Healthcare is a Human Resources Puzzle

Posted on November 19, 2012


Every once in a while, a total stranger provides me with the perfect quotation to communicate a concept with which I have been previously unsuccessful.

October 29 was one of those days. That is when Gerard van Grinsven, CEO of Henry Ford West Bloomfield Hospital, offered the following quote:

“From a financial perspective, the environment we have created does not significantly impact the overall cost curve, because the amortized capital expense of a building is a very small component of the overall cost of care in an industry where labor expense makes up about 75% of overall cost.”

I could hug the man.

Mr. van Grinsven’s words elucidate a realization very few in healthcare understand, or at least a perspective on which few base meaningful project decisions. In full context, Becker’s Hospital Review was interviewing Mr. van Grinsven about luxury in healthcare—the classic comfort-versus-care investment philosophy. 

Interestingly, Mr. van Grinsven ‘gets it’ because he spent part of his career with The Ritz-Carlton Hotel Company.  In other words, he knows at least two things very well:  1)  customer service, and 2)  where to spend money to make money.

Hospital-as-hotel debate aside, I am simply happy a leader in healthcare administration was able to articulate a fundamental belief behind healthcare design execution:  focus project dollars on what really matters (care delivery). 

He has, in effect, endorsed a big-picture mentality that downplays the battles most hospitals love to fight when a project rolls around—design fees, change orders, value engineering—first cost items.  Over and over, architects and builders fight to prove that their 10-20% of project cost adds value, and we are not the bad guys; in fact, we want to earn our stripes fighting for what the hospital should want:  reduction of the legacy cost of managing the operations. 

One $20 million project for a hospital might represent 10% of the 10% of the annual budget dedicated to facilities and infrastructure, which makes it worth 1%.  And that makes discussion over an 11th hour proposed $20,000 savings in floor finishes worth officially 0.00001 of the hospital budget, or 1/100 of 1%, a little insignificant don’t you think?  And the nine combined man hours of research, design, pricing and meeting time among the owner, users and A/E/C team to reach a decision just erased 10% of that $20k.

Despite the surrounding medicine and technology, healthcare is ultimately a human resource management industry.  Administrators must realize this fact going into a project to ensure project value is not continuously eroded by micromanagement of the very human resources and patients for which we are all working to design and build a better place.