This document outlines a presentation on sustainable planning for healthcare. It discusses defining sustainability and the environmental context facing the healthcare system. It then covers the key components of successful planning, including time, people, money, energy, and physical assets. Finally, it provides three case studies as examples: 1) market reform initiatives at a community hospital, 2) physician integration strategies, and 3) energy innovation projects including a wind turbine and fan-wall technology.

1. SUSTAINABLE PLANNING FOR THE “NEW NORMAL”
IT’S MUCH MORE THAN LEED
November 14, 2011 - Nashville, Tennessee

2. Agenda
1. What is Sustainability
2. Environmental Context
3. Components of Successful Planning
4. How Can We Integrate These Components – Case Studies
– Market Driven Reform
– Physician Integration
– Infrastructure
– Tactical Solutions
5. Questions and Answers

3. What is Sustainability?
• From Merriam-Webster:
– Sustainable (adj)
1. Capable of being sustained
2. a: of, relating to, or being a method of harvesting or using a
resource so that the resource is not depleted or permanently
damaged
b: of or relating to a lifestyle involving the use of sustainable
methods
http://www.merriam-webster.com/dictionary/sustainable?show=0&t=1317869714

4. What is Sustainability?
• Harvesting or using resources so that they are not depleted
or permanently damaged
– Awareness
– Planning
– Intent
– Balance
• This is not just about the environment

5. Environmental Context
• Our current healthcare system is not sustainable!
• Tremendous amount of emotion and ideology
within the debate
• Change is necessary

6. Environmental Context
• What’s stressing the system?
– Uninsured population / underinsured population
– Limited access to primary care
– Declining federal and state budgets
– Aging population
– Utilization
– Aging facilities
– Demanding population

7. Environmental Context
• Percentage increase in Medicaid enrollment under ACA (2019)
% of Hospitals in Systems
2007 2009
80% 73%
67%

8. Environmental Context
• State budget shortfalls are projected to top $112b in 2011

9. Environmental Context
• What are hospitals doing to address these issues?
– Cut costs
– Plan an independent future
– Consolidate (Merge, Affiliate, Acquire)
– Close
– Nothing

10. Environmental Context
% of Hospitals in Systems
• Percentage of Hospitals in Systems
2007 2009
80% 73%
67%
70%
59% 61%
60%
50% 52%
50%
40%
29% 31%
30%
20%
10%
0%
% of Hospitals in Systems
Small HospitalsCommunity
Hospitals
AMCs Total
2007 2009
80% 73%
67%

11. Environmental Context
• Announced Hospital Transactions

12. Environmental Context
• Now is the time to plan for alternative futures
• Planning is one required element towards sustainability
– Awareness
– Planning
– Intent
– Balance

13. Components of Successful Planning
13

14. Components of Successful Planning
• Time
• People
• Money
• Energy
• Physical Assets

15. Time
Time = Money

16. Time = Location = Access
• Existing Service
Distribution

17. Time = Location = Access
• Annual Discharges

18. Time = Location = Access
• Existing Drive Times
– 15-20-25 Minutes

19. Time = Location = Access
• New Drive Times
– 15-20-25 Minutes
– For a Potential West
Campus Location
– Improve Access by 13%
– 93% of Patients within
25 Minutes

20. Time = Location = Access
• New Service Distribution
– New Western Campus

21. Time = Schedule
• Integrated Project Delivery
– Trust
– Shared Risk and Reward/Single Contract
– Effective Collaboration
– Open Information Sharing
– Team Success is Tied to Project Success
– Value Based Decision Making
– Utilization of Technology/BIM

22. Time = Schedule
• Shifting the Curve to the Left

23. Time = Schedule
• Shifting the Curve to the Left

24. Time = Schedule
• Shifting the Curve to the Left

25. Time = Schedule
• Shifting the Curve to the Left

26. People
People = Money

27. People = Multi-Disciplinary Approach
• The Blind Men & the Elephant
– To Learn What it is Like Each
Touches a Different Part
• Side…”A Wall”
• Trunk…”A Snake”
• Leg…”A Tree”
• Ear…”A Fan”
– No One Individual Can Know
the Whole Truth About the
Elephant

28. People = Money
1 $79,300
Cost of an FTE 2 $82,472
•
3 $85,771
– $3,302,521 4 $89,202
• Project Life Cost of a Single FTE 5 $92,770
at $65,000 Base, 22% Benefits, 6 $96,481
4% Annual Cost Inflation 7 $100,340
8 $104,353
9 $108,528
10 $112,869
11 $117,383
12 $122,079
13 $126,962
14 $132,040
15 $137,322
16 $142,815
17 $148,527
18 $154,469
19 $160,647
20 $167,073
21 $173,756
22 $180,706
23 $187,935
24 $195,452
25 $203,270

29. People = Partnership
• Benefits of Hospital-Physician Alignment
– Growth – hospitals need to grow to maintain financial
performance to fund investment in clinical programs, new
technology, etc.
– Efficiency – physicians can assist hospitals in reducing costs,
increasing throughput, access, quality, outcomes, and value

30. People = Process Improvement
• What is LEAN?
– A disciplined and focused process to identify and eliminate waste
and improve quality, care, and safety
– Shift in hospital culture
• Looks at process through eyes of the customer
• Questions the status quo
• Asks “why”
• Continuous improvement

31. People = Process Improvement
• 3P Workshop
– Programming and space
planning condensed to one week
– Multidisciplinary team including
clinical staff, architects,
contractors, vendors, patients,
lean experts, and other
stakeholders
– Team identifies and defines flow
challenges and preferred flow
patterns from the patient
perspective

32. People = Process Improvement
• 3P Workshop
– Team builder
– Facility design supports
model of care
– Streamline design process
– Architect and contractor with
real-time input into design

33. People = Process Improvement
• 3P Tools
– Fish bone diagrams
– String diagrams mapping 7
flows of medicine
– Simulations
– 4 options
– Mock ups

34. Money
Money = Money

35. Money = Margin
Private
Medicare
Medicaid

36. Money = New Business Model
• Prospering in a Post-Reform World
– FFS to Patient Management
– Volume = (Value = Quality/cost)
– Cost Management to Cost Structure
– Downward Pressure on Price
– Focus on Strengths

37. Money – Clinical Affiliation
• Benefits of Clinical Affiliation
– Increase market share volume
– Decrease cost; improve financial strength
– Leverage clinical expertise
– Improve quality of care locally; Reduce outmigration
– Make best use of scarce capital and clinical resources

38. Money = Focus
• Create Value
– Single, Specialty Player
– Part of a System

39. Energy
Energy = Money

40. Energy
• Facility Age

41. Energy
• Gross Square Footage

42. Energy
• Utility Costs CLIMATE ZONE $/GSF
1 $4.12
2 $4.00
3 $4.42
4 $4.93
5 $4.53
AGE
<5 years $3.88
5 – 10 $4.53
11 – 15 $4.56
16 – 20 $4.95
21 – 30 $4.47
31 – 50 $4.25
>50 $4.66

43. Energy
• Energy Management Practices
% UTILITY CONSERVATION PRACTICES
43% Replaced ex. light fixtures with new lighting
40% Retro fitted ex. light fixtures
34% Installed energy efficient motor
31% Installed occupancy sensors
22% Set back thermostat
20% Installed energy management systems
20% Installed energy efficient ventilation equipment
19% Installed energy efficient chillers
19% Installed energy efficient heating equipment
15% Recommissioned building systems

44. Physical Assets
Physical Assets =
Money

45. Physical Assets = Investment
• Drivers of Construction

46. Physical Assets = Roadmap
• Vision

47. Physical Assets = Roadmap
• Vision

48. Physical Assets = Roadmap
• Vision

49. Physical Assets = Roadmap
• Vision

50. Physical Assets = Roadmap
• Vision

51. Physical Assets
• Highest & Best Use

52. Physical Assets
• Factors Driving Ambulatory Network
– Growth in ambulatory care services
• Healthcare reform
• Shift of care to outpatient setting
• Reimbursement policies that support outpatient investment
• Rise in chronic conditions (e.g., diabetes)
– Decompress main campus
– Increase access and visibility of L&M in market
– Opportunity to align with physicians (MOB strategy)

53. Case Studies
53

54. Case Studies
Market Reform Initiatives
#1
Physician Integration #2
Infrastructure #3
Tactical #4
Solution

55. Case Study #1 – Lawrence & Memorial Hospital
• Non-Profit Community Hospital in New London, CT
• Founded in 1912
• 280 Licensed Beds
– Medical, Surgical, Rehab, Obstetrics, Psych
• Centers of Excellence
– Critical Care, Rehab, NICU, Oncology
• 2,300 Employees
• 302 Active Staff Physicians
• 14,000 Inpatient Discharges,
10,000 OR Cases, 84,000 ED Visits

56. Case Study #1 – Lawrence & Memorial Hospital
• First, the Good News…

57. Case Study #1 – Lawrence & Memorial Hospital
• Where are the Revenues Going with the Reform?
– Volumes Remain Flat for All Services
– Payer Mix Remains Constant
– Medicare Follows the Reform Mandates
– Medicaid = No Increase
– Non-Governmental Rates Increasing at 4%

58. Case Study #1 – Lawrence & Memorial Hospital
• Medicare Gap
Year % of Cost % of Business
Medicare 2009 85.50% 39.50%
Medicare 2016 64.80% 39.50%

59. Case Study #1 – Lawrence & Memorial Hospital
• Expenses
– Salaries Increase 4% Per Year
– Benefits Increase 4.5% Per Year
– Supplies Increase 3% Per Year
– Purchased Services Increase 3.5% Per Year
– All Other Expenses increase 5% Per Year

60. Case Study #1 – Lawrence & Memorial Hospital
• Status Quo Model

61. Case Study #1 – Lawrence & Memorial Hospital
• Where Should We Invest Our Capital?
– Market and Community Need Analysis would Indicate
• Surgery
• Emergency Care
• Cancer
• Inpatient Beds

62. Case Study #1 – Lawrence & Memorial Hospital
• L&M’s Portfolio Analysis
220
200
180
160
140
120
100
Finance
80
Quality
60
Physician
40
Market
20
Community
-

63. Case Study #1 – Lawrence & Memorial Hospital
• Emergency
– 84,000 Annual Visits
– 60% of Inpatient Admissions
– 6th Busiest in the State

64. Case Study #1 – Lawrence & Memorial Hospital
• Emergency
– Use Rate Continues to Increase

65. Case Study #1 – Lawrence & Memorial Hospital
• Emergency
– At Capacity on Main Campus
– Decreasing Volume at Ambulatory Site
Main
Pequot

66. Case Study #1 – Lawrence & Memorial Hospital
• Emergency
– Decreasing Market Share
L&M
Market Competitor

67. Case Study #1 – Lawrence & Memorial Hospital
• Emergency
– Investment Strategy
• New 24/7 ED at Ambulatory Site
• New ED at Main Campus

68. Case Study #1 – Lawrence & Memorial Hospital
• Surgery
– Inpatient & Outpatient
• Volumes and Market Share Declines

69. Case Study #1 – Lawrence & Memorial Hospital
• Surgery
– Investment Strategy
• Open 2 Existing / Idle OR’s at Ambulatory Site
• Increase Number of Surgeons
• Program Development: Bariatric, Spine, Ortho, Cardiac
• New ASU on Main Campus

70. Case Study #1 – Lawrence & Memorial Hospital
• Cancer
– Own Radiation Therapy Market
– Medical Oncology done by 2 Physician Groups

71. Case Study #1 – Lawrence & Memorial Hospital
• Cancer
– High Incidence Rates for New London County
– Projected Newly Diagnosed Cases per Year at 2,000

72. Case Study #1 – Lawrence & Memorial Hospital
• Cancer
– Investment Strategy
• Affiliation with Top NCI Partner
• Broaden Scope of Services
• New Free-Standing Comprehensive Cancer Center

73. Case Study #1 – Lawrence & Memorial Hospital
• Balanced Scenario

74. Case Study #1 – Lawrence & Memorial Hospital
• Staffing & Wage Strategies
TOTAL: $13.1 M Savings

75. Case Study #1 – Lawrence & Memorial Hospital
• Project + Efficiencies = +3% Margin

76. Case Study #2 – Physician Integration
• Medium Size Community Hospital
• Very High Inpatient Market Share Within Primary
Service Area (PSA)
• PSA Population >200k
• Competition with Larger Community Hospitals and
Small Academic Medical Centers in Larger
Community 45 minutes away
• Competition Fierce For Tertiary Services

77. Case Study #2 – Physician Integration
• Developed a Strategic Plan
• Identified Need to Strengthen Tertiary Services
– Cardiology
– Orthopedics
– Neurology / Neurosurgery
• Completed a Charrette Master Facility Plan
– Identified the need for additional space to accommodate new
physicians, either on campus, off campus, or through acquisition
– Existing facility could not accommodate high level services

78. Case Study #2 – Physician Integration
• Balanced Approach Looked at
– Acquisition,
– Affiliation, or
– Recruitment of New Specialty Physicians

79. Case Study #2 – Physician Integration
Affiliate with
Go Alone Acquire Group
XYZ Hospital
Time Duration 1 4 2
Physician
People 1 5 3
Relationships
Money Revenue 5 4 3
Infrastructure N/A N/A N/A N/A
Physical Assets Project Scale 1 3 4
Risk 1 4 3
Result 9 20 15

80. Case Study #2 – Physician Integration
• Result Was a Decision to Acquire
Large Group of Cardiologists
– Implement short term facility improvements to
meet bolus of new volume
– Identify opportunities to shift less acute volume
away from main campus
– Prevent regional competitors from acquiring group

81. Case Study #3 – Energy Innovations
• Wind Turbine
– Kadlec Regional Medical Center – Richland, WA
• .5 Kilowatt, Multi-directional Wind Turbine
– Designed to Work at Lower Wind Speeds
– Rebates Available
– Part of a Comprehensive Energy Saving Program
– Save Organization 30% ($250,000) on Electricity

82. Case Study #3 – Energy Innovations
• Fan-wall Technology
– Kaiser Permanente – Number Locations
• Multiple Fans (Rather than Simple or Dual) to Move the Air
– The Unit Was Actually Less Expensive
– Has Become the System Standard

83. Case Study #3 – Energy Innovations
• Solar
– Sutter Auburn Faith Hospital – Auburn, CA
• Consists of some 3,000 Solar Panels
– Generates 1 Million KW Hours per Year
– Save $2.5 Million Over 25 Years
– Remains on the Grid for Emergency Generation

84. Case Study #3 – Energy Innovations
• Wood Chips
– Cooley Dickinson Hospital – Northampton, MA
• Wood Chip Boiler to Produce High Pressure Steam
– Runs Electric Turbines (350 KW) & 680 Ton Absorption Chiller
– Cost Savings per Year Over Oil = $2,000,000

85. Case Study #3 – Energy Innovations
• CHP from Brewery Waste
– Gundersen Lutheran Health System – La Crosse, WI
• Uses Biogas Discharged from Nearby City Brewing Co’s
Waste Treatment Process to Produce Electricity
– Sold Back to the Grid
– 2 Million KW Hours per Year

86. Case Study #4 – Tactical Solutions
• Community Hospital Has Desire to Provide for
Significant Increase in Surgical Volume
• Existing Facility is Reportedly at Capacity
• Identified Risks of Not Providing Additional OR Capacity
– Loss of Direct Surgical Revenue
– Loss of Indirect Revenue
– Loss of Providers
– Improvements in Competition’s Market Share
• Identified Options to Increase Capacity

87. Case Study #4 – Tactical Solutions
• Identified Options to Increase Capacity
– Expand Existing OR in Place
– Build New Ambulatory Surgery Center (ASC)
– Adjust Operational Factors to Increase Volume

88. Case Study #4 – Tactical Solutions
Expand in Adjust
Build New ASC
Place Operations
Time Duration 2 1 4
Physician
People 5 5 2
Relationships
Money Revenue 5 5 5
Infrastructure N/A N/A N/A N/A
Physical Assets Project Scale 2 1 4
Risk 3 1 4
Result 17 13 19

89. Questions?
89

90. SUSTAINABLE PLANNING FOR THE “NEW NORMAL”
IT’S MUCH MORE THAN LEED
November 14, 2011 - Nashville, Tennessee