Healthcare Master Planning

A NEW MASTER PLANNING APPROACH

Our objectives

· Differentiate ourselves

· Create a call to action

· Be highly readable and reproducible

· Get printed in Architectural Record, Health Care Facilities, the HFMA journal

· Use as a basis for a seminar presentation

Careers are made in facility master plans: they prove a leader’s ability to predict, inspire, and manage. Failure can be catastrophic, success exhilarating. This article provides the logic, information, and experiences leaders need to make good decisions.

WHAT IS MASTER PLANNING?

Master planning no longer means simply site or campus planning. A master plan has become a business-smart capital plan that answers the vital leadership question, “What facilities must we have to support our goals over the next ten years?”

Master planning, therefore, is not just about the campus, but the entire network of facilities, including those of affiliates. It is a complex task for which few architectural firms or brokerages have the training.

Master planning is too often driven by a transaction or a dire space need. Decision-makers must be absolutely clear on their objectives or, even though they solve today’s space or cash crunch, they hog-tie their operation for decades.

INTEGRATED FACILITY PROGRAMMING

Core logic

Every facility decision has three elements: geography, space use, and finance. Some of the links are obvious: for example, a geographic analysis of a market area’s potential will help decide how much space to have. Other links are subtle: a workflow analysis may hold the key to finding new operating gains—and an opportunity to boost ROA by reconfiguring spaces.

Each facility objective is driven by one or more strategic objectives. A strategic objective to be “first to market,” for example, will affect decisions about clinic locations and the supporting spaces back on the campus. A different objective, such as “protect market share,” will lead the facility decision in a different direction.

A typical strategic plan, with objectives for marketing, operations, staffing, and corporate finance, will generate forty to fifty important, measurable facility objectives. Failing to define all these objectives correctly at the beginning will guarantee a failed master plan.

Facilitation

Every leader has his or her own need for information and consensus. That said, master planning decisions need the perspective of managers responsible for finance, operations, staffing, and marketing: facilities affect every aspect of an organization. An architect’s experiences and skills are obviously essential: master planning is the most valuable service an architect provides, and the leader should select an architect with good facilitation skills, solid business sense, and a proven planning methodology—not just a portfolio of site plans and pretty pictures.

A broker may be able to provide useful local real estate knowledge, but the real estate value of buildings or land is, in the long run, less important than their operating value to the enterprise. Many master plans are skewed by the excitement of a transaction.

Basic steps

The basic sequence in the master planning process is:

1. Establish detailed facility objectives to support strategic objectives

2. Develop the right information to understand the situation and to forecast needs

3. Create, refine, and score alternatives

STEP 1: ESTABLISH OBJECTIVES

Its facilities must help an organization meet important strategic goals. Strategic goals for marketing, operations, staffing, and corporate finances will define facility objectives for location, size, layout, image, and project financing.

A strategic goal to increase operating efficiency may suggest a facility objective to streamline a layout or to relocate to optimize centralized material management. A strategic goal to attract a certain kind of staff may suggest relocating to a better labor pool or updating a facility’s appearance or both. A corporate strategy to find working capital to fund an acquisition often settles the lease versus own question.

STEP 2: DEVELOP THE RIGHT INFORMATION

Geography - Basic theory

The three key elements of geographic analysis are market areas, labor pools, and the transportation web. How does this relate to the architect’s master planning? Geography has always been the context of architecture; an understanding of socio-economic geography is the best way to understand market areas and decision patterns, staff distribution, and the complex transport web that moves people and things among the facility network.

Staffing is a huge constraint in facility planning. It is one thing to recruit for positions on a large campus, where there are personal networks and known success; it is another thing to assume twenty terrific staff members can be found to operate a facility that may not yet exist.

SPACE USE INFORMATION

Myths and mistakes

Site plans, floor plans, and renderings are important parts of any master plan. But it is false progress to publish these powerful drawings too quickly. An analysis of need—called a space use program—is a better starting place. A master plan is not first about how much space can fit on a campus or a remote site, but about understanding what is the right mix of spaces to have when.

New services, new technologies, new work methods mean new kinds of spaces. Starting with a floor plan does not let planners reexamine the intricacies of how they use space; it is intellectually lazy. Similar organizations will use space very differently. Only dentists and veterinarians can use floor plans downloaded from the internet.

A space use program breaks space requirements into their component parts: size, adjacencies and infrastructure. This abstracted data can then be compared to benchmarks, not to adopt without question, but to stimulate useful conversation before making these near-permanent decisions.

Quantifying space use data is essential for successful master planning: this data can be used to a) record calculations of capacity requirements, b) conduct early project budgeting and financial analyses by department or room type, and c) create useful comparative graphics of space mix and use trends. Thinking of a square foot of space as a unit of capital is extremely helpful in making capital allocation decisions.

Basic theory

Some tough issues in space use planning are issues of centralization and long-term flexibility. It is best to use workflow diagrams to analyze the sequence and frequency of activities.

Usually the most senior managers are more willing to pay for flexibility than intermediate managers. Perhaps this is because the people at the top see just how volatile and uncertain the future is. In any event, the master planner should create a menu of tools for both physical and financial flexibility, ranging from over-sizing the air conditioning equipment to providing financing options to extract or draw down underused capital.

FINANCE INFORMATION

Finance is part of architecture and master planning; financial limitations are as real as zoning restrictions or soil conditions. Financial, like master planning, is all about capital allocation. Knowing what the ROA should be for a certain service line is critical to master planning decisions about location and space use.

Myths and mistakes

Complex discounted cash flow analyses, like IRR and NPV and other variations, can actually paper over the gut-wrenching decisions for which executives earn their pay: how much market share will we gain and what revenue will we capture? Can we really leverage our technologies investments to use fewer staff and, therefore, less expensive space? What will payroll costs be in five years? Reams of spreadsheets prevent decision-makers from looking these subjective, but essential decisions in the eye.

Another common mistake is to think of a facility as only an expense; it is an investment. Of course the CFO should get a good deal, but that does not mean making an uninformed investment. No responsible CFO would call buying a hundred $10 stocks better than fifty $20 stocks because he got more of the cheaper ones, yet many facility planners assume that cheaper is always better. This is probably because few facility planners help their clients frame the financial decision appropriately.

Basic theory

The simple spreadsheet shown here is a powerful facility planning tool. It confront decision-makers with the tough questions about whether or not a master plan alternative will, by virtue of its location and design, materially affect and income statement. Yes, these are very difficult judgments to make, but they need to be made. A good master planner will have provided the logic, information, and experience to help the hospital managers make these projections.

Operating margin per square foot is a simple, yet solid basis of comparison. While there are no external benchmarks—just as ROA comparisons are difficult—it does create a sensible goal for planners wanting to find the very best investment. While the real estate firms have valuable information, the primary issue is not what the real estate is worth today, but how well the buildings work for the hospital long into the future.

STEP 3: CREATING ALTERNATIVES

The Statement of Facility Objectives is the instruction book for assembling all the pieces of information into the best possible solution. The master planning team should create two or three realistic alternatives, each of which meets the Objectives. These can then be compared, blended, and then distilled into the one best decision.

A facility master plan shows how to have the right building in the right place at the right time. A well-located building brings the right people to your door; an efficient building or buildings let everyone do satisfying work every day; a beautiful building is an undying source of creative energy every day.

With the right logic, information, and team, leaders can make facility decisions that point the way to a better future and provide the entire organization the means to get there.