Benchmarking Healthcare Facilities Performance: A Key Competency for Today’s Healthcare Facility Manager
Outline • Benchmarking; What? Why? How? • Benchmarking Focus for the Facility Manager • Brief Overview of Relevant Tools/Benchmark Sources • Case Study of Selected Memorial Hermann Initiatives • Q & A Follow-up 2
Why? * Benchmark: A standard by which something can be judged. A surveyor’s mark made on a stationary object and used as a reference point. • • •
Which definition is most relevant to healthcare facilities management? Is your operation a “stationary object”? Do you benchmark to justify current state, or benchmark, to improve outcomes?
* Source: American Heritage Dictionary 3
‘Myth Busters’ in Our Industry • The new building will operate more energy efficient than my 1975 facility. • The latest HVAC widget will reduce operating expenses by 15%. • This new computerized CMMS database is easy to use and is a simple tool to benchmark your organization’s performance. • This new expansion was designed to be LEED/ES certified and will meet the energy efficient standard at occupancy. • This widget will eliminate all chemical water treatment at your central plant • My project has never had a ‘change order’ (varying project delivery methods) • ‘Value Engineering’ produces a higher value product for the owner. 4
Benchmarking Toolkit • People (a financial analyst would be beneficial) • Excel (and) Excel Wiz • Facility Square Feet Statistic (which standard?) • Financial Summaries (R&M, Utilities, FTE’s, Contract Services) • Historical Perspective (not just current year performance) • Other Regional Facilities
• Other National Facilities • A Method (knowledge of) Normalizing Data • Logic and Common Sense
• Open Mind 5
Definitions/Buzz Words/ Statistics • Adjusted Patient Days • Adjusted Discharges • Bed Count vs. Operating Beds
• Cooling Degree Days/Heating Degree Days • Current Replacement Value (CRV) Index • Gross Square Foot (GSF) vs. NRA, NUA
• n, mean, median, reversion to the mean Relevance All has direct impact on benchmarking outcomes. 6
Future State (Logic) • So: We know what it takes to operate an acute care hospital or medical center. However
• As we construct and operate the outpatient ambulatory, retail and hybrid facilities how do we calculate and justify staffing, R&M $, utilities, capital replacement $ ? • Focus Shift: facility responsibility vs. regional and/or multiple small facilities
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Future State (Reality) • Does this historical benchmarking data mean anything given declining reimbursements and bottom line erosion in healthcare? • “We’ve Always Done it This Way”
Therefore… • Best value of benchmarking is internal self improvement • Find your inefficiencies
• Resolve/Harvest low hanging fruit Benchmarking is a Change Management Tool • Benchmarking as a self-preservation ‘evolutionary’ tool • Dinosaur vs. Bacterium (Which are you?) 8
Necessary Data Collection Tools To Benchmark Systems That Never Seem to Work the First Time •
Internal Sub-Metering
•
Building Control Dashboards
•
Data Archiving from your BCS
•
Tenant Allocations (i.e., Billbacks)
•
‘Clean’ Building Separations (office/research/acute care)
All of these are Challenging to ‘Normalize’: • To Other Facilities in your Portfolio • To Neighbors; Regional, National 9
Benchmarking Thoughts To Consider • Often only Year/Year is evaluated and rewarded (close the books at year-end) • Law of Large Numbers: Long Term focus (trends) • Do we know what the latest MEP “widget” actual does compared to a traditional system? Facts vs. Sales • Do you have the tools in place to evaluate - Kwh, chilled water tons, kw/ton, heating Btu production, etc. Is it readily available to the operator via a simple dashboard. • How do the various buildings on your campus perform: against each others against a neighbor against a national standard
against what the design team stated as a goal (i.e., LEED, energy model) 10
Benchmarking Thoughts To Consider • Do you trust your own data? (be critical)
o What are you truly metering? o What method of sq ft are you using? Verified? o What “other” cost data is mixed in with your
R&M Budget Utility Budget i.e., Activities Based Costing Concept • Nationally recognized benchmarking and/or quality standards in our industry o LEED
o Delta
o ENERGY STAR©
o ASHRAE’s – (Energy Performance Ratio)
o Solutient
o ASHE/IFMA 11
What’s Wrong With a National Benchmark? • ‘Normalization’ of data (using linear regression modeling to compare the features of an apple to a soccer ball out six decimal places). Humor, or Reality? • Can buildings from different eras, regions, and climate zones truly be compared? • Benchmarking ‘standards’ are not standard • Normalization process often obfuscates the obvious (Focus vs. Fixing)
• Historical data may not justify current operating environment (bottom line); I trust your data but… cut 10% regardless! However; • Several good sources of benchmark data and benchmark processes 12
Benchmarking Sources and Tools • IFMA/ASHE “Operations and Maintenance Benchmarks for Health Care Facilities Report” (2010) o Capital Replacement Metric o Staffing Rates o R&M Costs
• EPA’s “Energy Star Portfolio Manager” o Ranking by Building Type o EUI Comparisons (Source vs. Site Energy) o Emissions Improvements
• BOMA Regional/National Building Summaries for O&M [The Experience Exchange] o Salary Data o Expense/Sq Ft
• ASHRAE Design Standards for Healthcare (Fabulous Energy
Information) 13
Energy Benchmarking & Design Best Practices • ASHRAE; Energy Benchmarking Best Practice Design Guides
- 90.1 Energy Standard for Buildings… - Advanced Energy Design Guidelines…(Large, -50% & Small, -30% Healthcare) - Extracting the relevant information… - Ensuring these best practices avoid “VE”
o ENERGY STAR© - Does ES signify best of best, or simply best of what we understand today? Static sample? The industry standard comparative metric? - Easier way to view comparisons within your region (dashboards)? - Many competing ‘energy’ comparisons…could we ‘pool’ talents? - ES Design Guides (how to engineer an ES facility) - Source versus Site Energy Data (normalized)
• Targeting 100 Sustainability Guideline (University of Washington, 2010) - Compilation of Regional Best Practices? - Conclusion: New hospital can use 60% less energy (Northwest Climate) - Is there a cross over to hot/humid climates? - Worthy of discussion/debate? 14
Utilities
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The Value of Benchmarking • A Performance Improvement Process • Required by Regulatory Bodies (TJC, DNV) • Why not “measure” things that have direct correlation to facility management? • Memorial Hermann Measures • Staffing Ratios: FTE/KSFT • Energy: Btu/SFT, KWH/BD, KW/Ton • Repair and Maintenance Expenditures • Capital Replacement (CRV) Index • $/SFT for All the Above 16
Why $ Are Actually More Important Than “Units” (Sales) • i.e., the ‘Engineer’ vs. the CFO • Engineer/Architect/Facility Manager • LEED
• ENERGY STAR© • Lean Six Sigma • Kbtu/SFT+ • EUI Rating • CFO:
$ 17
Energy/Utilities (CFO) $/SFT (Acute Care) 2007 2012 42% 25%
$5.90/SFT ($53M) $3.40/SFT ($30.6M) Bottom Line Improvement Btu (Consumption) Improvement
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Energy Trend Graph: Total Natural Gas Consumption System Total Natural Gas Consumption
70000 60000 FY 08
MMBtu's
50000
FY 09
40000
FY 10
30000
FY 11
20000
FY 12
39% Reduction in Natural Gas Consumption; FY 13 vs. FY 08 "WOW"
10000
FY 13
0 July
Aug.
Sept.
Oct.
Nov.
Dec.
Jan.
Feb.
Mar.
Apr.
May
June
Month
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EUI Data (Site Energy) • Where we were… (the most challenged) – 420 to 300 range; - 27%
• Most Improved; -51%, Several >30% • TMC vs Suburban Campus – District Energy vs Stand Alone (Buy vs Make Ton)
• Old vs New (Older easier to Tune?) • Overall Portfolio… 5 in 150 EUI Range • Best In Class = 141 EUI (WOW) 1983 Era 20
Energy/Utilities (Engineer) Btu/SFT (Acute Care, Site Energy) 2007 303,662 Btu/SFT 2012
227,966 Btu/SFT
~25% Improvement Or EUI ∆ 304 vs. 228 (Site Energy) Gross Data; NOT Normalized (Houston – Proper) 21
14 Hospital Portfolio Energy use (Btu/SqFt) compared to Energy Star Rating System Avg. 100% 300,148
90%
292,575
300,000 266,864
80%
241,675 Btu's per sq.ft. vs. Percent improvement.
350,000
68%
229,147 53%
70% 60%
250,000
200,000
50% 40%
150,000
41%
38%
30%
100,000
30% 20%
50,000 10% 0%
Energy Star Rating
0
FYR 08 thru FYR 12
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*Repair & Maintenance • Much More Difficult to Define (For Memorial Hermann; For Healthcare?) • Market and P&L Driven (Correlation to ‘Payor Mix’?) • We Range from $1.50/SFT to $4.00/SFT • Different GAAP Interpretations Between Facilities – Expense vs. Capital (CFO) • MH Average = $2.30/SFT • IFMA/ASHE Benchmarking Statistic: (IFMA/ASHE, 2010) – $ 15.07/SFT Best in Class – $3.22/SFT Mean – MH ≈ 38th Percentile ($2.30/SFT) * Includes contract services such as landscaping, HVAC, window cleaning in addition to traditional ‘R&M tasks. 23
R&M Trend Graph: Cost FY 2012
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*IFMA/ASHE’s CRV Index • Fabulous Tool/Resource; n=151 (67% Acute Care) • 68% Sample; Age = >20 years; Sample Size Concern, but… • Current Replacement Value = Cost to Replace “As-Is” for Building and Grounds (not FF&E) • CRV Index Annual Facility R&M and Cap Ex/Replacement Value
• IFMA/ASHE Best in Class: CRV Index = 5.08% (99th) – MH CRV Index ≈ .87% (≈ 30th percentile) *Routine R&M budget should be 2% to 4% of aggregate current replacement value $
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Facility Benchmark Data • Facility Operating Current Replacement Value (*CRV) Index • Replacement Cost of Hospitals
$2.1 Billion
– (at $300/SF)
• Total Maintenance – R&M Expenditures (FY10)
– CRV Index (.87)
$17.9 Million 30th Percentile
• Summary: MH Investment Well Below Industry Mean * Source: IFMA/ASHE O&M Benchmark for Healthcare Facilities Report, 2010 26
CRV Index • What did we do? – Tool (Real Data) to Leverage $20M/year for Infrastructure Projects at Facilities • • • •
Roofs Exterior Building Façade AHU’s/RTU’s Boilers/HVAC Items
– Data and Benchmarking can work! – Benchmarking = Proactive Approach to Capital Planning! Duty to ‘Inform’ 27
• Worthy of Your Review • Google IFMA/ASHE Benchmark to Download • Now: Who will keep up this effort to improve statistical validity? • A Real “Tool” for Healthcare? 28
Memorial Hermann Lessons Learned • So, Wisdom or Sinkholes? (A Summary) – Engineer’s Cost Estimate – The Cost of Construction in Heaven – Low Bidder – A Contractor Who is Wondering What He Left Out – Liquidated Damages – A Penalty for Failing to Achieve the Impossible – Auditor – People who go in after the war is lost and bayonet the wounded – Lawyer – People who go in after the Auditors and strip the bodies (Humor or Reality?) 29
Opportunity/Reflections • Utility Costs and ‘Breakeven on Medicare’ Focus – Hospitals consume 250% more energy than other building types (ASHRAE) – Noted that > 1 B GSF of Healthcare Real Estate in USA – Some have stated that over $8 Billion/year in Healthcare Utility Expenditures – Memorial Hermann has improved portfolio (Reduced waste ≈ 25%) – Memorial Hermann has reduced utility expenditures ≈ $1.25/GSF (Consumption) – Memorial Hermann has yet to capture all the low hanging fruit
Therefore, could there be greater than $1.3 Billion in wasted energy among our healthcare peers? 30
‘Bragging’ Page • • • • • •
Seven Energy Star Hospitals Eight Energy Star Medical Office Buildings 33 ASHE E2C Awards (more to come?) Energy Star Leader 2012 Energy Star Partner of the Year 2013 Improved from ~30th to 64th Percentile Across the Portfolio • We started at the 5th Percentile with One “New” Facility • Our journey has just started…
• You Can Do it Also; TAHFM Texas Healthcare Energy Challenge – April 2013 (FREE) 31
• Our journey to “tune” one high-tech building • Fun/Fear of discovering what should and should not be Best Practice • Construction = Defects = VE = Compromise
• Our Mission: Minimize Start-Up Challenges • Spend year-one $ to reduce future utility expenses? 32
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