Life Cycle Cost—As If!

Posted on May 23, 2013


I am a LEED AP, BD+C, HIJK, and have been such for nearly ten years.  I believe in the top and bottom-line benefits of sustainable design, and think green design provides a superior built environment for both individual and community…which is why I have had such a hard time reconciling my own conflicted feelings after a recent talk with a facility manager at a two-hospital system.

In the context of systems design, we were discussing sustainability and smart energy design.  He acknowledged that, although life cycle cost analysis (LCA) is important, his hospital system and all of the colleagues he knows never base a purchasing decision on it:  “first cost matters 100% of the time”.  He said LCA was more-or-less a box to be checked in the process of design, unless the evidence was overwhelmingly in favor of a particular scheme, system or brand.  Although he recognized the value of the effort and study, and personally believed it was relevant, almost no administrator acts on it.

Heresy?  The idealist in me would like to think this is a case of legacy, old school healthcare thought that has yet to become extinct with the PPACA evolution—but I don’t think that is accurate.  Looking at the different perspectives, and other industries’ ‘what-have-you-done-for-me-lately’ attitudes outside healthcare, I think myopia is the norm.

Wall Street cares about this quarter’s earnings today, not how well a company is set up three years out.  Politicians fight every issue today with an eye toward reelection, and hardly look at a holistic picture of negotiation and give-and-take for the long-term greater good.  Sports coaches are hired and expected to win now; rebuilding year(s) is a luxurious concept of the past.

This is not a naiveté discussion; healthcare administrators acting in congruence cannot be deemed ignorant.  This is human nature, reality.  When financial accountability and personal reward (salary / bonus) are on the line, it appears most people, including healthcare administrators:

  • Make decisions with a short-term benefits bias
  • Make decisions with a bias toward what they know
  • Make decisions with a bias to not ‘rock to boat’

These are some reasons why true business model innovation in healthcare has been such a long time coming.

The dirty secret of many long-term benefits, including those of life cycle cost analysis:  no one cares.

Only time will determine if, and how long, this will last.  Part of me feels it is bound to change—that smart managers will embrace the numbers that support value over time.  After all, Southwest Airlines is as dominant as it is now because of shrewd, long-term planning.  But, part of me feels that human nature is incredibly difficult to change, especially when driven by monetary reward, in which case savvy, long-term decision-making in healthcare may never be the norm.

What do you think?