Consider This a Burn Notice

Posted on February 22, 2012


 As Republican presidential hopefuls square off in primaries across the U.S., a lot of talk is on how much money candidates are spending to position themselves as the most attractive.  The longer the primary process stretches on, the more resources are needed. Political pundits note that candidate “super PACs” bring in millions a month yet can spend much more—not a sustainable burn rate for cash. Not only that but after all the expenses, debates and travel, the lone successful Republican nominee will be depleted, in more ways than one—far from a position of strength to take on an incumbent in a presidential race.

Does your hospital ever find itself in a similar position? Would you recognize it if you did?

Capital projects are only one category of major decisions for hospitals, and they may not even be made every year. Their infrequency can be a barrier to excellence at managing that decision process. Also, the infrequency only increases the importance of getting it right when an opportunity does arise. Capital projects can expose weaknesses in a hospital or system decision process, more so than other major decisions, and mistakes can cost millions of dollars.

Decision makers may want to consider their pace of decision. I find situations where hospital building committees wander aimlessly for several years on whether or not to do a capital project, where to locate it, how big it should be…then for some reason get anxious, and over two random weeks manage to make short-sighted decisions that preclude very viable, but unexplored, options. Like the political analogy above, their burn rate on time was incredibly high for a long time. This is fine provided it meets the expectation of an excellent outcome (decision) in the end. But making sudden choices out of boredom or embarrassment that lead to a poor outcome is not beneficial and only burns more time later.

The pace of process leading to a decision should be comfortable and adequately thorough without being too hasty or too deliberate. Previous posts have made reference to the Expected Value of Perfect Information (EVPI).  Although based in decision theory, this concept’s core nugget is that there is an unknown value assigned to knowing all the facts which can lead to an ideal decision. However, it may be cost-prohibitive to “spend” the resources to acquire perfect information to make a decision certain. Strangely, for a hospital architects, program managers, builders, consultants, real estate, ROI, etc. all seem to be assigned dollar values (and hotly debated) before time spent is even considered.

Time is the most precious resource a hospital has. More beds, more doc’s, more patients, more land, more money would be nice but those all carry inherent complications. More beds (capacity) require more staff (expense). Even money can be had from other sources. No one can acquire more time. Still, time is too undervalued in a hospital’s decision process. Time is most valuable not only because it is a finite resource, but because a hospital can convert it into big-time revenue. Even one day is extremely valuable.  Ask your OR scheduler, or ED nurse, or MRI tech what a day means to them financially.

One of the most dangerous things a hospital can do with a capital project is speed up a decision process. This is a no-no for reasons other than it violates Newton’s First Law of Motion. Slowing down a pace to ensure a good decision is acceptable behavior; however, accelerating pace is never wise. A healthcare architect and mentor of mine was fond of saying in project progress meetings “We’re not taking five minutes to decide something that took five months to design”. In other words, the best decision will be arrived at through the typical decision process, not a hasty one; otherwise, something important will be missed.  And those misses are what cost hospital extra money. Those burn.

Salvaging a few days or even weeks is very achievable. For instance, the RFP process’s value has already been questioned given the time required to determine a project partner. Team selection could save months. Or a hospital could hire a design-builder that can eliminate a couple months (or more) with their efficient process.  Or a hospital could simply have decision makers lined up throughout the project process when necessary, like having users available for user meetings the first time the meetings are scheduled—no excuses. This saves at least a week each time.  All of these actions preserve valuable time.

For any decision, hospitals may want to improve how decisions are made internally. As noted earlier, capital projects are especially vulnerable.  By saving precious time, hospitals can turn a position of weakness into a position of strength as a project is completed, and decrease the chance of being burned, with or without notice.

Posted in: Project Cost