The Compelling Business Case for Building Better Hospitals The Quality Colloquium August 20, 2008 Blair L. Sadler, JD Past President/CEO Rady Children’s Hospital, San Diego Senior Fellow, Institute for Healthcare Improvement

Learning Objectives How to balance initial capital costs with ongoing operating costs and savings How to balance initial capital costs with ongoing operating costs and savings Ten steps to successfully implement the business case in collaboration with hospital leadership Ten steps to successfully implement the business case in collaboration with hospital leadership A return on investment framework (ROI) that you can use to measure the impact of an evidence based design innovation A return on investment framework (ROI) that you can use to measure the impact of an evidence based design innovation

DEFINING EVIDENCE-BASED DESIGN Evidence-based design is the deliberate attempt to base building decisions on the best available evidence with the goal of achieving the best possible outcomes for patients, families and staff while improving utilization of resources Evidence-based design is the deliberate attempt to base building decisions on the best available evidence with the goal of achieving the best possible outcomes for patients, families and staff while improving utilization of resources

The Good News There is significant evidence published in peer reviewed journals that shows a relationship between environmental evidence based design interventions and improved safety/quality outcomes for patients, families and staff There is significant evidence published in peer reviewed journals that shows a relationship between environmental evidence based design interventions and improved safety/quality outcomes for patients, families and staff This is true whether looking at existing health care environments (low cost, high impact) or building new ones (higher cost, high impact) This is true whether looking at existing health care environments (low cost, high impact) or building new ones (higher cost, high impact)

The Bad News Most hospital leaders do not understand the powerful connection between evidence based design and their overall strategic and business objectives Most hospital leaders do not understand the powerful connection between evidence based design and their overall strategic and business objectives These leaders and their boards do not realize the compelling business case in support of evidence based design innovations because they do not understand the positive impact on operating cost savings and revenue enhancements These leaders and their boards do not realize the compelling business case in support of evidence based design innovations because they do not understand the positive impact on operating cost savings and revenue enhancements

Balancing Capital Costs & Operating Savings The Fable Hospital

Recent Events Strengthen the Business Case CMS Pay for Performance CMS Pay for Performance NQF Never Events NQF Never Events CMS No Payment for Certain Harm and Infections – Other Payers Are Following CMS No Payment for Certain Harm and Infections – Other Payers Are Following HCAPS survey—Raising the Patient Satisfaction Bar HCAPS survey—Raising the Patient Satisfaction Bar Hospitals will no longer charge for harm they cause, regardless of the payer Hospitals will no longer charge for harm they cause, regardless of the payer

From Ideas to Action: Ask Question #6 1. Urgency/Need? 2. Appropriateness of Solution? 3. Relative Cost per Square Foot? 4. Overall Financial Impact? 5. Sources of Funds? 6. Incorporate Evidence-based Design?

THE NEW REALITY REQUIRES A NEW VALUE PROPOSITION THE NEW REALITY----HOSPITALS FACE GREATER TRANSPARENCY AROUND PATIENT + WORKFORCE SAFETY/QUALITY ISSUES THE NEW REALITY----HOSPITALS FACE GREATER TRANSPARENCY AROUND PATIENT + WORKFORCE SAFETY/QUALITY ISSUES PROGRESSIVE HOSPITALS CAN ACHIEVE MEASURABLE IMPROVEMENTS + OPERATING SAVINGS THROUGH EVIDENCE-BASED DESIGN PROGRESSIVE HOSPITALS CAN ACHIEVE MEASURABLE IMPROVEMENTS + OPERATING SAVINGS THROUGH EVIDENCE-BASED DESIGN

Ten Steps to Implement Evidence-based Design (1-5) 1. Create a multidisciplinary team and develop a clear vision that includes measurable quality improvement goals 2. Select an Architect with experience in Evidence-based Design and a proven track record of at least successful healthcare project (ask for evidence of which team members are EDAC certified) 3. Identify Evidence-based Design interventions and select them 4. Evaluate current practice and develop a baseline for each (e.g. infections, transfers, employee turnover) (develop baseline costs) 5. Set measurable post occupancy improvement targets and get buy in from all key stakeholders

Ten Steps to Implement Evidence-based Design (6-10) 6. Incorporate design improvements into capital and operating budgets approved by the board 7. Widely communicate improvement targets internally and externally 8. Track and report progress 9. Continually incorporate new Evidence-based Design strategies 10. Publish your results!

A Proposed ROI Framework 1. Describe the current scope of the problem in your facility 2. Identify your improvement target goal 3. Identify the number of patients and their associated hospital charges with specific hospital acquired infections 4. Outline specific clinical and administrative strategies used to reach target goal and identify associated costs 5. Identify specific evidence-based design strategies to reach target goal and identify associated costs

Problem Summary and Improvement Opportunity OutcomeNumber of Cases Number who died MortalityRateAverage Length of Stay CostHAI No HAI Difference

Intervention Costs Intervention Initial cost Life cycle cost Calculations/Comments Provide 100% single patient rooms Increased SF with associated housekeeping, energy, replacement furnishings costs Single -patient rooms are now the standard. However, these rooms are estimated to be __SF larger resulting in an average increase of __SF for an average inpatient unit, which could increase life cycle operational costs. Separate sink for staff in patient room Increased operational plumbing maintenance costs Separate staff sinks are now standard for new hospital construction. There may be minimal increased life cycle operational costs. Alcohol-based gel devices Replacement and maintenance costs and gel refill costs Initial cost = total number of devices per room X number of rooms Administrative – training interventions Training costs Include all incremental operating costs Total Intervention Costs

Revenue Improvement through Cost Avoidance Outcome TargetCalculationsCost Avoidance Decrease HAIs by __% or __ cases Identify the total number of cases to be eliminated and multiply times the average increased cost for patients with an infection Expressed in dollars Total Cost AvoidanceExpressed in dollars

Return on Investment Equation Variables Initial, First Year Two Year Life Cycle Point Five Year Life Point Total cost avoidance Total intervention costs Savings

CONCLUSION Winning health care organizations will enhance their quality improvement work by including evidence based design interventions. Winning health care organizations will enhance their quality improvement work by including evidence based design interventions. This will help them succeed in the marketplace through reducing harm to patients, lowering operating costs and increasing satisfaction scores This will help them succeed in the marketplace through reducing harm to patients, lowering operating costs and increasing satisfaction scores

Selected References Berry, Parker, Coile, Hamilton, O’Neill, & Sadler (2004) The Business Case for Building Better Buildings, Frontiers in Health Services Management, 21(1), Berry, Parker, Coile, Hamilton, O’Neill, & Sadler (2004) The Business Case for Building Better Buildings, Frontiers in Health Services Management, 21(1), Sadler, DuBose, & Zimring (2008) The Business Case for Building Better Hospitals through Evidence-Based Design, Health Environments Research & Design Journal, 1(3) Sadler, DuBose, & Zimring (2008) The Business Case for Building Better Hospitals through Evidence-Based Design, Health Environments Research & Design Journal, 1(3) Zimring, Augenbroe, Malone, & Sadler (2008) Implementing Healthcare Excellence: The Vital Role of the CEO in Evidence-Based Design, Health Environments Research & Design Journal, 1(3) Zimring, Augenbroe, Malone, & Sadler (2008) Implementing Healthcare Excellence: The Vital Role of the CEO in Evidence-Based Design, Health Environments Research & Design Journal, 1(3) Ulrich, Zimring et al. (2008) A Review of the Research Literature on Evidence-Based Health Care Design, Health Environments Research & Design Journal, 1(3) Ulrich, Zimring et al. (2008) A Review of the Research Literature on Evidence-Based Health Care Design, Health Environments Research & Design Journal, 1(3) Nachri & Center for Health Design (2008) Evidence for Innovation: Transforming Children’s Healthcare Through the Physical Environment, and Nachri & Center for Health Design (2008) Evidence for Innovation: Transforming Children’s Healthcare Through the Physical Environment, and