This document summarizes 10 topics related to challenges in healthcare construction projects. It discusses how healthcare clients have little experience managing major capital projects which often leads to budgets not being met due to scope creep. It also notes that healthcare executives have trouble making timely decisions due to various stakeholders needing consensus. Additionally, decisions on major medical equipment are often made late in the construction process, leading to higher change orders.

1. Demystifying Healthcare Construction Projects – Top Ten Topics Allen H. Aardsma Director Navigant Consulting, Inc.

2. Topic 10 Healthcare Projects Never Come In on Budget (& contractor gets blamed) Healthcare clients generally have little consistent experience with major capital projects, often rely on architectural estimates, and lack the discipline to avoid ‘scope creep’; Collective recent experience – across all industries, not just healthcare – has reflected the escalation in materials prices and the variability in labor rates and availability;

3. Topic 9 Healthcare Execs Can’t Make Decisions – or Make Them Stick Healthcare clients are comprised of various “stakeholders”: Executive Management Medical Staff Board of Directors Customers/consumers Decisions cannot be made unilaterally by any one stakeholder, but rather a consensus reached – “decision by committee” prevails in healthcare

4. Topic 8 Decisions on Major Medical Equipment Are Often Made at the Last Minute (out of sequence for the construction schedule) Rapid advances in healthcare technology make it impossible to determine - at the outset of a project – which specific technology will be installed and commissioned just prior to moving day. Successful architects and contractors find ways to accommodate these ‘out of sequence’ decisions

5. Topic 7 Healthcare Projects Have Among the Highest Change Orders In the Business Inexperience with the design process, and inability to ‘dimensionally visualize’ the functional spaces often results in unmet expectations which must be corrected once the space is physically constructed; Turnover within the management ranks often results in a different approach to managing a departmental function, or ‘second guessing’ the original intent Hospitals are unique, custom-designed and built facilities, so there are no ‘off the shelf’ solutions which apply across the spectrum of hospital design and construction

6. Topic 6 Hospital Personnel Cannot Seem to Agree Even on Basic Matters Such as Number of Electrical Outlets or Placement of Medical Gases in Patient Rooms Delivery of patient care has become more ‘outcomes based’, using the principle of ‘evidence-based-design’; Increased emphasis on patient safety, minimizing medication errors, and involvement of family as caregivers has resulted in the ‘rethinking’ of patient room layouts, even to the point of having ‘same-handed’ rooms;

7. Topic 5 You Can’t Make Money on Healthcare Projects Because Competition on Fees and GC’s Have Driven Them Below “Market” Healthcare clients have recently ‘got religion’ and have encouraged competition via rigorous RFP’s; CM/GC’s specializing in healthcare projects have become more efficient at delivering healthcare projects, and seem to succeed with lower fees and more modest GC’s

8. Topic 4 Owners of Healthcare Projects Continue to Mitigate Their Risks by Transferring Risk to Design and Construction Healthcare clients are becoming more ‘savvy’ at contracting, and have found ways to push risk onto the architect and/or CM/GC; An ‘enlightened few’ believe that a more equitable distribution of risk will result in a better project outcome for all – Integrated Project Delivery & LEAN Project Management

9. Topic 3 Working With Doctors Is Impossible – Their Expectations Are Unachievable! Although physicians are well-trained in medical technology, and for the most part are outstanding diagnosticians, they are not well-trained in business (despite their belief that they are savvy businessmen!) Managing expectations via education and ‘bookending’ the possibilities and choices can be effective Facilitate their input – early and often – by accommodating their practice schedules (6:30 – 8:00 a.m. breakfast sessions; luncheon sessions; and 6:00 – 7:30 p.m. dinner sessions – with good food!)

10. Topic 2 Well-Qualified Subcontractors Are Refusing to Bid – or Work – on Healthcare Projects Healthcare projects often place constraints on working hours, and minimize disruptions to existing hospital operations; Regulatory agencies often require assemblies and working methods which differ materially from commercial construction; Result is diminished efficiency for subs, placing margins at risk

11. Topic 1 Healthcare Clients Are Disruptive of Efficient Project Delivery by Conducting Frequent Visits to Construction in Progress, and by Involving Third-Party Inspectors and Commissioning Agents Hospitals generally are community-owned, with a great deal of interest and pride in a new or replacement, state-of-the-art facility for providing care; Because of their critical life-saving mission and responsibility, regulatory agencies rigorously monitor design and construction, often requiring hospitals to engage quality inspectors to ensure compliance with current life safety codes; Due to the complex operating environments required by state-of-the-art hospital facilities, hospitals are increasingly retaining commissioning agents to assist with design specifications and to certify resultant operating performance.

12. Contact Info Al Aardsma Principal, Medical Project Advisory Services (MedPAS) E-mail: [email_address] Phone: 720.883.2238 Website: www.medpasllc.com