Preserving construction capital

The Zen garden at Jupiter Medical Center’s Margaret W. Niedland Breast Center is the centerpiece of the 26,000-square-foot project that features comprehensive women’s services.

Image by Jeffrey A. McDonald

Hospitals and health systems must evolve their bricks-and-mortar investments to adapt to patient preferences as more care moves out of the hospital and toward outpatient facilities.

That evolution often involves expensive greenfield construction or extensive retrofitting of existing space, which poses its own unique challenges. Cost is a chief concern, but minimum design specifications that govern building size and scale are also extremely important and can limit flexibility.

Yet with careful planning and execution, budgetary limitations can be met successfully.

Five rules

Don’t let common mistakes trip you up. When making the important decisions that are critical to a project’s success, adhere to the following five rules to preserve capital during health care facility development.

1. Choose the right design partner. When constructing new or upgrading health care facilities, it’s important to choose an architect who has health care facility experience and has previously demonstrated an ability to adapt to changing priorities during the design process.

It is also key to find a design partner with experience designing to a budget. It sounds simple enough but requires a skill set that demands architects exercise additional discipline. The architect should be able to create a building design that can be realized within a dollar amount set by the hospital or health system — preferably with some wiggle room in case of unforeseen challenges along the way.

Having the right team assembled on the front end will reduce or avoid hidden costs and likely eliminate the need to redesign after construction has begun, which is sometimes necessary, but is expensive and can lead to delays.

The orthopedic center being developed for Campbell Clinic, a Germantown, Tenn.-based orthopedic physician group, is an example of how to design to a budget. The Campbell Clinic made a distinct effort to hire an architect with experience designing similar projects that combined ambulatory surgery centers with sports performance facilities. In this case, the ambulatory surgery center (ASC) and sports performance facilities account for half of the 120,000-square-foot building. In their request for proposal for the project, the Campbell Clinic made clear they were designing to a budget.

The architectural firm was selected based heavily on their extensive experience designing orthopedic, surgical and sports performance facilities and their proposal being within budget parameters. At the outset of the design, extensive communication was imperative so that the architect could capture the Campbell Clinic’s vision for the project while using their experience to filter that vision through the project’s budget parameters. Setting the project up for success means micromanaging the design details within the framework of the budget so the design team can successfully manage the changes that invariably arise as the design evolves. An architect with deep experience in the particular type of facility envisioned will bring an expertise to the design process and minimize the need for redesign.

2. Set an aggressive schedule. Aggressive scheduling has two primary benefits. It promotes a project’s speed to market, and it saves money. Knowing that a health care organization’s business depends on being open to see patients, it is important to set deadlines and to routinely revisit the schedule during the design and construction process to keep things on track for timely completion. The health care client and its development partners must also build schedules that anticipate the inevitable hurdles that arise before the ribbon is cut on a new facility.

There is a skill in setting an aggressive and accurate schedule, much of which is dependent on a myriad of essential but complex steps. Government staff and officials, codes and many other permitting and licensing bodies must be navigated – in a specific order and often concurrently – to move a project forward. In addition, historical weather data must be considered when setting a reasonable schedule, providing room for contingencies that are unavoidable but still minimizing the time between deployment of capital and putting the facility into service.

It is critical to map out completion dates on specific components of the project, noting where components depend on progress made in other areas. Then the development team must work diligently to meet those milestones, because delayed completion of one step inevitably trickles down through the schedule to impact many others.

Aggressive management of milestones before construction starts can also help mitigate the impact of factors such as interest rate risk on the construction loan and increases in material and labor costs. Considering that government fees and labor costs can increase overnight when the calendar turns to a new year, and that material costs can rise dramatically and somewhat unpredictably the longer a project is delayed, it is vitally important to quickly get to construction loan closing, guaranteed construction costs and a completed facility.

Aggressively managing of all these factors benefitted the $25.3 million, 60,000-square-foot ambulatory care center project for Bristol Health in Connecticut. Racing against the coming winter in the Northeast required tightly managed deadlines so the outside work was complete before the snow fell. Under way in April 2018, the developer raced against the winter, as well as cost creep from threat of a trade war between China and the U.S. The project will open on schedule in mid-2019 only because project managers adhered to an initial aggressive schedule in all stages of design and construction.

3. Regionalize the design. Building projects in the Northeast is completely different from building them in South Florida. It’s important to have regional experience to navigate the different construction design standards that are native to a project’s location. Everything from the architectural standards to the weather environment to appropriate materials to construction crew composition and more must be considered when designing a facility and implementing realistic deadlines. These regional variations can have a significant impact on costs and deadlines.

For example, in hurricane zones or earthquake zones local architects typically understand the region’s stringent structural requirements, so hiring an architect with local work experience and a regional general contractor can help avoid costly delays for redesign. There are also methods, materials and labor that are more conducive to construction in one region versus another. For example, in South Florida and the Gulf Coast, specialized concrete tilt-wall construction meets stringent hurricane requirements while offering an economical and efficient design alternative. Different building systems are required in the Northeast to deal with cold, snow and the annual fluctuations in temperatures.

The Jupiter Medical Center Margaret W. Niedland Breast Center in South Florida is a perfect example of the impact and variety of such variables. The tilt-wall-constructed freestanding 26,000-square-foot medical office building houses comprehensive women’s services including 3D mammography, breast ultrasound, stereotactic breast biopsy, bone density, and breast and general MRI. The second floor features the high-risk and genetics program, physician offices and educational space.

4. Challenge overdesigns. From medical office buildings to ASCs to cancer treatment centers, one size and space does not fit all. Health care leaders must be careful not to overdesign significant parts of their facilities and make sure they are designing each functional space for a specific use. For example, outpatient facilities do not have to be built to hospital specification, with more expensive complex building systems, and not all health care projects require reinforcements in construction to support heavy imaging equipment.

A project for Clara Maass Medical Center in New Jersey included several different construction design grade levels that had to be managed efficiently  – including a new medical office building, a new intensive care unit (ICU), and a new “front door” and lobby area for the main hospital.

The four-story facility totals 87,000 square feet. About 32,000 square feet is occupied by the ICU, construction of which required much more stringent construction standards compared to the physician office portion of the project. Physician offices were required to meet only business occupancy standards, whereas the new lobby, admissions office, pharmacy and ICU had to be built to medical grade, institutional occupancy standards. It would have been easy to overdesign this building to the highest standard. By instead integrating several design standards into the project and being specific on what was needed from each space, the developer was able to deploy project capital more efficiently, both in terms of construction materials costs and labor costs.

In addition, it’s critical to tie design consultants’ pay to a certain price-per-square-foot of their work, instead of a percentage of construction costs. The latter can create an incentive to overdesign, which has a ripple effect on costs.

5. Use design-side technology. Technology is always evolving and can be extremely helpful in avoiding mistakes in the design and construction process. Today’s design technology and interactive software can effectively “build virtually” and identify potential, costly mistakes and delays to avoid. Building virtually before beginning actual construction can identify potential stumbling blocks and conflicts uncovering incompatible pieces of the puzzle well before construction equipment and workers begin their tasks.

Before breaking ground for the North Alabama Medical Center Medical Office Building in Florence, Ala., the developer had already seen the building — several versions of it, in fact — built onscreen. Incorporating this virtual technology into the design phase of this $15 million, 72,000-square-foot facility helped the design team integrate all the medical equipment and building systems into a complex, multi-tenant project that includes an imaging center, as well as obstetrics, gynecology and cardiology practices.

Building systems must be installed in specific locations, fit certain dimensions and coordinate with each other so that there is enough space for the medical equipment and its required connections. Utilizing building information modeling technology can minimize down time and facilitate coordination of utilities and system connections.

The imaging center at the North Alabama Medical Center Medical Office Building includes magnetic resonance imaging (MRI). It can be difficult to move a piece of medical equipment, especially a heavy-duty, expensive and sensitive MRI. The components of an MRI include heavy magnets that require perfect calibration in order to operate efficiently. Utilizing design-side technology can ease the minds and the pockets of health care organizations and chart the course for an easy transition for medical equipment.

The ability to model many different possible placement solutions is essential in such situations. There is only so much space between walls, floor and roof, and once that is established, everything must fit into that envelope.

Good stewardship

Hospitals and health systems are increasingly measured on efficiency and safety in a multitude of arenas, and their construction projects should be no different. Minimizing mistakes is critical to good stewardship of precious capital and following these five rules will ensure a much more efficient deployment of capital than would otherwise be possible.

Brian Mock is executive vice President of Construction and Development at Rendina Healthcare Real Estate, a health care real estate developer and manager based in Jupiter, Fla.