Construction and renovation projects demand the discipline that supply chain teams can provide
In 2006/2007, executives at Adventist Health System forecasted over $1 billion for near-term future construction. The number wasn’t surprising, given that Altamonte Springs, Fla.-based Adventist supports 44 campuses, from Florida, to Wisconsin, to Colorado; and employs close to 80,000 people.
Historically, management of construction was left in the hands of local teams – comprising architects, contractors and engineers – at the individual campuses, says Celeste West, vice president, supply chain. Without a standard process, the results were predictable: frequent contract discrepancies, inconsistent and unsatisfactory construction outcomes, missed delivery dates, owner-furnished-equipment (OFE) planning inadequacies, and missed opportunities.
Advocate contracted with a construction program management firm to help implement discipline and structure throughout its system. The firm would assist with contract management, develop and maintain corporate qualification standards for design and contracting teams, and maintain consistency throughout the system.
West saw an opportunity for the supply chain to help.
“Corporate Supply Chain integrated into the process, initially focusing on partnering with the construction program management firm to help manage the core construction teams, ensuring that preferred partner relationships were protected, working in tandem with third-party equipment planners for medical equipment planning, developing initial processes with owner involvement, and building relationships,” she says. But she saw some further opportunities for supply chain.
“I envisioned the opportunity for someone on my team with construction-related experience to integrate into the ‘secret society of construction,’” she says. “Vision became reality, and the procurement manager position was created.” In 2008, Cheryl Smith was hired as procurement manager, construction management.
Smith has more than 25 years of construction industry experience, having worked in administration, accounting and operational/project management at a general contracting firm, specializing in commercial construction; and a small custom residential design firm.
With the support of executive leadership, Smith has developed Adventist Health System Supply Chain Construction Services. Her team – which also includes an equipment planner and facilities technology architect – is responsible for overall management of in-house planning for all owner-furnished equipment, including medical equipment, IT/telecommunications, furniture, artwork, etc.
At first, there were concerns that the individual facilities might perceive the supply chain team as taking away local control, says Smith, who, along with West, spoke about Adventist Health System’s approach to construction management at this summer’s Premier Breakthroughs Conference in San Antonio, Texas. “But at the end of the day, the facilities welcomed this process and the large construction project template that it provides. We are now closely involved from concept to completion, taking control as an owner and providing clear direction among core team members, clear concise deliverables, and uniformity across the system.”
Managing big construction and renovation projects is more important than ever, given tightening money supplies, questions surrounding the impact of healthcare reform, and the complexities of mergers and acquisitions, according to those with whom the Journal of Healthcare Contracting spoke.
Healthcare construction has slowed down in the recent past, says Jeff Stouffer, principal and senior vice president, HKS Architects, Dallas, Texas. “There are fewer large-scale projects than we saw a couple of years ago, and we definitely notice more renovation.” The economy is partly to blame, and access to money is tight. What’s more, questions about the impact of healthcare reform are giving healthcare executives pause.
The economy has definitely cut back construction projects, says Chad Beebe, director of codes and standards for the American Society for Healthcare Engineering, a personal membership group of the American Hospital Association. But activity has been climbing steadily – if slowly – for the past couple of years. Much of that activity is renovation, says Beebe. “That’s because the cost of infrastructure is so high,” he says. At anywhere from $300 to $1,000 a square foot, building on a hospital campus is expensive. “So you try to stay within your existing footprint and maximize your space.”
“There is a lot of discussion – and a lot of uncertainty – about what healthcare reform might do,” says Beebe. Some designers are guessing that one immediate impact of reform might be an influx of patients into the emergency department. “We may see an initial surge, as more people become insured,” he says. But presumably, those patients will learn that routine medical services are best provided in non-ER settings, such as community centers and doctors’ offices.
Given questions surrounding the economy, healthcare reform and market dynamics, healthcare executives – and architects – are trying to maximize the adaptability of the structures they build or renovate, says Stouffer. “It’s being able to change as healthcare changes.”
Designing for maximum flexibility might mean anticipating changes in the OR, he says. “Just a few years ago, you would never have heard of an MRI in an operating room. Now it’s common practice.” If the movement toward outpatient care continues, it’s reasonable to assume that patients in inpatient facilities will be more critical than those in years past. “So when designing a facility, you may need to design all the rooms to accommodate critical care.” Designers face another challenge – creating facilities whose infrastructure can accommodate tomorrow’s IT technologies.
“The key is designing the future state before you design the building,” says Stouffer. HKS’s consulting group is busier than ever assisting clients to do just that.
One more change Stouffer notes is that toward lean project delivery. “The construction and design industry, which hadn’t done much innovating in 50 years, is starting to create a more efficient way to design and deliver the project.” General contractors, subcontractors, design teams, architects, engineers and others are collaborating to deliver projects better, quicker and less expensive. Prefabrication can help save money, improve quality, and speed up projects.
Three strategies for supply chain
Supply chain executives can play a key role in pre-construction and pre-renovation activities.
“Many of the standard divisions of construction specifications include areas of work in which Adventist Health System contracts directly with manufacturers/vendors,” says Smith. Examples include ceiling tile, drywall, paint, elevators, roofing, building environmental systems, flooring, lamps and ballasts, to name a few. These are typically included in the scope of work carried by the construction manager/general contractor.
Adds West, “Prior to AHS oversight, our experience was that design teams often did not specify appropriate products or manufacturers/vendors as contracted by AHS. [As a result], we were not able to validate that pricing was accurate per contracts, or that appropriate contracts were being honored; and it was difficult to capture the spend of material, particularly in these categories, which was creating missed opportunities for reported sales to Premier.”
“AHS involvement has ensured preferred partner participation and monthly tracking of construction manager/general contractor procurement and reporting of material bought, and cost,” says Smith.
Smith and West offer three strategies to align supply chain contracting and supply teams, and improve project coordination, scheduling and procurement:
- Learn the process; own it; take control and stay in front of it.
- Focus on alignment and relationships, with multi-disciplinary collaboration.
- Use clear, concise communication and clearly articulate direction and expectations.
Time traveler’s look at hospital design
If you were a time traveler from the year 2000 visiting today’s newest healthcare facilities, what changes would you note in patient rooms, surgical suites and emergency departments? Chad Beebe, American Society for Healthcare Engineering; and Jeff Stouffer, HKS Architects, offer some quick opinions.
Today’s patient room
Beebe: The biggest thing is, you’d see one patient, not two, or even four.
Stouffer: There’s a distinct area for the caregiver, the patient and the family. Hospitals are also counting on families being in the room; they’re inviting them into the care process. The other difference is flexibility; it can be transformed into a critical-care room if necessary.
Today’s surgical suite
Beebe: You might see some imaging equipment you’d never seen in an OR before, like MRI. That’s especially true in major specialty or educational facilities. Sometimes that imaging equipment is suspended, and can serve multiple rooms.
Stouffer: We see integration of radiology and surgery. Does it have an MRI or CT? A gamma knife? And we see larger rooms, for flexibility.
Today’s emergency department
Beebe: As an architect beginning my career 22 years ago, I remember walking through big new emergency department waiting rooms, seeing all these great spaces and things to help entertain people while they’re waiting. Now, the good ERs have only a few chairs, because they realize that it’s not about waiting, it’s about getting people seen and getting them out the door. There’s better patient flow.
Stouffer: The goal with most facilities is to drastically reduce the wait time in the emergency room. It’s more of an operational issue. So we see smaller waiting rooms. We’re also seeing more freestanding or outlying emergency rooms, especially for providers who want to establish market share and provide services closer to the patient.
Building for outpatient care
The acuity of care delivered in the outpatient setting has been steadily increasing over the past 20 years, says Chad Beebe, director of codes and standards for the American Society for Healthcare Engineering. That has affected construction. “An outpatient surgery center today is every bit like an inpatient [surgical suite]. You walk into a surgery department in a hospital, then in an outpatient facility, and you really can’t tell the difference.”
Says Jeff Stouffer, principal and senior vice president, HKS Architects, Dallas, Texas, “If you look at the premise of the Affordable Care Act, it provides care for all people.” In response, some hospital systems are focusing on adding beds. But those tend to be systems whose facilities are outdated, or that are bidding for greater market share.
The real action, in terms of construction, will be outpatient facilities that are integrated into the urban or suburban fabric, says Stouffer.
“The Affordable Care Act is shifting the focus away from treating illness, to covering the health of the population,” he says. “Caregivers are responsible for an entire population, so they need to get out into the community and focus on preventive care. There’s no better way to do that than to partner with schools and other community organizations. So I see hospitals moving into community centers and retail developments. Some of that is already happening, but I think we will see it in a more robust manner.” That represents tremendous opportunity for HKS, given its experience in designing education centers, hotels and community centers, he says.
“I think there will be a tremendous shift in the way communities and cities are designed. And I think the healthcare system will be a big player.”
M&As: Impact on construction
With more than 100 hospital mergers taking place in 2012 – double the number of three years earlier – it’s not surprising that administrators, supply chain executives and their colleagues in construction are considering the impact of mergers on construction and renovation. They may not have much time to ponder, however. Of the roughly 5,700 hospitals in the United States, about 1,000 will have new owners in the next seven years, according to consulting firm Booz & Company.
“If any construction projects are ongoing [at the time of the merger], they will be looked at to see how they fit within the new system,” says Chad Beebe, director of codes and standards for the American Society for Healthcare Engineering. One question executives will ask is, “Will both hospitals continue to perform as they did pre-merger, or will their missions change?” “Any prudent CEO will look at this and say, ‘Let’s pause on our projects and see that we’re going in the right direction.’”
A merger can affect construction in several ways, says Jeff Stouffer, principal and senior vice president, HKS Architects, Dallas, Texas. For example, it can tie up capital dollars, leaving little money for construction. Or it may lead to consolidation of services, creating the need for renovation or even new construction. “One facility may become the community hospital, another might become a specialty or tertiary medical center,” he says. If that’s the case, renovation or construction would probably follow.
Just as hospital systems step up their merger activities, so too do they continue to acquire physician practices – often with consequences for construction and renovation.
“We have had the good fortune to be working with progressive systems that have been doing this for years,” says Stouffer, referring to Salt Lake City, Utah-based Intermountain Healthcare as one example.
“They have an integrated physician network, so we began years ago creating what that office/clinic environment of the future might be on each of their campuses. I see this going forward even more with the new healthcare plan, where clinics and physicians offices are integrated in or adjacent to the hospitals.”
At one facility with which HKS worked, doctors’ offices, inpatient units and diagnostic/treatment areas for various disease states, such as oncology, are located on one floor, separated by atriums. (Better to separate physicians’ offices with something like an atrium than merge them with inpatient units, as the building requirements for an inpatient unit – considered a Group I occupancy, or institutional occupancy – are more complex than those for physicians’ offices – considered a Group B occupancy, or business occupancy.)
“There is an interesting complexity added when a hospital system buys a physician practice,” says Beebe. When a physician’s office is acquired by a hospital, its status may change to that of a hospital outpatient department. That can trigger changes in the conditions of participation, that is, conditions required to participate in Medicare and Medicaid, including incorporating the National Fire Protection Association life safety codes. “That could trigger some construction work in order to comply,” he says.
Mindful of costs, some hospitals and hospital systems are striving to incorporate so-called “green” practices into their construction practices.
“It’s definitely having an effect,” says Beebe. And that makes sense. Unlike many office buildings, which are heavily used 10 hours a day, then powered down for the night, hospitals are 24-hour-a-day operations, and using energy all the time. “You have more than twice the opportunity for potential savings” by incorporating green techniques.