Replacement or Renovation Six-Pack

Posted on September 21, 2011

0


Any hospital or system which has a strategic master plan at least four years old possesses a largely useless study.  Since 2007, economic and legislative changes have put previously-scoped capital project plans back in play. For some, that means revisiting whether a project is necessary; for others it may mean redefining the program, or maybe even starting a project that was not likely to happen in the first place.

Few administrators would choose renovation over the new qualities a replacement brings. With an economic shakeout still to occur based largely on revised revenue streams, hospitals must make prudent investments in their facilities now to improve operational efficiency, patient outcomes, and stay attractive in regard to customer choice and competition.

Here are six issues to consider when deciding to renovate or replace a facility:

  1. Project scope.  Changes to a few departments will likely still work as a renovation.  At some point too many moving parts affecting too many areas gets too muddy, especially with circulation changes and new boundaries. There are internal adjustments to consider with each change, and sometimes a new project addition just makes that easier, or beware…
  2. …the ripple effect.  Even a simple renovation will trigger a project or two that will allow the real project to get going; these are called enabling projects.  In addition, renovation has a way of affecting neighbors and other departments—worker access, temporary barriers, scheduled shut-downs, public / private circulation, parking and egress—so phasing, and permiting, can get complicated.  But if you have the various departments’…
  3. …current operational performance at attractive levels, a full-on replacement may not be warranted.  A main benefit of new construction is, for the most part, you get to put things exactly where and how you want them. This can mean shorter travel distances and ideal adjacencies, which can translate into greater efficiencies and less FTEs, which is a real long-term savings.  Yet even a top-notch operational machine is no offset for ignoring…
  4. …your facility’s “bones”, aka the current state of your hospital’s infrastructure.  Age, quality, condition of MEP systems, and floor-to-floor heights all contribute. I know a hospital system which began an anticipated $750,000 electrical renovation project and spent $2.2 million because they kept finding hidden systems issues. Redundancy, capacity and adaptability for new technology from imaging to IT is a big deal, and almost impossible to change when severely limited by the building. A replacement project can solve these issues, but not…
  5. …site limitations. Physical real estate constraints are as permanent a problem as there is. Even buying more land does not always help when an existing building, unhappy neighbor, wetland, street or public area is in the way. And then there are the things you cannot see:  underground utilities, water tables, boundaries, poor soil, easements, complicated legal structures, endangered species…you get the picture. In an urban site, real estate is precious and vertical expansion is the only way to get a replacement project outside of demolition and new construction.  Still, the key to any capital investment is to minimize risk and…
  6. …anticipate future conditions, always easier said than done because no one can predict the future. This is why hospitals have the aforementioned master plan. However, demographic trends—age, ethnicity, population growth / loss, typical service demands—are crucial to planning.  On top of that, building and municipal codes evolve. The regulatory environment for services, reimbursement, or ownership can change, which can force changes to buildings. Only you, senior leadership and your facilities team, will know whether your existing hospital(s) can support these demands.

Unfortunately, there is no easy rule-of-thumb for CEOs that once your facility reaches X years old, it needs replacing. Renovation work is not cheap on a per-square-foot basis, when compared to new construction, mainly because of the unknowns. Despite increasingly more, and more accurate, information on existing conditions from archived drawings, it is still difficult to know with certainty where very important pipes, conduit, and structural elements lie, where that mysterious crawl space starts, or how exactly something was built. This is what makes the replacement or renovation debate a case-by-case decision.

Advertisements