Build New, Renovate, or Demolish?

By Cathy Demmitt

Aging assets go beyond aging infrastructure. Understanding asset value and utilization will help determine which is best for your organization.

Hospitals can operate vastly different today. New equipment, technology evolution; changing patient population,  staff and patient safety,  Facility Guidelines Institute,  new building codes; contribute to increased operational cost. Medical office buildings are more than physician offices, laboratory, and imaging services. New services lines may have different  MEP and accessibility requirements, all of which are considered to understand how, or if,  your medical property assets can adapt. Owners must conduct a thorough analysis of what is at stake under multiple options. Do we build new, renovate, or demolish?  This is not simple and may be a combination of methods.

Assess what you have, perform a Strategic Facility Assessment (SFA).

Go beyond Facility Condition Index (FCI) and Age of Plant Index (AOPi). Add strategy to the process, understand interconnectivity of these with operational indicators and cost to an organization, with respect to sound fiscal policy.

You must know the true worth and efficiency of facilities. What is the cost to maintain and operate a physical plant, the cost of moving people from place to place, percentage of used space, etc? How do you start?

Survey and understand the location of assets, include interrelationship between each of the properties, overall physical condition, and value Include:

• Physical characteristics of property, real estate data, tax and resale value, marketability, operational efficiency.
• Physical Condition Assessment (FCA) – Are there capital plans for improves or  planned infrastructure replacement plans?  What is cost of deferred maintenance including staffing costs?
• Analyze use – Do occupants have to move from one property  to another? At what cost?
• Are  properties on main internet fiber, or  independently connected? At what cost, any opportunities for monthly savings if on main campus?
• Do supplemental properties have independent utilities with different consumption rates? Any advantages to obtain one rate, one centralized bill?

Property such as small, acquired physician offices, donated residential, or nearby commercial – are these needed? Are they being used for overflow departments, which could consolidate elsewhere? Tax structure?

In the main facility, do you have multiple occupancies, non-clinical services operating in former patient rooms?  Can these move out of institutional occupancy into another facility?  Would that free up space for phased renovation demolition options?

Does floor to floor height limit IT expansion, new MEP system requirements? Is structure so robust that internet connectivity and speed are hampered?

Next – Explore Options or Combination of Options.  

Align assets with your strategic business plan. Most campuses and satellite facilities span many decades and may operate differently from energy to occupant use/efficiency metrics.  The SFA should include knowledge of the infrastructure and connectivity to each building if renovation or selective demolition is chosen.  Often organizations look at the process, timeline, and applicable construction costs of a new facility compared to renovation costs.  Both have merit and warrant review, and both have operational impacts on the daily care of patients.

Total Replacement – Items to Consider, Research, and Evaluate
If you replace the hospital, what programs are needed to align with the strategic operational plan? Do you know what the building needs in 10 years; will it be viable in 20 or more years?

Land use and availability  – Does buildable land exist nearby to be close to existing utilities, services? Is there merit in moving further away? Is it zoned appropriately and does the program fit? What are potential pitfalls? Rezoning or other entitlement processes can be more expensive and add time to resolve – how will that affect goals?

Staff impact – New facilities may require more staff involvement due to move from one environment of care to another environment. Prior to design, current state should be understood, and future state mapped for ideal patient care. Transition planning is important to prepare staff to work safely in a new environment.

Community involvement – Often communities have an emotional attachment to the existing campus. Will the community oppose or support a new project, and any needed fundraising?

Vacant Facilities – What is the cost to operate an empty asset? How do you divest?

Renovation and Additions
In addition to the above, the following should be taken into consideration:

Phasing construction and on-site construction activities require more interaction with staff on daily basis. Phased construction typically costs more, takes longer, and staff, patients, and visitors can grow weary of disruption to their daily routine, so communication is critical

Life Safety Measures and Infection Control are the biggest and most important challenges with any onsite construction. Methods of monitoring and staff involvement are key with system disruption, etc. It is important to establish baselines prior to construction start.

Partial Demolition or Adjacent Demolition
All the above factors are involved in demolition. Noise, vibration, and air quality both in and around the hospital are critical. Baselines must be established. Procedures must be in place to monitor and remedy.

Demolition
Today’s raw materials are valuable and recycling of materials whether partial or total demolition is a must and will greatly reduce cost if using a specialty demolition expert.  Brick, metal door frames, aluminum windows, and stainless; nurse call and IT systems have much-needed copper and other wiring.

Next – Determine Cost/Compare Value of Options

Calculate comprehensive costs of each option noting demolition cannot be capitalized. Include land and entitlement matters, environmental costs, construction, management and professional fees, furniture fixtures and equipment (FFE), relocation expense, and recertification of equipment. Include transitional planning costs, training of staff at the new location, any phased costs such as dual location, and other operational costs and labor burdens to staff during any project.

Obstacles, both physical and psychological exist with many options, so the outcome must align and meet the organization’s vision.

Summary

No one solution fits all. Each organization must balance the assets they have with the resources to improve or replace to make them viable for the future in a responsible fiscal model.

Connect with Cathy on LinkedIn to find out more, here.