Healthy Funding

14 April 2008

By working with accurate facilities data and evaluation tools, Susan Anson and Jim Blaschke explain how one Canadian Province has planned its investment strategy for renovation and construction for its healthcare facilities

MOST FMS WOULD AGREE that taking a proactive approach to building maintenance and renewal enables organisations to get the best out of their facilities while avoiding crises and emergency funding. But putting this philosophy into practice is another matter.

In the public sector, in particular, funding for major facility renovations, replacements and upgrades of buildings systems, and other capital projects are held under close scrutiny. Capital planners must be able to demonstrate both that such investments have significant returns for their constituencies, and that they are most costeffectively planned and managed.

Meanwhile, the building infrastructure of most western countries is aging rapidly. In Canada, for example, a large percentage of public infrastructure is the result of the post-World War II building boom, and is more than 60 years old. A significant portion is nearing the end of its service life. The result is a staggering infrastructure deficit estimated in the hundreds of billions of CDN$.

In the province of British Columbia, the provincial Ministry of Health wrestled with the issue of aging facility infrastructure across its six health regions which are responsible for local health services delivery. Like all Canadian provinces, British Columbia has a publicly funded healthcare system, and receives funding and tax transfers from the federal government in support of health services. Determining how to allocate those resources optimally across the province can be a complex equation, given changing demographics, unique regional requirements, emerging technologies, evolving regulation, and uncertain levels of future funding.

Making the task more difficult still is the fact that each region previously collected and maintained its own information regarding the conditions of its healthcare facilities, what repairs and replacements were necessary, and what those improvements would cost. Because there was no consistent method of collecting or evaluating this information, the Ministry of Health could not easily evaluate the needs of different regions, or prioritise the various funding requests from the regions.

Aging facilities
The issues facing Canadian health ministries and authorities are similar to those faced by the UK’s National Health Service and its regional Strategic Health Authorities. An aging facility infrastructure has led to an increasing backlog of deferred building maintenance and renewal. These projects ultimately complete for a limited pool of funds for investments in new technologies and in programmatic changes required by demographic shifts, including an aging population. Understanding the implications of these investment tradeoffs requires a detailed understanding of current facility conditions and needs, as well as how those needs will change over time.

Capital planning
In British Columbia, the Ministry of Health set out to establish a strategic, long-term capital planning capability based on a foundation of detailed data about facility conditions around the provinces, and common methods for maintaining and evaluating that information, consistent with the capital asset management policy defined by the Ministry. Policy requirements included a standardised facility condition audit process, as well a common system for continual management of inventory information.

The Ministry of Health worked with VFA Canada Corp., a provider of facility audit services and capital planning software, to complete physical audits of all acute facilities and owned residential care in the province. The data collected, including information about the condition of each structure and all major building systems, was documented in a central database using VFA.facility software. In addition to identifying requirements for repair, replacement and renewal, the audits also provided detailed cost estimates of each requirement, using an industry-standard cost database built into the software. Each requirement was also assigned an urgency level, based on how soon it needed to be addressed.

With detailed data about facility needs and a central software repository for this information, the Ministry of Health was able to benchmark conditions across different regions and categories of facilities, and measure building performance through key indicators such as Facility Condition Index, a ratio of the total cost of a facility’s deficiencies and its total replacement cost.

At the Interior Health Authority (IHA), one of province’s six regional health authorities, the new processes and systems have provided the region with a long-term view of capital needs, and the tools to make a business case for funding those requirements. IHA manages approximately 120 acute care, residential care and administrative facilities, comprising over 1m sq ft of property. It includes a staff of more than 16,000, with an operating budget over CDN $1bn.

The Ministry of Health requested that IHA and the other health regions prepare defensible tenyear capital plans to present to the Treasury Board to secure necessary funding. However, because it previously relied on individual plant managers to identify and estimate the cost of necessary facility repairs, it lacked confidence that facility condition information across its portfolio was accurate and consistent. IHA also had difficulty effectively categorising and prioritising identified maintenance and renewal projects, including adequately identifying those that involved life safety issues.

Facility condition
To prepare capital plans, IHA needed a comprehensive and accurate understanding of facility conditions, including building lifecycle components. However, since individual plant managers were responsible for reporting on repair and maintenance needs, the information was highly subjective. IHA Executive Director Dave Mackintosh notes that no one could confidently identify the biggest priority renewal project. IHA had little documentation of the history of its facility requirements.

After VFA conducted detailed audits of IHA facilities, regional staff were able to use VFA.facility software to analyse the condition of different types of facilities relative to each other. IHA used the software’s decision support and analytic tools to assist in the prioritisation of requirements and projects, addressing life safety requirements as a top priority, and in the development of capital project plans and multiyear capital budgets.

Makintosh notes that the facility data collected during the audits confirmed the assumptions of facilities management staff within IHA – that overall condition was worsening, and funding levels were not adequate to support the mission of the organisation to provide quality healthcare to the residents of the region.

Armed with an objective evaluation of facility conditions from a third party, and analysis if the long-term impact of different funding scenarios on facility condition and spending requirements, Mackintosh presented a detailed funding request to IHA’s Board of Directors, which specifically enumerating how allocated funds would be used in critical life safety and preservation projects. The board subsequently approved funding for all of those critical projects.

One example of those projects was a CND $21m expansion and upgrade of the East Kootenay Regional Hospital. The VFA audit had identified CND $11m worth of needed upgrades to the hospital, including repairs and system renewals, which were incorporated into the renovation project. Mackintosh notes these issues might not have been identified in the absence of detailed audit data, and could have potentially impacted the construction and usability of the expansion.

Today, IHA employs VFA.facility to maintain current information about condition and requirements across its facilities, and to prioritise all its maintenance and renewal projects based on urgency and potential returnon-investment. IHA can now readily track the relative condition of its buildings using the Facility Condition Index within its capital planning software, monitoring its progress over time. It can also determine the most efficient approaches for bundling requirements into construction projects. By using software tools to view its facility portfolio in terms of components, IHA has also been able to realise significant efficiencies in construction and conservation that have reduced operating costs.

IHA can now also more effectively prioritise capital needs. While those needs always exceed available funding, it was previously difficult to apply a consistent rationale to such decisions. IHA now categorising each capital requirement in its database based on such categories as building type, building use, system type, facility condition index and urgency of need, each with a different importance score. IHA can then compare the total scores of each project, and easily consistently rank the projects to create capital budgets.

With accurate facilities data and evaluation tools that empowers it to plan new renovations and construction, Mackintosh says the region can now plan projects with confidence. As an example, when IHA was conducting an $8m conservation of lighting, windows, boiler, domestic water, air handling, and mechanical systems, IHA staff used its capital asset management system to determine how to group retrofits and replace systems in the most efficient way. By doing so, Mackintosh estimates that IHA will be able to pay back its investment over a 10-year period by reducing operating costs.

IHA has gone on to make continuous improvements to its capital planning processes and systems that will yield cost efficiencies and enhance productivity. One example is the automation of project requests.

At IHA, just as at many other organisations, the process of developing capital plans, projects and budgets, getting them approved, and then managing their ongoing execution engenders its fair share of required forms and reports. In many cases FMs, capital planners and financial analysts find themselves manually populating Microsoft Excel-based forms, or transferring data by hand into complex reports that are required to be in a standard format.

IHA must submit a form to the provincial Ministry of Health for each capital project it undertakes, summarising the project budget.

IHA previously populated this form manually for every capital project. However, by exporting the appropriate data from its new capital management system, the organisation has been able to automate the process of creating these budget summaries. IHA can select specific criteria, including project group type, specific plan and type of project, and with the stroke of a key generate a 1553 Form pre-populated with information from its asset database, saving many man hours of effort.

● Susan Anson is General Manager of VFA Canada Corporation VFA opened its first operation outside North America in the UK with an office in Reading headed by Steve Hand.
www.vfa.com/uk