Health Care
Construction
Moving Your Project From
Concept to Reality
Health Care Construction
¾ There are 1,283 CAH’s in 48 States
¾ In 2005, the Flex Monitoring Team
estimated CAH’s would need almost
$1.6 Billion in capital for construction
projects (expansion, renovation,
replacement and mandatory code
upgrades).
Health Care Construction
¾ Two thirds of Minnesota’s rural
hospitals were built in the 1960’s or
earlier.
¾ These same hospitals are being used
to accommodate a much different
health care delivery system with a
limited workforce and immense
changes in technology
Challenges
¾ Financial Performance-Key to long-term
survival.
¾ Rising construction costs.
Up 8-10% on
the materials side in past three years.
¾ Aging infrastructures and functional
obsolescence dictate something has to be
done to remain competitive in the current
market.
Good News
¾ Interest Rates are remaining low.
¾ There are more and better financing
options available to CAH’s.
¾ Overall slow-down of construction is
creating a good, competitive bid market on
the labor side.
So……..
¾ Why is it so many major
renovation, expansions or
hospital replacement projects
start with big dreams and end up
a set of drawings in a closet?
We couldn’t afford it!
Or
Politics got in the way!
How you approach a major
renovation or replacement
project can make or break
the project and in some
cases define your career.
What is the key to
seeing a project
through from Start to
Finish?
FIRST
¾Work on the project
starts long before the
architectural drawings
begin!
False Assumptions
¾
¾
¾
¾
¾
¾
Hire an architect first.-False
You and/or your Environmental Services staff
can manage the project.-False
It really doesn’t matter if the architect, contractor
or other project consultants have health care
experience-False
Community Support for the project is not very
important.-False
You can short-cut the pre-project planning and
preparation-False
The State does not need to be involved in the
project until the end when they make the “final
determination”
“Get ‘er Done”
Pre-Planning
¾Improve Financial Outlook
Key Financial Indicators (Days Operating Cash on
Hand and Total Cash on Hand, Current Ratio, Gross
Days In AR, Average Payment Period, Operating
Margin, Net Margin, Debt Service Coverage)
zCharge and Revenue Capture
zCharge Master Review
zAssuring CAH Reimbursement Benefit
z
¾Debt Capacity
¾Financial Feasibility/Explore Financing Options
¾Project Proforma (5-8 year)
¾Key Objectives
Architect Vs. Project Management
Which comes first chicken or the egg?
¾ Project Management/Owner Representation
should be brought on board early in the
planning process.
¾ Project Management will:
z
z
z
z
Help navigate the complex project planning, design
and construction phases of the project.
Perform project programming and cost estimate.
Assist in the selection of location, architect and
construction management.
Keep the project moving forward.
Do it yourself?
¾ How many hospitals have you built?
¾ How current are you on all of the hospital
construction regulations?
¾ Do you have the time to devote to the
project?
¾ Can you keep the project on time and on
budget?
¾ Time is money.
¾ Do not allow the mismanagement of the
project to define your career.
Experience
¾ You wouldn’t hire someone without
experience to build your home- so why
would you hire someone without hospital
experience to design and construct your
hospital?
¾ Local politics can get in the way of hiring
an experienced firm but inexperience can
cost the project.
Community Support
¾ The importance of engaging
community support cannot be
underestimated.
¾ Lack of community support can have
a negative impact on the project and
can at a minimum slow the project
down.
Project Programming
“No shortcuts”
¾ Project programming/Staff involvement
¾ Time spent involving the staff will pay off in
the end, in terms of a decrease in change
orders.
¾ Predetermine service lines, estimate
service volumes, peak staffing, equipment,
and development of new programs or
service lines.
New CAH Relocation Guidelines
¾
If a necessary provider CAH relocates its facility
and begins providing services in a new location,
the CAH can continue to meet the location
requirement based on the necessary provider
designation only if the CAH in its new location:
z Serves at least 75% of the same service area
that it served prior to its relocation
z Provides at least 75% of the same services
that it provided prior to the relocation
z Is staffed by 75% of the same staff (inc.
Medical Staff, contracted staff & employees)
that were on staff at the original location.
New CAH Relocation Guidelines
¾ If a CAH that has been designated as a
necessary provider by the State begins
providing services at another location after
January 1, 2006, and does not meet the
requirements, the action will be considered
a cessation of business as a CAH.
¾Involve
the State Survey
Agency early in the process.
LEED
¾
Decide early if you want a LEED Certified
building
¾ Hire project team with experience in green
building or LEED construction
¾ Do your homework
¾ Identify your “green” goals
¾ Align incentives so LEED Certification is
everyone’s responsibility
¾ Contracts and construction documents
should clearly define responsibility in
green building construction.
Costs for LEED Construction
¾ $0-$20/ SF
Hard costs for technology
Additional design effort for
¾ $1-$2/ SF
A/E Team
Cost for commissioning
¾ $1-$3/ SF
Contractor’s charge
¾ $1-$4/ SF
Special means & methods
Tracking & collecting info
¾ $0-$.35/ SF USGBC Fees for certification
¾ Total $3-$29.35/ SF
Conclusion
¾ Get Hospital’s Finances in order
¾ Financial feasibility
¾ Debt capacity
¾ Project Management
¾ Community Support
¾ Engage State Survey Agency early
¾ Make decision on LEED early in process
Questions
Colleen A. Spike
St. Peter Community Hospital
[email protected]