Subject: July, 1999 Items of Interest
Date: 7/15/99 7:44 AM
KIRKWOOD ASSOCIATES / JULY, 1999 HEALTHCARE ITEMS OF INTEREST.......
1) NORTHWESTERN MEMORIAL HOSPITAL
2) WHITESTONE RESEARCH / M & R FORECASTING
3) QUEST FOR QUALITY IN HEALTHCARE CONFERENCE
4) ECONOMIST SURVEY OF E-BUSINESS
5) KAISER-PERMANENTE NFS "TEMPLATES 2000" INITIATIVE
6) McGRAW HILL FACILITIES ENGINEERING & MANAGEMENT HANDBOOK
7) MODEL CAFETERIA PROJECTS
8) ASHE LISTSERVES INITIATED
1) NORTHWESTERN MEMORIAL HOSPITAL
Two of our list members, Hank Winkelman of HOK in St. Louis / Chicago and Rebel Roberts of VOA in Chicago, figure prominently in an article on the replacement Northwestern Memorial Hospital featured in the the June, 1999 issue of Building Design & Construction. Hank and Rebel and their respective firms were associated with the Ellerbe Beckett firm in the design of the new facility, which recently opened.
2) WHITESTONE RESEARCH / M & R FORECASTING
Whitestone Research <www.whitestoneresearch.com> has released an interesting little study performed for the U.S. Military which illustrates an important concept in facility asset management.
The study forecasts total facility spending for 1.) routine maintenance (i.e., PM & minor repairs); 2.) unscheduled maintenance (i.e., corrective); and 3.) major repairs and replacement. Since the study was developed for the government, the normal distinctions that we all make between capital expenses and operating expenses did not apply. In most entities to which the accounting rules apply, #1 is always operating and for the most part so is #2. On the other hand, #3 is almost always capitalized.
The study developed forecasts for three types of facilities:
• research hospital (academic medical center)
• community hospital
• "troop medical clinic" (ambulatory care)
The average annual forecast costs per square foot for Maintenance & Repair are given in the table below (I hope that the columns line up after making the trip over the Internet).
| Average Annual Costs per Sq Ft * |
| First Year Over 5 Years Over 20 Years Over 50 Years |
| |
| Research Hospital $1.29 $1.44 $2.51 $3.11 |
| Community Hospital $1.14 $1.28 $2.16 $2.84 |
| Troop Medical Clinic $1.04 $1.15 $2.32 $2.56 |
| |
| *For buildings located in Washington DC. Costs are expressed in undiscounted $1998.|
The "first year" costs might be considered a close estimate of routine maintenance, recurring every year. As the time horizon stretches out to 5 years the impact of unscheduled maintenance is seen. In fact, I would suggest that the difference between "First Year" and "Five Year Average Annual" costs amounts to the risk-based portion of maintenance costs -- the reserve that one should prudently plan to cover breakdown maintenance, the repair of unforeseen equipment and system failures.
Note that this assumption yields a ratio of 90% routine (i.e., for the research hospital category, $1.29 divided by $1.44), 10% unscheduled. Of course, the routine category includes both PM and "minor repairs" that recur annually.
As we look at the 20 and 50 year time horizons we see the impact of life cycle repair / replacement costs. We can turn to the R.S. Means M&R Cost Data publication for an illustration: Preventive maintenance on a 200 ton water-cooled chiller (with a service life of 20 years) runs less than $1,000 annually according to Means. However Means predicts a major repair (amounting to a rebuilding) on the chiller after 10 years, to the tune of $76,000, and replacement after 20 years at $171,000. If we take $171,000 as the Currrent Replacement Value (CRV) for the chiller, then over its life cycle the forecast spending is (20 x ($1,000) + $76,000) / 20 = $4,800 average annual spending, or approximately 2.8% of CRV annually.
So the Whitestone figures above indicate that what we normally think of and budget as "Maintenance" in the annual operating budget only accounts for about 40% to 45% of the total forecast spending (both operating expense and capital expense) associated with a building and its fixed equipment and systems.
Failure to identify and accomplish the right routine maintenance shortens service life of key building components and equipment. Failure to plan, budget, and implement life cycle repairs / replacements in a timely manner puts the institution at higher risk of interruptions in building services from equipment failures and drives the eventual cost of repairs up sharply (since breakdown repairs are much more costly).
The management of building component and equipment life cycles is a real challenge, requiring special planning tools, good data, and insight into the institution's long range business strategies and consequent space / facilities requirements.
3) QUEST FOR QUALITY IN HEALTHCARE CONFERENCE
>The Quest for Quality and Productivity in Health Services Conference
>
>Join your colleagues in Washington, D.C., August 29-September 1, for
>the Quest for Quality and Productivity in Health Services Conference,
>a spectacular four-day event targeting performance
>improvement in healthcare.
>
>This is your opportunity to translate strategy into action. Top
>quality speakers from across the country will share their knowledge.
>There is no better way to learn than from professionals who have
>faced your challenges and conquered them. Take home established
>techniques for improving quality and productivity in health services.
>Learn from the experts, and contribute your own experience and
>knowledge.
>
>Visit http://www.iienet.org/conted/qqphs99.htm for an online
>brochure, including educational session descriptions and
>preconference workshops. You can also call 1-800-494-0460 or
>770-440-0460 for a complete Quest for Quality conference brochure.
4) ECONOMIST SURVEY OF E-BUSINESS
The June 26 edition of The Economist contains an excellent survey of "e-business," the business-to-business side of the internet. The corresponding leader is copied below. It's interesting to think about what impacts business-to-business use of the internet will have on the administrative & overhead costs of healthcare delivery. Clearly there will be implications for materials / supply chain management as well as for reimbursements & payor relationships.
For reprints try the Economist web site <www.economist.com> or get a paper copy of all the survey articles for $3.75 from the Reprints Department, The Economist Newspaper Group, Inc., at (212) 541-5730.
>When companies connect
>
>"THE full importance of an epoch-making idea is
>often not perceived in the generation in which it is made... A new
>discovery is seldom fully effective for practical purposes till many minor
>improvements and subsidiary discoveries have gathered themselves around
>it." Thus Alfred Marshall, a British economist, writing in his "Principles
>of Economics" more than 100 years ago. Nobody today could doubt that the
>Internet is an epoch-making idea. And the minor improvements and
>subsidiary discoveries that will enhance its use are taking place at a
>speed unimaginable in Marshall's day-partly because the process of
>invention has been refined and accelerated since then; partly because the
>Internet itself encourages improvements to spread instantly around the
>world; and partly because there is a lot of money available to back bets.
>Even so, it is still unclear what the greatest impact of the Internet will
>turn out to be.
>New technologies have always changed the world in unforeseeable ways. Who
>could have imagined, when the first car rolled along a road, how that
>invention would alter shopping, urban design or courtship? When Faraday
>experimented with electricity, who foresaw the coming of the skyscraper,
>its lifts driven by electrical power, or the movement of women into the
>workplace, their domestic productivity transformed by the washing machine
>and vacuum cleaner? What connection did anyone make between the arrival of
>television and the future of political debate, or of branded goods? It is
>a cliche to say that "the Internet changes everything": the challenge now
>is to guess what, how and how quickly.
>
>Wiring the familiar
>
>It may, as Marshall suggested, take a generation to see how the Internet
>reshapes society and human behaviour once it becomes a mature technology.
>But the reshaping of business is already happening, and much faster than
>is often appreciated (see our survey after page 62). Most popular guesses about the Internet's
>commercial future have concentrated on fashionable new companies run by
>geek billionaires. It is dizzyingly rated firms such as Amazon, Yahoo! and
>eBay that have hogged the limelight. Yet far more significant is the
>effect the Internet will have on established companies.
>One forecast: although a few familiar names and even whole businesses may
>vanish forever, most large companies with established brands should
>survive and prosper from the spread of the Internet. Ten years hence,
>Amazon is unlikely to have wiped Barnes & Noble off the face of the earth,
>and E*Trade will probably not have killed off Merrill Lynch. Indeed, it is
>the move of established firms on to the Internet that seems likely to
>drive this technology forward to maturity. "The storm that's arriving,"
>said Lou Gerstner, chief executive of IBM , a few weeks ago, "is when the
>thousands and thousands of institutions that exist today seize the power
>of this global computing and communications infrastructure and use it to
>transform themselves. That's the real revolution."
>In the immediate future, that revolution will not be mainly about how
>business communicates with and sells to consumers. That is indeed
>changing, but it is likely to happen on a smaller scale, and more slowly,
>than the change in the ways that businesses communicate and trade with
>each other; and also than the changes within companies.
>Thus, business-to-consumer electronic commerce remains modest in
>scale-perhaps $8 billion last year in America, according to Forrester, an
>American consultancy, compared with $43 billion-odd of
>business-to-business e-commerce. In the near future, retail commerce may
>hit obstacles. It has grown faster inside the United States than outside
>it, even though the biggest impact of the new technology may well be felt
>when consumers learn to use the border-hopping properties of the Internet
>to shop all round the world. In Europe, the Internet will help to turn the
>single currency into the foundation of a genuine single market for
>consumers. Yet Europeans are less prepared than Americans to buy
>electronically: they are less likely to have credit cards, have less
>experience of mail-order shopping, and are generally more conservative in
>their shopping habits. Even in America, reckons Forrester,
>business-to-consumer commerce in 2003 will be worth no more than $108
>billion, less than Wal-Mart's 1998 sales.
>Business-to-business e-commerce, in contrast, might well top $1.3 trillion
>in 2003. For all sorts of reasons, businesses are more likely than
>consumers to buy and sell online. They are better equipped and connected,
>more used to trading at a distance, more cost-conscious. Besides,
>electronic corporate trading has a rapid multiplier effect. Once large
>firms move their purchasing online-as, say, GE has done with its Trading
>Process Network, on which suppliers can bid electronically for components
>contracts-business partners and suppliers will have to do the same. It
>will become progressively harder for firms that cannot or do not want to
>trade online to survive.
>
>The Hollywood effect
>
>Nor will it be only trading between companies that is transformed.
>Companies themselves are likely to be reshaped. Managers will find that
>the Internet gives them lots of ways to do things better, faster and
>cheaper than now. Improvements in efficiency will come from switching
>paper-shuffling online, from reducing transaction costs, from making
>information more widely and quickly available, and from using it more
>effectively. The long-awaited computer-driven boost to productivity, not
>least in management, is about to arrive.
>The boundaries of companies will also change. Once, a Hollywood studio
>employed everyone from Humphrey Bogart to the lighting technicians. Today,
>it is more like a finance-house-cum-marketing-department. Studios have
>retreated to their core roles: for a film, they now assemble the teams of
>self-employed people and small businesses that are today's stars and
>technical support. The Internet will push other industries in the same
>direction. Companies will find it easier to outsource and to use
>communications to develop deeper relations with suppliers, distributors
>and many others who might once have been vertically integrated into the
>firm. Indeed, vertical integration is likely to become less attractive;
>instead, the diplomatic art of managing ad hoc partnerships and alliances
>will become a key executive skill.
>Many companies may end up as loose agglomerations: networks of smaller
>firms or individuals bound together by corporate culture and
>communications. And not only companies. The public sector could follow
>suit, as governments find that provision of services becomes easier to
>monitor and measure-and so to outsource-in the new world of the Internet.
>Hollywood-style government: now there's an epoch-making idea for our wired
>future.
5) KAISER-PERMANENTE NFS "TEMPLATES 2000" INITIATIVE
Visit this page <http://www.kaiserpermanente.org/nfs/docs/news/templates.html> to learn about Kaiser-Permanente's new "Templates 2000" program, aimed at "developing room, departmental, and in some cases entire building templates that draw on the best practices in facilities operation, design, and construction across and outside of Kaiser Permanente."
6) McGRAW HILL FACILITIES ENGINEERING & MANAGEMENT HANDBOOK
The "magnum opus" of facility management, FACILITIES ENGINEERING and MANAGEMENT HANDBOOK: AN INTEGRATED APPROACH, to be published by McGraw-Hill Book Company, is coming together at <http://members.aol.com/HlthCareEE/index.html#top>. It's a simple but interesting example of web-based collaboration by the numerous authors of this text. By the way, Chapter 8 of the Handbook will be devoted to healthcare facilities issues, as detailed in the Table of Contents below, and includes several colleagues of our Partners Healthcare list members as contributing authors:
>08 Chapter 8 - Health Care Facilities (70 Pages) (Anand Seth, Editor)
> 0801 Planning and Programming Process for Health Care
>Buildings/Facilities [Harvey Kirk AIA, The Stubbins Associates] (5P ?F ?T) #
> 0802 Planning and Programming Process for New Health Care Facilities
>[Same] (5P ?F ?T) #
> 0803 Planning and Programming Process for Modifying or Renovating
>Health Care Facilities [Same] (5P ?F ?T)
> 0804 Engineering & Design Process [Eugene Bard PE, Arjun Rao PE &
>Kevin Sheehan, BR+A Consulting Engineers, Inc.] (10P 0F 0T) #
> 0805 Special Engineering and Design Process for New Health Care
>Facilities [Harvey Kirk AIA, The Stubbins Associates] (7P 0F 0T) #
> 080501 Facility Layout [Same] (2P 5F 0T)
> 080502 Special Systems and Needs [Same] (2P 2F 0T)
> 08050201 Medical Waste Management [Jorge A. Emmanuel Ph.D. PE
>CHMM, The Environmental & Engineering Research Group; Consultant, EPRI
>Healthcare Initiative] (10P 3F 4T) #
> 08050202 Clinical Technologies (7P ?F ?T)
> 08050203 Pharmacological Control (7P ?F ?T)
> 08050204 Dietary (4P 0F 0T)
> 080503 Structural Systems [Michael Brainerd, Simpson Gumpertz &
>Heger, Inc.] (2P 0F 0T)
> 080504 Electrical Systems [Arjun Rao PE , BR+A Consulting
>Engineers, Inc.] (15P ?F ?T) #
> 080505 Mechanical Systems [Eugene Bard PE, & Kevin Sheehan, BR+A
>Consulting Engineers, Inc.] (15P ?F ?T) #
> 080506 Unique Systems and Components [Harvey Kirk AIA, The
>Stubbins Associates] (4P 3F 2T)
> 0806 Special Engineering & Design Process for Adding to, Modifying or
>Renovating Existing Health Care Facilities (1P 0F 0T)
> 0807 Construction, Modification/Renovation & Demolition/Site
>Restoration (4P 0F 0T)
> 0808 Maintenance for Health Care Facilities (4P 0F 0T)
> 0809 Management of Patient Care Environment [Anand Seth PE CEM,
>Partners HealthCare System and Rick Cotter, Medsafe] (5P 0F 1T)
> 0810 Utilities Management Program [Same] (2P 0F 0T)
> 081001 HVAC Systems [Same] (2P 0F 0T)
> 081002 Plumbing Systems [Paul Sullivan, R. W. Sullivan Co.] (2P 0F
>0T) #
> 081003 Steam Systems [Anand Seth PE CEM, Partners HealthCare
>System and Rick Cotter, Medsafe] (2P 0F 0T)
> 081004 Electrical Systems [David Stymiest PE SASHE CEM, Partners
>HealthCare System] (10P 0F 0T) #
> 081005 Medical Gas Systems [Paul Sullivan, R. W. Sullivan Co.] (5P
>0F 0T) #
> 0811 Fire Safety Management Program [Jack McCarthy , Environmental
>Health and Engineering] (15P 0F 0T) #
> 0813 Environmental Health & Safety Management Program [Jack McCarthy &
>Nanette Moss, Environmental Health and Engineering] (10P 0F 0T) #
> 0814 Personnel & Materials Movement/Transport Systems [James Fortune,
>Lerch Bates] (0P 0F 0T)
7) MODEL CAFETERIA PROJECTS
One of my clients recently inquired about functional planning / programming for a public / staff cafeteria in an academic medical center (600 bed hospital, zillions of outpatient visits, thousands of staff, residents, medical students, etc.). The goal involves both an improvement in cafeteria aesthetics and an improved bottom line ($$$) for the cafeteria operation.
Does anybody have any "cafeteria re-do success stories" that I can pass along to my client? Is anybody else contemplating such a project? If so, please let me know. Thanks in advance.
8) ASHE LISTSERVES INITIATED
On June 22 ASHE (American Society for Healthcare Engineering) initiated four "ListServes" or mailing lists, dedicated to the following topics: Environmental Health & Safety, Clinical Engineering, Facilities Management, and Codes & Standards. ASHE members can subscribe to the lists by visiting the ASHE web site <www.ashe.org>.
