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The Business of Facilities Management Benchmarking
 

The Business of Facilities Management Benchmarking

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  • One can compare data to the point of analysis paralysis. But there is more to the numbers than what is reported. Some of the issues to look at include:
  • To gauge the size of the facility and determine density, respondents were asked to quantify the number of occupants they serve. Site population includes the average number of fulltime, part-time and contract workers who occupy space over a 12-month period.
  • Utility costs are associated with the provision of electrical power, potable water, central heating and cooling and sewage service. The utility categories provided were those most commonly used: electricity, fuel oil, natural gas, chilled water, steam, water and sewage. More than half of the respondents, 55%, reported sewage costs embedded in water costs, as they were unable to separate the two. The overall utility cost does not equal the sum of the separate utility costs because of different sample sizes. Here, utility costs are broken out by square footage and adjusted discharges.
  • Utility costs are affected by a variety of factors including climate, region, facility use and the presence of a central plant. These charts show the differences in utility costs for a variety of settings.
  • For 83% of the hospitals represented in this study, utility costs increased when compared to the previous year. For one out of five, the increase exceeded 10%. Many of the hospitals in this study are in a growth mode, so increases in utility costs are a result of expansion, but for most of the respondents, the rise in cost is due to higher utility rates.
  • Given the double digit increases in utility rates, maximizing energy efficiency is a priority within the healthcare sector. Here are some of the ways in which survey respondents have reduced their utility usage.
  • The majority of the study respondents, 65%, rely on a separate department such as biomedical or clinical engineering to handle maintenance for medical equipment.
  • Areas Researched Scheduled Maintenance Maintenance and Repair Testing Other
  • Environmental services costs are the costs associated with the cleaning of patient rooms, offices and work areas, restrooms and common support space. Also included in this cost are wages, benefits, staff support, supervision, administration, supplies, paper goods and noncapital equipment. Labor is the major component of the cost, therefore any change in wages can affect the overall cost significantly.

The Business of Facilities Management Benchmarking The Business of Facilities Management Benchmarking Presentation Transcript

  • The Business of Facilities Management Benchmarking
  • Agenda
    • Introduction
      • Ed Tinsley
    • ASHE Benchmarking
      • Ed Tinsley
    • ASHE/IFMA MOU “ Why the need for Change”
      • Ed Tinsley/Todd Wilkening
    • IFMA Benchmarking Tactics & “How to Use”
      • Shari Epstein
    • 2010 IFMA Survey Highlights
      • Shari Epstein/Todd Wilkening
    • Real Life Example of How to Use this Information
      • Todd Wilkening
    • Lessons Learned, Questions & Answers
      • All
  • What is Benchmarking?
    • Identifying a comparable standard.
    • Testing yourself against that standard.
    • Using the process to improve efficiency and increase quality.
  • Other Benchmarking Programs
    • Statistical Analysis Only
    • Indexed to Patient Discharges or Patient Days
    • Not Specific to a Particular Facility
    • Does not Identify Variances or their Cause
    • Not Useful in Resolving Variances
    • Not Widely Accepted by Facility Managers
    • “ Double-Edged Sword”
    Performance Benchmarking Metric Distribution, All U.S. Hospitals Top 10% Top 25% Median Bottom 25% Bottom 10% Operating Margin 11.8% 6.9% 2.9% -1.1% -6.3% Expense per CMAED $14,700 $7,600 $5,700 $4,800 $4,200 Revenue per FTE $164,300 $143,900 $123,100 $102,500 $90,500 Occupancy Rate, Staffed Beds 78.1% 69.1% 55.1% 40.5% 25.6% Days Accounts Receivable 39.7 48.6 58.7 73.1 91.9 Days On-Hand Inventory 2.32 3.99 6.14 8.24 10.75 Adjusted Average Length of Stay (Days) 2.37 2.76 3.12 3.66 4.51 Source: Almanac of Hospital Financial and Operating Indicators, 2007 available from www.ingenixonline.com
  • Benchmark Studies can be a “Double-Edged Sword”
    • Magazine Article in Healthcare Purchasing News, March 2001 by Todd Shields
    • “ Downsizing should never be taken lightly, or enacted in an unbridled, compulsive way…”
    • “ Cutting back too many workers can result in a burst of turnover due to burnout…”
    • “ Ultimately, customer satisfaction starts to fall if downsizing is done inappropriately…”
    • “ After consultants come in, nine of out ten times the recommend something smaller…”
  • You can pay me now or you can pay me later.
  • How Many FTE’s do I Need?
    • As Little as Possible?
    • Same as Last Year?
    • Whatever the Administrator Says?
    • Whatever a Consultant Says?
    • Same as a Your Competitor?
    • 20,000 SF per FTE?
    • It Depends on Many Factors
  • ASHE Benchmarking Tool
    • Excel Workbook
    • 3 to 4 Hours to Complete
    • User’s Manual Has Not Been Developed
    • 48 Facilities in Database
    • Recommendations Based on Adjusted Database Averages
    • Compares Recommended Costs to Actual Costs
  • Case Study Comparison
    • Does not Include Janitorial
    • Does not Include Security
    • Includes Grounds
    • Does Not Include Biomedical Equipment Maintenance
  • Comparison of ASHE Tool to NEHES Results
  • Using the ASHE Tool
    • Use the Tool Safely
    • Complete the Workbook
    • Enter in Actual Staffing and Costs
    • Identify Variances
    • Consider Other Sources of Information
    • Develop a Plan
    • Implement the Plan
    • Evaluate the Plan
    • Modify the Plan
  • ASHE’s Next Steps
    • Realignment with IFMA Data
    • User’s Manual
    • Web Rollout
    • ASHE Trademark
    • Regional and Chapter Conferences
    • Selling the “C Level” with IFMA
  •  
  •  
  • Values and Language
    • Real Estate & Construction World
      • Cost or unit per Square Foot = /sq. ft.
    • Facilities/Environmental Management World
      • Cost or unit = /dkthm, /kwh, /gal, etc.
      • Cost or unit = /gallon, /vial, /bag,
      • Pay back
    • CEOs/CFOs World
      • Cost per adjusted discharge/patient day, etc
      • Patient care volumes, procedures, etc.
      • Return on investment (ROI)
      • Time Value of Money (TVM)
      • Cash Flow
      • Strategic, Political, Branding and Image, Marketing
  • FMs Language
  • An Executive Quote on Value
    • "The value, at the end of the day, has to translate to revenue or cost. The ultimate value has to be described in common-sense business terms."
    John Hill, Siemens Business Services
  • Value: How does one define it?
    • Without a concerted effort to show the business, in terms it understands and what your department is doing to further the business' goals, the chances of having any say down the road about the future of your department will begin to slim .
    • -Allen Benard
  • Six Sigma
    • Inputs match Outputs
    • process defects
  • Use Per Adjusted Patient Day
  • Cost per Adjusted Patient Day
  • Importance
      • - Financial impact
      • - Adds opportunity
      • - Strengthened leverage
    • - Perception as an expense department diminish
      • - Increased net worth as a business partner
  •  
  • Fast-Cycle Benchmarking
    • Figure out what you’re looking for
    • Benchmark companies roughly at your level
    • Study the system rather than one technique
    • If you’re benchmarking a system, adapt what you see rather than simply copying it
    • Remember why you’re doing it
  • Challenges in FM Benchmarking
    • Commitment
    • High participation level and willingness to provide what is requested
    • Data
    • Is data available, accurate and accessible?
    • Variability of infrastructure, operations
    • Must be defined prior to making comparisons
    • Valid comparisons
    • Need to normalize data (e.g. climate zones, EUI, rating systems)
  • Beyond the Data
      • Are FM departments structured differently?
      • What does the FM supply chain look like and does it deliver?
      • Are corporate social responsibility and environmental management tied to FM?
      • What is the approach to investment and longer-term life-cycle issues?
  •  
  • Facility Region
  • Hospital by Region
  • Facility Setting
  • Facility Age
  • Facility Size
  • Hospital Staff
  • Financial Matrix
    • Adjusted Patient Days
    • This figure is used as a way to
    • standardize the per unit measure
    • between hospitals allowing for
    • more valid comparisons. Adjusted
    • patient days is calculated by dividing
    • total charges by inpatient charges,
    • then multiplied by the number of
    • inpatient days and admissions.
    • (Gross Revenue/Inpatient Revenue) x Inpatient Patient Days.
    Adjusted Discharges Adjusted discharges is a calculation that adjusts the number of discharges (hospitalizations) to reflect the impact of both inpatient and outpatient volume. The formula is as follows: (Total Gross Revenue/Inpatient Gross Revenue) x Discharges (or days). For this report, we used adjusted discharges as a means to compare costs.
  • Total Adjusted Patient Days
  • Total Adjusted Discharges
  •  
  • Utility Cost by Square Foot
  • Utility Cost by Adjusted Discharge
  • Utility Cost by Region and Type
  • Utility by Building Age
  • Utility Cost Impact
  • Utility Drivers for Change
  • Energy Management Practices
  •  
  • Preventive vs. Repair Maintenance
  • Clinical Engineering
  • In-house versus Contracted
  •  
  • Environmental Services Cost
  • Environmental Services Costs by Type and Age
  •  
  •  
  • Application to Real Life
  • Financial Overview
    • Capital Investment - $259,772.00
    • Utility Rebates - $34,703
    • Department of Commerce – 50% subsidy of financing interest costs for first 5 years
      • Find the money!
    • Positive Cash Flow every year of program
      • Cash Flow – Year 1; +$79,101 - Value
      • Cumulative Cash Flow – Year 20; $1,199,902 - Value
    • Annualized Return on Investment (ROI)– 23.10%
  • Financial Performance
  • The Outcome
    • Our project cost $12.92/sq.ft.
      • Reduction operating expenses of $2.98/sq.ft
        • Building size of 20,109 sq. ft.
    • Our project cost $12.92/sq.ft.
      • Increase in patient revenue (value) of $2.32/patient day
        • Annual avg. patient day volume of 25,842
  • What we just did…
    • Turned the focus away from “expense” and onto added “value” (revenue).
      • Expenses
        • at the expense of, at the sacrifice of; to the detriment of: quantity at the expense of quality.
      • Value
        • Value is that quality of anything which renders it desirable or useful.
  • Environmental Impact *From Reduction in Electricity and Natural Gas Consumption
    • Reduction in harmful emissions:
      • Benefits to Human Health - Value
      • Benefits to Environment - Value
    • Reduction in greenhouse gases and air/water pollutants: - Value
      • Carbon Dioxide (Global Climate Change) – 480,458 lbs/yr
      • Sulfur Dioxide (acid rain) – 1,520 lbs/yr
      • Nitrogen Oxide (smog and human health) – 760 lbs/yr
      • Mercury (air/water pollution and human health) – 6,568 milligrams/yr
    • Carbon Dioxide Equivalent Comparison:
      • 66 Acres of Trees Sequestered - Value
      • 42 Cars on the Road – Value
    • Improved Community Health
    • Shown Compassion
      • Source: U.S. Department of Energy and U.S. Environmental Protection Agency
  • Thank you