Healthcare leaders are responsible for creating and maintaining a comfortable, safe environment for patients, visitors and staff. In this pursuit they are often challenged by deferred maintenance, lack of funding and dated technology. Achieving their desired goals are not out of reach, but it does require planning and research beforehand – much like buying a car.
For most of us, when it’s time for a new set of wheels, we have a goal in mind for what type of car we want, whether it’s fast, safe, fuel efficient or a combination of everything. After the initial research is complete and you have the end goal in mind, you head over to a dealership to test drive different models and make the final decision. The last step is a trip to the financing office where you figure out how you’ll pay for the car.
What if that process was reversed? What if you never even took the test drive or picked the model or color, would you feel compelled to jump into negotiations with the financing department? Of course, not – and the same should be true for healthcare leaders looking to make infrastructure upgrades that will make their hospital safer or more efficient. Healthcare leaders should be taking an outcomes-based approach to improvements and then determine which procurement option makes the most sense based on their specific needs.
For example, hospitals use a large quantity of energy as their buildings are always on and operating. Where most facilities – like a school or office building – can turn off at night, hospitals are running lights, medical equipment and HVAC systems 24/7. Because of this, hospitals typically spend about two percent of their overall budget on energy, a large expensive given the amount of additional expenses they accrue. In this scenario, the end goal is cutting back on energy use. One way to accomplish this is through upgrades to building automation systems and LED lighting. This can help ensure that only the energy needed to run these solutions are being used and can even be programed to only be in use when needed – think lights that automatically turn off when a person exits a room or lights that automatically get brighter during surgery. Not only would this help cut back on energy use, but improving the environment a patient is being cared for in also helps healthcare facilities address another prominent goal – improving patient care.
With a plan in place, it’s now time to think about how you can finance all these improvements on what’s likely a limited budget. There are several procurement methods that can help a healthcare facility meet their goals with different levels of ownership attached.
• Buildings or Infrastructure as a Service: By transferring ownership, healthcare leaders can show up and do their core business, while a service provider ensures the availability and quality of the building or infrastructure, which therefore manages risk. The facility is billed periodically over the concession term for results and outcomes such as uptime, capacity and plant output while their private sector partners hold the asset either through outright ownership or under a limited term ground lease or concession agreement.
• Design, Build, Finance, Operate and Maintain (DBFOM): This approach lets a healthcare facility transfer risk to an operator or third party without transferring ownership.DBFOM arrangements involve contracting a third-party consortium of companies who assume the full risk of designing, building and operating the asset, while the facility pays over time via output or availability.
• Performance Contracts (PC, EPC, ESPC): Driven by legislation at the local and state level, where energy and operational savings are used to offset the cost of building improvements through savings over a fixed period. An Energy Service Company (ESCO) guarantees the savings and will pay if the savings targets are not met.
• Design-Build (Energy Services Contract [ESC] or DBIA Agreement): Typically used for a traditional construction project, an ESCO uses a business case to support the offer to design and install infrastructure improvements benefiting utilities, maintenance, operations, and capital savings. This may or may not show a payback during the finance term and may not come with a performance guarantee.
Healthcare leaders are continuously working to improve patient care and comfort levels, while also keeping overall safety and operations in mind. While the available technologies and solutions may change, the end goal remains the top priority and driving force behind infrastructure improvements. Procurement methods and other mechanisms are available to make sure those goals can be met. But, like buying a car, financing is a means to an end, not the main goal. Focus on the outcome and the rest should follow.
Fawn Staerkel is the director, Healthcare, Performance Infrastructure business for Johnson Controls, Building Solutions North America.