing Opportunities How are you planning to fund the new facility? Do you know the alternatives that may be available to you? Integrated Process Planning Has a detailed room-by-room space program been developed based on scope and operations and have all constituents accepted it? Has an operational vision and clinical strategy been developed? Master Program Budget Has a realistic total project budget been developed and vetted that matches the project scope, financial ROI targets, and available funds? Master Program Schedule Has a realistic, detailed project schedule been developed and vetted? Medical Technology & Equipment Strategy Has a medical technology and equipment strategy been developed? 4
Capital Project Solutions – April 2011
Regulatory Approval Process Do you have a comprehensive understanding of the zoning and CON issues and have you developed a strategy to address them? Transition & Occupancy Strategy Have you begun planning for how you will operate in the new space? Do you have a plan for moving from the existing location to the new facility?
Now You Are Ready to Launch In summary, a LGA aligns expectations with project objectives while validating the plan of action to get everyone moving in the same direction. The key deliverable out of the process is a well understood and agreed upon Project Implementation Plan that will be delivered to the Board for approval and the Project Delivery Team for consistent implementation. Conducting a LGA is the most important thing that you can do to guarantee that you meet your project goals. And remember, initiating and completing an LGA may even demonstrate that there is no need for a capital facility project. With so many things on the plate of busy executives, this type of due diligence can avoid distractions that can take the institution off a positive track towards meeting important strategic objectives. However, if you did find yourself scratching your head and thinking “Hmm, I hadn't thought of that" when you read the questions above, your first step should be a LGA. Whether conducted internally or with an outside consultant, do yourself a favor and do not proceed until you are truly prepared to launch.
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