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California Summit Highlights Need for Agility & Flexibility in Healthcare Facilities Investments

 | Published on 1/23/2019

As healthcare costs continue to skyrocket, facility managers are being urged by healthcare leaders to take greater responsibility in helping to reduce costs. Perhaps nowhere is this more challenging than in California where healthcare construction is rampant. Many systems are retrofitting or building new to meet the state’s seismic compliance mandates. Others are simply following the industry shift to greater outpatient offerings. The result is that facilities managers are being tasked with becoming more strategic in their investment decisions, agreed many of the presenters during the Dec. 2018 California Hospital, Outpatient Facilities & Medical Office Buildings Summit, organized by SquareFootage.net.


That has not always been the case. While serving as a Chief Administrative Officer, Facilities Planning and Management, at UC San Diego Health, Patrick Daniel asked 21 individual departments a simple question: “Do we need another medical office building?”


As Daniel shared during the Dec. 2018 California Hospital, Outpatient Facilities & Medical Office Buildings Summit, seven of those departments split dramatically by providing a growth forecast that would support a freestanding MOB dedicated solely to their department. He noted, “I have never seen such creativity in healthcare as forecasters for certain departments they represent … They’ll find the literature to support the assessment and assume that every exam room will always be full.”


The reality however is that these investments need to be made strategically, with annual planning that can keep health systems more agile. Daniel suggested five steps for more strategically planning facility investments:

  1. Develop the strategic plan and update it annually. “Strategic plans move at such a pace that you have to learn on the fly,” Daniel said. “You must keep your capital plan updated annually.”
  2. Perform a financial analysis.
  3. Create a capital plan.
  4. Define the delivery plan by pinpointing the right programs at the right location.
  5. Program the building for right size at the right cost profiles.

Gary Dunger, Business Process Manager, eServices, at California Office of Statewide Health Planning and Development, Facilities Development Division, provided additional tips for making these facility projects more agile: “Be realistic about the time it takes to deliver a California hospital project. OSHPD review time takes as long as it does, so be ready for it,” Dunger commented.


Dunger adds that improving initial planning, imposing adequate project management controls and adhering closely to the original plan can help speed the agency’s approval process and help healthcare systems to better manage their costs.


“Know precisely what you want before you start,” Dunger advised.


Of course, many systems are opting to repurpose space, particularly in more congested areas. Michael Monaldo, VP/Facilities Development & Corporate Real Estate, at John Muir Health noted that repurposing space is virtually unavoidable in the Bay Area where real estate parcels large and small are scarce and expensive. When done carefully, it can be a successful strategy for growth. ““The Bay Area is a dense place, so you have to get creative by acquiring multiple parcels and repurposing them, for example,” he said.


Monaldo noted that there’s ample support for projects of this nature. “There’s a phenomenal amount of private equity flowing into our space.” He found that private equity investment accounted for 30% of total volume of projects in 2017 but nearly doubled to 59% in 2018.


There’s little expectation that the rampant pace of projects is expected to slow. “We’re busy with no signs of slowing down in the next 18 months or so,” commented Mike Conn, Senior Vice President, Meridian.


To read the full event highlights, visit 
http://www.squarefootage.net/2018_summit_SFOrecap.html.


Looking for a regional event near you? Find the full 2019 event listing at 
www.squarefootage.net.


Patrick Daniel, former UCSD Chief Administrative Officer,
Facilities Planning & Management and Capital Committee Chair


Gary Dunger, Business Process Manager, eServices,
at California Office of Statewide Health Planning and 
Development, Facilities Development Division


Michael Monaldo, VP/Facilities Development &
Corporate Real Estate, John Muir Health


Mike Conn, Senior Vice President, Meridian