Since the onset of the COVID 19 pandemic in March 2020, hospitals have faced a profound financial toll, with projections for the rest of the year indicating margins will be down 37 percent relative to pre-pandemic levels, according to a September 2022 American Hospital Association article.
Financial pressures like these make it more important than ever to integrate disciplines that help healthcare systems optimize their limited capital. A facility condition assessment (FCA) is just such a discipline, bringing into line one of a healthcare system’s biggest expenses – maintaining its built environment.
An FCA brings together financial and healthcare facility managers to build a centralized database of the healthcare system’s building inventory. It prioritizes assets essential to the organization’s mission and provides a credible expense forecast that optimizes return on investment. An FCA also can increase the reliability and extend the serviceable life of the institution’s building inventory.
An FCA is a living document that gives managers the understanding they need to set informed priorities for financing facility capital renewals. Such a tool should be flexible enough to allow the allocation of these expenditures in any given year but disciplined enough that the justification is clear for every dollar spent. It is most purposeful to the long-term owner with buildings essential to carrying out the mission of the organization, like a hospital.
A matter of timing
The timeline required for completing an FCA varies by scope but can take about three months and typically includes:
- a systematic inventory of building and site infrastructure components
- determining operational condition
- documentation of observed deficiencies
- development of a prioritized multi-year forecast of costs for maintenance, repair and capital investment.
Some managers initiate an FCA at the time a building opens to set a baseline against which the living database is updated regularly. Others might take place decades into ownership, investing as their awareness of the need suggests. Still others are driven to action by a triggering event, such as a fire, flood, failure or repurposing of the structure.
At any stage, the three elements that are critical to a healthcare system effectively leveraging an FCA as a planning tool stay the same – reliable data, a trusted process and CFO-level financial modeling that justifies the spend.
There must be thorough awareness of the healthcare system’s building inventory to effectively budget to manage it: the way it is heated or cooled; its maintenance history, lifecycles and replacement costs; and where everything is and to what degree each component is essential to the organization’s mission.
Healthcare systems are about improving the clinical outcomes and experience of its patient community. If reliable FCA data and its analysis demonstrate that a hospital can responsibly push out a roof replacement for a year or two or three, that frees up funds to serve its mission more directly with the purchase of lifesaving equipment, funding needed programs or recruiting high-value talent.
Reliable FCA data must be current and thorough and provide clear rationale for measured investment in building maintenance over time that can be planned for. That requires a trusted process.
A trusted process
An effective FCA process is understood and followed so that confidence exists when budget numbers are presented.
Analyzing the building condition data already in hand and its quality can help narrow the scope of an on-site assessment. Is it in electronic format? Does it have the necessary detail to accurately represent condition? This internal evaluation can include a review of records for facility components, building assets, deferred maintenance, and a system cost catalog.
A normalization effort can reveal data errors and shortcomings and the degree to which an on-site effort is needed if the data is insufficient. Some of the questions in this preliminary review include:
- Does the data accurately reflect the building systems that would pose the greatest risk to the organization’s mission should they fail?
- Is the data frequently updated, or are there processes in place to update or make the data current?
- Does the organization feel confident in the accuracy of the data?
- If not, what are the major concerns or clues that lead to this conclusion?
A model built for CFOs
The most successful organizations ensure the CFO and the facility manager or their designees are on the same page as they get an FCA system in place for the long-term maintenance of and investment return on the building inventory.
Before conducting or contracting for an FCA, managers need to determine the best approach for sustaining data collected as part of the project. Consideration should be given to training and defining processes and workflows, as well as in-house vs outside resources necessary to sustain the data. Frequency of data analysis and review dictates how accurate the data needs to be. If the intent is to make the FCA data an active part of capital replacement decision making, assuring the data’s continued integrity is imperative.
Recent studies report that nearly 40 percent of facilities managers will retire in the next several years, taking decades of institutional knowledge with them. This challenge is just more motivation to act now to establish a baseline and institutionalize an FCA program that provides that data to optimize the investment needed to manage mission-critical buildings and systems.
David Schultz is a national facilities asset management consultant with Terracon. He has more than 15 years of experience in maintenance, operations and construction management and engineering consulting. Schultz has performed facility condition assessments and property condition surveys of institutional, healthcare, high-density residential, commercial and industrial facilities to determine deficiencies and required repairs and improvements to buildings and sites.