THE ROLE OF PROJECT MANAGEMENT IN HEALTHCARE FACILITIES. Helping Create Places for Healing. Realty Trust Group

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1 THE ROLE OF PROJECT MANAGEMENT IN HEALTHCARE FACILITIES Helping Create Places for Healing Realty Trust Group

2 The Role of Project Management In Healthcare Facilities The role of a project manager is critical to the success of a new facility under development. The project manager must be able to lead multiple stakeholders and other parties through the various stages of the process to provide guidance, support, feedback and results. This Realty Trust Group white paper examines the current best practices that hospitals, health systems and physician groups should consider incorporating into their planning, development and construction of new facilities. Background With the advent of the Patient Protection and Affordable Care Act ( ACA ) and the introduction of the concept of the Accountable Care Organization ( ACO ), many health systems are re-evaluating their plans for adding new facilities and are rethinking which services to be included in those new facilities. Healthcare construction starts are down dramatically since 2008, with more focus on ambulatory strategies and physician network issues than mega-inpatient projects. According to the 2013 HFM/ASHE Construction Survey, ambulatory facilities are projected to account for most of the new facilities to be built this year. Ambulatory facilities are typically more cost-effective than inpatient facilities and can be more accessible to growing population nodes within a health system market area. The ACO concept and the ACA are getting much of the credit for the rapid consolidation occurring in the industry, as health systems look to build scale to accommodate EMR applications, lower reimbursement rates and adjust to some type of future bundled payment system. The consolidation over the past several years has been prevalent in virtually every sector, particularly with respect to hospitals and physicians. Irving Levin & Associates reported that 92 hospital mergers or acquisitions were completed in 2011 (the most in a decade), and was then topped by 94 in Hospital acquisition of physician practices over the past several years has also proceeded at a hectic pace. In its first national survey of hospital practice acquisitions, Jackson Healthcare noted that 44% of hospitals surveyed acquired physician groups in 2012, and 52% have planned acquisitions for The most common specialties acquired were family practices, internal medicine groups and obstetrics/gynecologists. The primary reasons given in the survey for physician practice acquisitions were: Being approached by physicians to acquire their practice Building a competitive advantage Part of recruitment strategy Maintaining a competitive advantage ACO formation Improving patient safety The consolidation strategies, coupled with leaner capital budgets, have created certain real estate challenges for health systems and physician groups, especially as new construction projects are considered. Healthcare designers have responded by utilizing streamlined construction processes, employing more efficient mechanical/electrical systems and re-aligning tenant adjacencies to incorporate better designs within new ambulatory facilities. These are some of the proven design concepts that providers should consider as they plan new projects. One example resulting from the dramatic increase in employed physicians is that many health systems are planning new facilities which would not include third-party physician space, and would therefore not necessarily be designed as a series of traditional, individual office suites with redundant waiting areas, reception offices and laboratories. 2

3 Start at the Start Project Planning The role of a project manager is critical to the success of a new facility under development, especially during the design phase. The project manager must be able to lead multiple stakeholders and other parties through the various stages of the design process to provide guidance, support, feedback and results. The first step in planning a new project is defining how it fits with the organization s real estate and clinical strategy. These and other questions should be considered and answered either prior to or early in the planning phase: What factors are driving the need for the new facility? Where should it ideally be located? What synergies can be created with the completion of this project? How can the mission of the organization be advanced with the investment in this facility? What is the impact of the new facility on our current facilities? Selecting the required tenant mix, location, size of the building, and services/ programs in the building all dictate the direction the design team will take. The size and type of the tenant groups will impact optimal bay depth, floor plate size, floor to ceiling clearances, and potentially even the number of stories. The decision to locate the facility on- or off-campus will impact parking, patient access, security, facility management, strategic adjacencies, and a number of other important building elements. Who Should Be Involved Feedback for the Design Team Planning Phase Design Phase Construction Phase The planning stage is the ideal time to think outside the box. As the project progresses through each phase, the cost of introducing new ideas or change orders increases exponentially. COST COST OF CHANGE TIME Organizations often form habits to cope with existing conditions that shape their way of doing things. Processes are restricted by physical constraints such as facility conditions, wall layouts or existing adjacencies. Frequently, there is a tendency to duplicate what is familiar when designing new facilities. Planning new facilities is the perfect time to think outside the box and introduce lean process planning to look at every aspect of the way care is being delivered. A new design should be formed around the most efficient process. Cost control, eliminating waste and providing better customer value continue to be very important for organizations in the future. Lean Process Planning is a systematic approach that centers around eliminating non-value added steps in the process. It should include a multi-functional team of representatives including management, physicians, clinicians, facilities, material management, infection control and even the patient. Each group brings a unique idea on how the facility can be set up to best serve 3

4 Who Should Be Involved (continued) those who will use it. The project manager s role is to make sure that everyone is heard and that all ideas are introduced to the discussion. This phase of the design is the best time to consider new ideas because as the project progresses through later phases, the cost of introducing new ideas increases dramatically. This integrated approach also allows for team buy-in and ownership into the project. It builds a team atmosphere inside the organization as all participants feel as though they have contributed to the design process. After the design team has assimilated the program into a conceptual design, the project team can begin developing a cost model. The cost model should include estimated construction hard costs and "soft" costs such as design fees, testing fees, construction interest, legal and regulatory costs and contingencies. This initial cost model provides a basis for the team to set expectations on finish selections and other design features in order to stay within established capital investment parameters. It should also include an assessment of the level of risk associated with the project by setting the appropriate level of contingency for the project. Using Lean processes for design and planning are basic to a successful project and will become even more critical in the future. Lean techniques will be the expected going forward. With future projects every aspect of Lean will be necessary for every design, planning and construction and it must be aggressively seized by all. - Bill Alton VP Facilities & Construction Mountain States Health Alliance Project Management Roles and Responsibilities Assistance to the Owner in the selection of the Project design/ construction team (Architect and General Contractor) is typically part of Project Management services. It is important when selecting an architect and contractor that experience, cooperation and teamwork are qualities that are considered. One of the project manager s first tasks is to understand the capabilities and similar project experience of the individuals on the project team. The initial step in working with the project team should be a kickoff meeting to review the basics of the program, budget and schedule, and to define the expectations for each team member and to define roles and responsibilities for team members. He or she must ensure that all team members stay engaged and complete tasks on schedule and must feel comfortable communicating to the Owner what they need to hear not just what they want to hear. Every meeting must include an agenda which focuses on current priorities and overall progress within budget and schedule. The project manager s main role is to lead and facilitate the meeting. Someone other than the project manager should be responsible to keep accurate meeting minutes, which will provide an important record throughout the project should any disputes arise. The project manager s role on the team is as a facilitator, project monitor, and liaison with the Owner. 4

5 The Project Management Process WORKFLOW Realty Trust Group PROJECT INPUT PROJECT BOUNDARIES PROJECT OUTPUT DESIGN TEAM Energy Lean COLLABORATIVE TEAM APPROACH USER GROUPS Clinicians Physicians Technicians Infection Control INTEGRATED PROCESS PLAN EXECUTE Project Manager Owner / User Architect Contractor PLAN INITIATE CLOSEOUT PROJECT DELIVERABLE PROCESS IMPROVEMENT COST MODEL C O N T R O L M O N IT O R PROJECT RECORDS FACILITY MANAGER All projects have four recurring stages planning, execution, monitoring and controlling. All projects have four recurring stages planning, execution, monitoring and controlling. As execution of the plan occurs, the project manager sets up controls that are monitored to make sure everything is running on track. Most projects have unforeseen variables that are introduced as issues that must be addressed/resolved. These variables may require adjustment to the plan, and the cycle begins again. The diagram on the next page depicts this cycle. Throughout the project development cycle, the project manager must be an effective communicator so that all stakeholders are current on the status of the project. monitoring and controlling phases of the building cycle, the project manager will continually analyze potential risk triggers and communicate to the key team members in order to develop proactive solutions. Regular meetings with the key members of the project team as well as timely and accurate reporting to the owner help to facilitate these decisions. Also, as changes occur, the setting and management of expectations of the outcome are keys to creating success and satisfaction within the management team and other important team members. Timely and informed decisions must be made so as to minimize potential impact to the budget and schedule. During the 5

6 The Move Prior to move in, the project manager should have a complete list of the owner/tenant vendors, including furniture, equipment, telecommunications, and movers. These vendors are often introduced to the project during the construction phase. Telephone and data cable installation is coordinated during construction, usually prior to the ceiling grid being installed, for easier access. Lead times for furniture and equipment delivery must be considered so that shipments arrive at the appropriate time. Coordination is required to ensure that the space has been cleaned, that wall and floor protection is in place and that room numbers are clearly marked for the movers. Communication is an important tool that the project manager must employ to ensure that each team member knows what their individual roles and responsibilities are throughout the project, and how they must be coordinated in both time and space. Prior to project completion, the project manager and property manager should walk the space together and coordinate the turnover from construction to management of the property. Training for tenant staff and/or property managers should be scheduled so that both the user and the property manager understand the function of the building systems and controls. Project Completion Whether the project is a new building or a tenant suite build out, the primary goal for the project manager is to deliver a product that meets or exceeds the client s expectations. This means delivering the space to the Owner/Tenant on time and within budget, and ensuring that the space functions as the client intended. Upon completion of every project, a physical walk-through of the space should be performed with the client, contractor, and architect to develop a punch list of deficiencies and/or incomplete items. Similar to the task list during the project, punch list responsibilities should be assigned and a clear timeline established for the completion of each item. Additionally, anything that the client identifies during this walk-through that will result in added cost will be communicated clearly, as it relates to budget impact. Just as important as the completion of the project are the records ( history ) of the project. A monthly project status report ( PSR ) provides accurate budget tracking and a detailed breakdown of each budget line item, as well as a detailed change request log. Where the project is of sufficient scope and scale to warrant, the client may request a cost segregation analysis to provide potential for tax savings. This budget detail is very helpful if a cost segregation analysis is completed. Meeting minutes, contracts, proposals and other project documentation should all be provided to create a comprehensive record of the project. As part of the closeout process, the contractor should provide as-built drawings along with operations and maintenance manuals for all the equipment and systems in the building. Warranty information is also provided on the major building components including mechanical, plumbing, electrical, roof and building envelope. These documents are reviewed with the property management representative during the project turnover phase. Finally, every project typically includes a standard one-year warranty from the general contractor. A follow-up visit to the site should be scheduled prior to the expiration of this warranty to visit with the client and property manager to ensure the building and all building systems are functioning as designed. Any issues would be communicated to the contractor and a corrective action plan developed, to the requirements of the warranty. 6

7 Conclusion In an era of tremendous change and uncertainty in health care, having effective and capable project management for new facility development and construction is critical. Proper planning, communication and teamwork are essential elements to successfully managing new projects for health care providers. Because there are a myriad of parties involved in new projects including client stakeholders, architects, contractors and others a process-driven approach is required to maximize results and accountability. 7

8 Takeaways: Best Practices in Healthcare Facilities Project Management Healthcare environment is changing (ACA, ACO status/care delivery model, physician practice acquisition, asset monetization, etc.) Strategy for healthcare delivery drives resource allocation decisions for facilities Healthcare facility development can be enhanced through the value-add of project management professionals experienced in delivery of acute and ambulatory facilities Project planning is key (service lines, scope/scale, location, service area, adjacencies, provider mix, growth opportunity, resource allocation, role in advancing strategic initiatives) Design process should include feedback from user groups Project management, project design and project construction require intensive administration, coordination and monitoring for successful delivery of the project within schedule and budget Move-in is not the end project completion should ensure operational compliance with project specifications and warrants Project management approaches must take into account circumstances specific to the owner, site, patient population, tenants, schedule and budget 8

9 ABOUT US Since our inception in 1998 Realty Trust Group has focused on healthcare real estate becoming one of the most respected and recognized firms in our industry. Through this specialization we ve gained a unique perspective and understanding of the healthcare industry s complexities and their impact on strategic real estate decisions. We believe that bigger is not always better and more people for the sake of numbers is not the answer. Our goal has never been to be the biggest in the industry, however being the best is what drives every member of our team. When you work with us you ll appreciate our people: their knowledge, experience and integrity. We provide valuable solutions for our clients because we ask the questions that others may be unwilling or incapable of asking. To us, your real estate is a precious asset that should contribute to your organization s strategic goals and serve as a catalyst for business growth and increased market share. Whether your organization is considering expansion, acquisition, disposition, or cost reduction we can help. Q U E S T I O N S? Greg Gheen, President ggheen@realtytrustgroup.com Scott Evans, Executive Vice President sevans@realtytrustgroup.com KNOXVILLE One Cherokee Mills 2220 Sutherland Avenue Knoxville, TN ATL ANTA 1100 Johnson Ferry Road Building 1, Suite 400 Atlanta, GA RealtyTrustGroup.com RTG RESOURCES 0813-A. Copyright 2013 Realty Trust Group. All rights reserved. No part of this document may be distributed, reproduced or posted without express written permission of Realty Trust Group, other than the following uses: You may copy this document and its contents for personal use only. You may distribute quotes or content from this document to third parties in news articles, blogs, forums or educational resources provided you acknowledge Realty Trust Group as the source of the material. If distributed online or electronically you must provide a working hyperlink to: 9