Right-Sizing at Scale: Is It Possible?

Posted on July 8, 2014


Two weeks ago, I had the privilege of touring the new Exempla St. Joseph replacement hospital in Denver. The project is known there as St. Joe Heritage or simply “Heritage”.

Designed by ZGF with local architectural participation, and constructed by Mortenson, with local construction participation, it is massive—at one time the largest healthcare project in the nation at $400+ million and including site and infrastructure work, over $600 million.

As I toured this project, I was educated on unique concerns massive hospital projects have, concerns that smaller, faster moving projects do not have.

Besides the usual budget and schedule risks, what intrigued me most was the issue of delivering a project that satisfied the basic program needs of the hospital.  Remember, “right-sizing” is building the minimum absolutely necessary to satisfy needs and keep facility legacy costs down.  No one has the stomach to overbuild these days, and definitely not at the scale of Heritage.  This sounds easy, right?  Draft a program, verify against benchmarks, do efficiency simulations and calculations, and get sign-off from departmental heads.  Signed, sealed and delivered.

What about a project that takes three years to build like Heritage?  A lot can happen in three years—legislatively, business-wise, competition-wise, technologically.  I heard a similar story from a Children’s Hospital ready to open later this year.  And we know purchasing power only goes down over time.

This is one reason the Certificate of Need systems are so archaic.  It may take five years to settle a legal dispute on the legitimacy of a project, only to find out community needs have shifted and the program that was argued for is now out-of-date.  But that is what was approved by the courts, and to alter it resets the whole approval / protest process for the competing healthcare systems involved.  At this point, a project starts out off-the-mark from the very beginning.  In this regard, how is the CON a process that saves healthcare spending?

But I digress; back to Heritage.  Heritage looks great and is state-of-the-art.  Clearly, a great amount of research, benchmarking, testing and discussion went into design decisions for the care environment.  Despite all of this effort, the project quantity, i.e. the program, is still at risk because of the time delay between design and ribbon-cutting.

In Heritage’s case, the hospital continued to acquire physicians from 2011 to 2014, which is no surprise. Hospitals all over the nation were / are doing this.  But this affected the number of beds needed.  Exempla St. Joe’s also made strategic partnerships with other local providers that impacted space needs.  At the scale of Heritage, acquiring a dozen or more physicians or making some partnership promises could mean the need for another department or additional floor.

These are decisions that are smart efforts by Exempla to stay ahead in a competitive market.  It is no one’s fault that business conditions cannot be frozen for three years while the project is designed and built (I think there’s a Disney princess who could help out).  No bones about it; planning for this is difficult, maybe impossible.

Where does that leave us?  What can we learn, do better next time?

Two things:  1)  it is good to have a fast-moving project in order to hit your targets (time, budget, function, etc.).  To make that happen, it may mean changing project delivery protocol at your hospital.  2)  If you have a large project ($100+ million), pay special attention to program decisions that are affected by ongoing C-Suite strategy decisions.  Try as best as possible to be in the C-Suite’s pocket to expect changes.  This may include spacial flexibility to react to expected changes that make the project perform better from a business standpoint.  This does not include the whim of administrators who change during projects.

So, large projects like replacement hospitals are a blessing and a curse.  Exempla is lucky to have the problem of how to replace a 400-bed hospital, and we are lucky to have projects like Heritage to challenge us to improve project design and construction delivery to meet today’s market demands.  And even for the best-managed and business-savvy, it is far from easy.