I really enjoy working on Community Needs Assessments (CNAs). For me, it’s the critical starting point on the road to meaningful measurable improvement in the health and wellbeing of all community members.  So, you can imagine how excited I was when one of my clients invited me to join them in a Podcast to talk about the CNA that we just completed.

Northwest Michigan Community Action Agency (NMCAA) launched a series of regular podcasts about a year ago called “The Collective Us”.  This series, hosted by Erica Austin and Ryan Buck, focusses on inspirational stories and innovative programs that are at the heart of NMCAA’s poverty-fighting mission.  I’ve listened to some of the episodes and was very impressed with their professionalism, the high quality of the recording, and how they create a very friendly, collegial atmosphere.

During this particular episode we covered:

> Why CNAs are critical in helping those struggling with, or at risk of, poverty

> The vital role that clients, employees, stakeholders, and community members play in CNA research

> Leveraging meta-analysis to analyze findings and prioritize needs

Is there a Community Needs Assessment on your to do list, or would you like to know a little more about them?  Curious about some best practices, including how conduct the Assessment in a way that set you up for significant improvement in your community?  Check out the podcast at the NMCAA website or on Spotify.

And let me know if I can be of any help with your Community Needs Assessment efforts.

Jeff

Margins, and the capital investment pools they enable, are gradually recovering for some organizations. For most though, these funds are still scarce, so capital investments must be selected more carefully than ever. In this series we've been describing evaluation criteria that can be used to select the best investment opportunities. In this post, we focus on implementation and project management.

 

We suggest that there are four major types of criteria, each of which were addressed in previous posts in this series (see sidebar). If the selection criteria deserve extra scrutiny in an era of tight capital, then it stands to reason that implementation and project management also need added focus. And at that stage, it’s all about the details, especially these five.

1. Certificate of Need   Health care investments are regulated in many states by certificate of need laws. 35 states have these laws and three more have variants. In Michigan, for example, many types of facility acquisitions and capital expenditures require state approval for investments of $4,250,000 or more. Other nonprofits may have similar standards to consider. Knowing the laws, requirements, and/or standards to comply with is a detail you can’t afford to miss.

2. Process Flow   Often capital investments are made to accommodate growth for services that claim to be “running out of space”.  Process Flow Mapping can be a critical step to uncover the root cause of inefficient operations and can mitigate unnecessary capital investment. If additional space is a necessary part of the solution, it is important to map how the space will be used before designing it. Process Flow Mapping with front line staff can identify Critical Paths, where consideration of all required steps, hand-offs, and dependencies can expose vulnerabilities as well as points of emphasis in training before a project “goes live”.  Even if the project is simply an additional location of an existing service, make sure all personnel are trained in all the relevant procedures, and those procedures have been adjusted as needed to accommodate any differences with the new space.

3. Key Dependencies  Along those same lines, it is important to identify key dependencies related to physical assets, personnel and supplies. If helpful, think of these as supply chain vulnerabilities; recall how the Covid19 pandemic clarified how important those are.  Does the project require a specialized team member, supply, or piece of equipment? What are the contingency plans if someone, or something, is suddenly unavailable. Have alternative sources been identified?

4. Contingency Planning  Dependencies and vulnerabilities warrant contingency planning, and the Process Decision Program Chart (PDPC) is a great tool.  We reviewed the PDPC previously in Part 5: Risk Assessment, the fourth and final major project selection criteria.  Upstream in project selection, it provides evidence that the proponent(s) have already considered possible failure points and counter measures, further minimizing the risk associated with the project. And now, during Implementation Planning, any PDPC work already prepared should be reviewed and updated if needed. If one hasn’t been created yet, we definitely recommend doing so at this point.

5. Pilots and Trials  Lastly, in many cases, a limited scale test run is very doable and can be extremely helpful in implementation planning. In preparing for a pilot or trial, take time to carefully define the scope and duration, as well as the success measure(s), procedures, training, and thorough debriefing. The lessons learned and critical success factors identified can lead to important process refinements. Attention to detail with pilots or trials will lead to smoother, trouble-free full-scale implementations.

Most of these implementation “details” are considered Project Management best practices.  Other important steps include the composition of, and support given to the Implementation Team. Determine the key areas of expertise needed and if it will be needed throughout implementation (core team members) or at specific phases (ad hoc members). Will they need any resources, and how often should they meet? The answers to these and other questions will be a function of the nature and scope of each approved project, however the most successful teams have the necessary expertise and resources to guide the implementation from beginning to end. This includes basic project management skills, which can be leveraged either through relevant expertise among one or more team members or a facilitator skilled in project management. It is common for large, complex projects to have an assigned facilitator with project management certification.

Final Thoughts  We have covered all four key Selection Criteria and now some key details of Best Practice Implementation. At this point the likelihood of success is near optimum. There are just a few remaining concepts for consideration which we will address next time in our last segment.

The concept of a Risk Assessment is not new, however incorporating a few tools and concepts can strengthen the reliability of the assessment. With these tools, the assessment can be more thorough and consider circumstances that might otherwise be overlooked. The fourth criterion, Risk Assessment, is intentionally positioned last so useful data gained from examining the other three can inform the risks to be considered.

 

Critical Risks and Countermeasures (PDPC) Borrowed from process / quality improvement, the Process Decision Program Chart (PDPC) is designed to identify potential failures and the countermeasures to prevent them or minimize their impact.  Building a PDCP begins with listing all the consequential potential failures associated with a proposed capital investment (e.g. critical supply shortage, inability to recruit key personnel, failure to meet key implementation milestone, etc.). Then, one or more carefully designed countermeasures are developed for each failure. For each capital request, have key failure points been identified and have the appropriate countermeasures been developed? If not, the risk of failure and associated consequences may be higher. A PDPC is an effective way to either design plausible counter measures or reverse-engineer a better plan and avoid the problems all together.

Scenario Sensitivity Analysis While a PDPC examines each project’s inherent risks, a Scenario Sensitivity analysis shifts the focus to the impact of the external environment. Begin by identifying a handful of Scenarios (typically 5 – 7) the key stakeholders are most concerned about. Some scenarios may relate to major trends (e.g. workforce shortage), while others stem from unique circumstances related to one or more of the requests (e.g. a competitor planning a similar investment). Use these as column headers in a matrix, with the various capital proposals as the row headers. Then, use symbols to indicate negative (-) or positive (+) impact that each scenario (column header) would likely have on each capital request (row header), keeping in mind that an empty cell (no impact) is also possible for any scenario/project combination. The completed table (see example at right) gives evaluators another way to compare the risk of the proposals.

Risk of not proceeding (opportunity cost) The last risk assessment tool is a concept you may have used in the past. Essentially, consider what may happen if the capital investment is not approved. In some cases, the consequences may be clear (maintenance costs, inefficiency, or code violations in outdated facilities), while in others, they may be more elusive (revenue or market share lost to a competitor). Are there risks of not proceeding related to evolving customer expectations or changes in reimbursement that are setting-dependent?  The best project proposals have a thorough consideration of the risks of not proceeding that can be quantified and weighed against the projected benefits if the project is approved.

Four Criteria Meta Analysis   In selecting the “vital few” capital investments from many proposals, each of the four criteria reviewed in this series has value as a point of discernment.  Even more valuable is the ability to consider all four together, revealing not only the strongest proposals across all the criteria, but shedding light on any tendencies across projects.  Preparing a quick “meta-analysis” of how the proposals compare across all four criteria can lead to some interesting questions…and improvements. For example, are most of the projects attractive from a Financial Feasibility perspective, while some are lacking in Strategic Alignment? Are there “stand-out” proposals in terms of Risk Assessment or Organizational / System Impact? These are important learning opportunities, and if leveraged, could result in even better options in the next capital approval cycle.

The “Other” List And yet, were’ not quite finished. Stay tuned for the last two installments in this series where we discuss several other considerations that may be applicable to individual proposals.

Are you and your leadership team prepared to get the most out of your capital investments?  Let us know if you have any additional thoughts as this series unfolds, or if we can be of any help applying these ideas in your capital project review, selection, and implementation processes.

Roberta Jelinek and Jeff Schilling

(This is the 5^th of 7 posts in the series.  For the full article, contact either one of us.)

Many organizations are working through an era of tight capital, reducing the margin for error on investment decisions to just about zero.  And the current market volatility is only adding to the stress level surrounding these decisions.  In this series, we describe how leadership teams can select the “best” projects to fund with limited capital from a large number of potential “game changers.  The previous post introduced the first of four recommended criteria for selecting the best projects to fund.  Some elements of that first criterion, Strategic Alignment, are well established, while others add new perspective to reflect where health care is heading.

This second criterion is also a blend, with the first two elements being well-established and four more to advance your discernment of the “best” projects.

2. Financial Feasibility: Whether familiar or not, nearly all these six elements could apply to just about any capital project, while the last one relates to “Bricks and Mortar” projects.

A. Performance on Standard Valuation Metrics: For any capital investment we recommend examining three key metrics: 1) Internal Rate of Return, 2) Payback Period and 3) Net Present Value (using a Discounted Cash Flow Model).

B. Cost Saving: For replacement projects, how do the operating costs for the proposed project compare with existing costs? Will the new project create operational efficiencies? Are the estimates accurate? Have they been considered in the valuation metrics?

C. Incremental Income: Consider the ways the project will (or won’t) generate truly new income. Moving an existing service line to a new building doesn’t necessarily bring in new revenue. What is an additive? Conversely, is there potential for new downstream revenue by increasing referrals for other needed services? For example, space used for cancer screening can lead to surgeries, chemo infusions, or radiation treatment.

D. Incremental Expenses: It is also critical to examine what new expenses will be incurred. Will a new service line require adding a new physician? Will marketing costs be incurred? Does growing a service line require additional staff, equipment or supplies. Are these readily attainable? Are the supply chains reliable?

E. Reimbursement and Inflation. Another critical consideration to be carefully examined is the impact of reimbursement. Will the project result in any changes in reimbursement (e.g. HOPD vs. ASC rates)? Relatedly, payer mix may change if the project involves a relocation, participation in a new network, or a different marketing plan. Lastly, consideration should be given to inflation which may impact the cost of materials and labor for new construction and specific line items in the operational financial projection.

F. Buildings: Bricks and mortar investments have important additional considerations:

• • Lease? Where possible, leasing or renovating existing space should be considered in addition to building new. The growing commercial real estate glut (resulting from the trend toward remote work) has made leased space more plentiful and affordable.
  • Minimize Non-Revenue Producing Space. With renovations, consider converting administrative or support space to revenue producing space. With new construction, consider if support services like finance or human resources can be maintained in a remote or partially remote capacity.
  • Flexibility by Design. Design flexible space that can easily adapt to a variety of services as the market changes. For example, design office space that can be modified for primary care or wellness offerings (e.g. physical therapy, mental health counseling, or lab), to better meet consumer expectations and community needs.

Are you and your leadership team prepared to get the most out of your capital investments?  Let us know if you have any additional thoughts as this series unfolds, or if we can be of any help applying these ideas in your capital project review, selection, and implementation processes.

Roberta Jelinek and Jeff Schilling

(This is the 3^rd of 7 posts in the series.  For the full article, contact either one of us.)

 

What’s that old saying…the Chinese word for Crisis (Wei Ji) is a blend of Danger (Wei) and Opportunity (Ji)?  While the truth in this literal translation is debatable at best, the concept has endured since the 1960s, probably because many have found it to hold elements of truth.

The “Dangers” of Tight Capital  Emerging from Covid19, inarguably a major crisis, many organizations found capital scarce, in part because lower margins during the pandemic resulted in lower (or no) funding of capital pools.  While there has been some improvement in margins for the industry as a whole in recent months, they may be slowing to a new normal.¹  And, the improvements have varied significantly across hospitals. Sustained profitability is a delicate balancing act. Funding for capital investments is still limited.

Lower margins usually translate to less capital to allocate to potential projects, and with lower margins, there is less ability to compensate for lower-than-expected returns, so the risks associated with any underperforming or failed projects are much higher. This clearly resonates with the “danger” part of the crisis definition.

The Post-Covid Opportunity  In true fashion regarding the other half of the crisis definition, many health and human service organizations found the Covid19 peak years to be a period of opportunity, in part because it required substantial innovation to respond effectively to the scope and depth of human need.  Responding to the Pandemic accelerated the pace of many innovations (e.g. tele-medicine, working remotely) and initiated others (e.g. supply chain improvements).  Furthermore, the pace of innovation seems to be continuing, inspiring as many proposals for capital investment as ever…maybe more. Many of these innovations require substantial funding, including shifting care to new settings, leveraging technology, and workspace redesign.

The Dilemma of an Era of Tight Capital  When viewed in this way, the Crisis of Covid19 Pandemic indeed meant both danger and opportunity for capital investment. If these conditions persist, at least into the foreseeable future, how do leadership teams select the “best” projects to fund with limited capital from a large number of potential “game changers?” This series explores how to get the most out of capital investments in a period where capital is tight, and risks are high.

Selecting the Best  In the next three posts, we will cover four key characteristics, and a few useful tools, for selecting the capital investments most likely to succeed. Your organization may have already established criteria for evaluating various capital requests. However, in the current environment the focus needs to sharpen on investments that will balance a rapid rate of return with other important considerations.  We will review considerations that help ensure both sustainability and also synergy with the evolving US health care landscape in future posts.

Ensuring Success  Then, in two additional posts, we will cover six important considerations, and the associated steps you can take to help ensure the success of the investments that you choose.  Selecting the capital investment opportunities that best fit your criteria is still no guarantee of success, especially in this transformative period.  Societal pressures, evolving consumer expectations, and technological and clinical advancements result in a dynamic environment.  However, there are ways to foresee, or at least minimize the impact of, potential disruptors, and enhance the resiliency and impact of your project.

Are you and your leadership team prepared to get the most out of your capital investments?  Let us know if you have any additional thoughts as this series unfolds, or if we can be of any help applying these ideas in your capital project review, selection, and implementation processes.

Roberta Jelinek  and Jeff Schilling

(This is the 1^st of 7 posts in the series.  For the full article, contact either one of us.)

¹ April, 2024 edition of Kaufman Hall’s National Hospital Flash Report.