Healthcare Insights: Achieving Conviction in Capital Planning and Development

Many systems have not returned to their operating margins from five years ago. At the same time, the cost of capital has increased significantly, leading to scrutiny of all capital expenditures. As capital is deployed, there must be certainty in committed costs compared to budgeted costs. Data-driven decision-making allows leaders to develop strategies guided by qualitative and quantitative data insights, which in turn provide certainty to the planning, procurement, execution and activation stages of a project.

Data-driven decision-making should be used as early in the capital planning process as possible. When data is guiding decisions that affect capital projects, it provides transparency across the organization. Stakeholders then buy into the plan due to a better understanding of how the capital plan is developed. As stakeholders get behind a plan, resources—financial and beyond—can be more clearly allocated to capital projects.

• Connecting Project Goals to Strategic Needs: At this stage, data can help align the project's goals to the system's strategic needs. This includes data around patient volumes, including the balance of inpatient and outpatient volumes with the corresponding revenue based on reimbursements.
• Measuring Progress Against Conditions of Satisfaction: It’s essential to use key performance indicators to establish conditions of satisfaction that are tied to clear performance metrics. Throughout the project, progress can be measured against these conditions. It should be easy to compare these metrics to performance and determine if the project was successful. As potential changes emerge and the project's scope comes into question, the conditions of satisfaction built based on data can be used to guide potential changes. This can also help prevent time-consuming value-engineering and re-design later in the project.
• Increasing Empathy by Understanding of Operational and Market Conditions: Harvesting industry data can help general contractors better understand health systems’ operational environments and concerns. For example, when a general contractor’s project team understands how outpatient and inpatient services drive revenue, they can better understand a health system’s priorities. Similarly, if the project team is aware of the data behind national healthcare trends—the growing percentage of the aging population or continued burnout epidemic in physicians and nurses, for example—they can understand the challenges systems face and be more empathetic builders.

Once the capital plan is advanced, data-driven decision-making can be used to allocate resources, develop schedules and provide plan certainty. As resources are allocated to the project, both health systems and general contractors can use their respective data to make smarter decisions.  

• Allocating Resources: Data can help systems determine how many (and which) employees to assign to projects. Data can assist in determining if employees have worked on similar projects and have a skill set that will help run the project more efficiently. Visualizing the spread of employees on current projects can also help determine who can take on a new assignment and when team members will have bandwidth for a new project as their current projects transition to a state where they can be more hands-off.
• Facilitating Schedule and Cost Efficiencies: General contractors often use past project schedules and data as baselines for future projects. Comparing actual and planned durations of past project sections helps refine the schedule. That helps the general contractor understand what sections of the schedule are at risk of slipping, allowing them to build in time to recover. Using a smart block and stacking program can facilitate schedule and cost efficiencies since input data on the program estimate and design concept can be used to establish a high level of cost confidence early on in validation. These tools allow input from the manufacturer and builder to optimize the budget and schedule for the project.

Leaning on data to inform decisions helps mitigate some of the risk of human error when decisions are made solely based on an individual's wants. When relying on data, an organization is less dependent on individuals who may be subconsciously biased or unknowingly commit errors.  

• Eliminating Bias: Choosing By Advantages is a decision-making process that evaluates decision alternatives, based upon established criteria for evaluation, while defining relative importance to assist in identifying variables among proposed solutions. This process allows data inputs to be appropriately evaluated as part of the decision-making process, promoting clarity and transparency.
• Proactively Managing Risk: Stakeholders can be more aware of potential risks because of data-driven insights and, with this information, make better-informed decisions with greater clarity of all associated implications. Understanding risks and related consequences also aids leaders in proactively developing and implementing risk mitigation plans. Data can inform project risk registers to provide as much information as possible on a risk when it arises. Before issues arise, risks can be actively managed by early identification. Once the risk register is robustly populated with data, mitigation plans can be developed that take that data insight into account. Project teams then better understand all options available to mitigate risk and any consequences of employing risk mitigation plans. Instead of mitigation plans that are prioritized based on instinct, they can be prioritized based on data insights that are known and can be forecasted.
• Monitoring in Real-Time: Applied data can make construction processes more efficient. While the planned schedule is being implemented, real-time monitoring can be used to track project progress and clearly forecast upcoming project activities. Combining historical data and current progress with predictive analytics helps teams model scenarios and forecast outcomes. Coordinated efforts free up the project team to focus on complex or high-risk aspects of the project, saving the organization both time and money.
• Harnessing Tools to Collaborate on a Single Source of Truth: Leveraging the tools of virtual design and construction via federated building information models can expedite the fidelity of coordination, work sequencing, and procurement planning, all while carefully calibrating skilled labor in the field. Procurement planning and Target Value Design allow organizations to harness supply chain market data and time purchases to best leverage market conditions. Applying these methods of building data and analytics enables higher cost and schedule certainty, leveraging early engagement of skilled labor insights aligned with the local market conditions.

When data-driven insights guide strategies, they mitigate the effects of industry changes and help to provide capital project cost certainty. The advantages are further enhanced when the system can work with a general contractor who can help guide data use. Health systems can lean on general contractors to assist in implementing data-driven decision-making that maintains consistency through tumultuous times.

Author: Laura Jones, DPR Construction Healthcare Strategist