One question to help clarify the true cost of facilities investments & budget cuts.
(1/6/2017)
When your facilities team comes to you seeking funding for new tools, services or changes to your facilities environment, how do you discern the essential from the wasteful? Put another way, how do you capture the right context and severity of those requests, and weigh them against cost-reduction goals?
Try asking this simple question:
“What happens if we don’t?” Often times a facilities department are asked to work with what they have because whatever the funding request is for doesn’t impose a huge problem today and the cost savings in the short-term contribute to most hospitals’ goals of cutting costs. Hospital executives may even know in the back of their minds that there will be long-term ramifications. However, the idea of asking yourself this question is to uncover what you might be at risk to
lose if you don’t spend the money, or if you delay the expense and taking a hard look at the actual data to support it.
In our experience serving healthcare facilities, we’ve often witnessed hospital executives mistake the essential items for the wasteful (and vice versa) when considering funding requests for capital projects. This usually happens when decision-makers fail to ask deep questions to unearth the answers they really
need to make the best decision, not just the answers they
want.
For some perspective, below we have outlined 3 situations of capital funding requests you may have already faced or may see in the future to stir your critical thinking and get you used to asking the “
what-happens-if-we-don’t?” question.
- To seal-coat a parking lot or not to?
Consider, for example, a healthcare facility that was repaving its parking lot. Concerned with expenses (as we all are), the facility debated whether to skip seal-coating to save money on this rather large project. The numbers reflected a big, immediate cost-reduction opportunity.
Until, that is, the question is asked:
What happens if we don’t? The parking lot would break down much faster and require another investment much sooner, forcing the hospital to repave the entire parking lot more frequently. In this case, what seemed like an unnecessary expense turned out to be key to saving hundreds of thousands of dollars in the long run.
- Single or duplicate air handlers?
At another hospital, the OR suites had two air handler units. Looking for ways to cut costs, the second air handler was “value-engineered” out of the OR suites. At the time, the second air handler certainly was not needed so spending money in order to maintain that redundant system seemed to be a low priority.
Although the hospital did accomplish immediate savings, they did not stop to think about what happens when the single air handler goes down. The hospital would lose all 25 ORs at the same time. The revenue loss from that single event would far exceed the cost of having a redundant system in place and is certainly not worth risking the compromise of patient safety.
- Staff training investments
At many healthcare facilities, low investment in internal service capabilities equals big reliance on external service providers. However, the immediate savings that you see from reduced staff training or staff cuts is a one time savings opportunity. In turn, the need for additional service contracts easily double your expenses, plus the loss of critical knowledge and depreciation of your staff.
What if a highly technical plumbing issue arises? If you do not have a fully trained associate in this skilled trade, you’re then paying for a contracted plumber, plus the salary of the facilities employee who made the service call and stood around while the plumber did his job. Not to mention the amount of time it would take to get a contracted plumber to your facility and make the repair versus having someone on-site with this skilled trade. Something that may take only a few hours to fix can turn into days with a contractor who has to fit you into their schedule and travel time to your facility. Multiply that by all the service and maintenance needs your facility encounters each month. It’s not an ideal use of your financial resources.
Parting thoughts
Although our examples above focused primarily on scenarios when saying “no” to an expense ended up costing the hospital many times over, there are times when expenses truly are wasteful. But the idea is simple: Ask deeper questions. Probe for what you stand to
lose without that investment.
And, just as important, use
data—historical performance, service and cost data of all components that make up your facilities—to guide decisions and identify waste so those funds can be redirected to where they’re truly needed. Dollars that are invested today could potentially save you ten times as much in the future.