HC Design: Revenue Enhancer, Cost Reducer or Both?

Posted on September 2, 2011

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This past week there was some notable comments on the AIA Academy of Architecture for Health’s (AIA-AAH) KnowledgeNet online forum.

A particular discussion thread centered around an AIA-AAH Research Committee member asking which research initiative would be fruitful given the goals of the group. One architect respondent took issue with a statement by the Committee:

The Research Committee believes that the physical healthcare environment has a direct impact on patient outcomes, staff workplace effectiveness, and revenue enhancement.

The architect felt that instead of “revenue enhancement”, design and research’s impact is felt in “reducing costs and enhancing the value—not in enhancing revenues.”

I disagree, and support the more courageous statement of a goal toward revenue enhancement for healthcare providers.

Value is a noble goal. All sales professionals preach value, and at the end of the day, what you do and how you do it must provide value or no one will buy. However, value is vague and achieved in many ways—too many ways to go into here.

One of the ways I feel architects have not backed up their design and research thinking is by not drawing a direct connection between what they do and how if affects a hospital’s bottom line. Revenue is the measuring stick that carries the most weight, and architects have been hesitant thus far to certify anything close to a return-on-investment (ROI) for hospitals, most likely out of fear of litigation should they not reach their stated goals.

News flash:  every other industry quantifies impact of its product or service with numbers that relate to revenue. Architects need to do it with their designs for healthcare.

Maybe the problem is that architects confuse revenue with profit. Revenue is the raw income of money, which can be measured through study, and calculated by using a hospital’s own metrics for procedures. Profit is what is left from revenue after expenses, and expenses from operations are business decisions made by the hospital—things the healthcare architect definitely cannot control. Architects should not shy away from measuring revenue.

And to use fear of litigation as a reason not to engage is cowardice because, good or bad, the law will always have a presence. Case in point: LEED buildings actually have to function to match their stated levels of energy savings—or architects and engineers will get sued. This was inevitable and is starting to happen. And backing away from legal risk is what has eviscerated the profession’s influence and power. Note the evolution of the AIA documents over the past 30 years.

It is time to start using research and finding demonstrable ways to quantify, measure, and prove ROI on each project. And this is done through design that minimizes infections, increases service (quality and efficiency: turns, rounds, etc.), reduces staff fatigue and injuries, and minimizes need for FTEs (the real cost in hospitals), among other things.

“Reducing costs” is a knee-jerk reaction to a balance sheet under fire. Yet savvy managers know there is only so much you can cut or reduce; it is not a long-term strategy for survival. Sure, reducing costs is fine—“with this design your electric bills will be 40% lower”—but it has limited impact. Any hospital administrator can hire any architect, or efficiency consultant for that matter, to come in and reduce costs. Real value is delivering increased revenue month-after-month from a better functioning building. This is where design and research needs to come in.

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