Managing Facility Development in Hospitals ©2000            (originally published in Matrix, the journal of The Medical Group Management Association, 2000)                                                                                       


 Richard J. Lanzarone                                    

Dynamic market forces are fueling tremendous demand for facility changes in hospitals.  Managed care is producing fewer inpatient admissions and shorter stays. In each successive year a higher percentage of care is being delivered on an outpatient basis, instead of in inpatient setting. Hospitals find themselves with excess capacity of inpatient bed space and with a severe shortage of facilities suitable for the rapidly expanding outpatient marketplace. Hospitals are being forced to compete in the outpatient diagnostic and treatment business against freestanding centers and physicians in their offices. These out-of-hospital alternatives not only deliver the care in a less costly setting but one that is usually more attractive and more convenient to consumers.

     Survival for hospitals depends on how well they can provide convenient facilities for outpatients, and few hospital facilities are currently adequately equipped to meet the new demands. Principal among the shortcomings is sufficient parking to satisfy the ever-increasing number of patient trips being generated; it takes 5 new outpatient visits to generate the business volume of a lost inpatient day. Similarly, way finding must be straightforward; registration and procedure spaces must be attractive and support a seamless, effortless flow of the patient through the care process. The days of shuttling patients from one waiting line to the next are over. Forcing patients to circle the parking lot for a spot and then wait in a long queue to be registered, then to sojourn through a labyrinth to find the correct outpatient department, only to wait again is a prescription for business extinction.     

Retooling existing hospital facilities to accommodate this new business model is a daunting task. Few building projects are more complex than the reconfiguring an existing hospital facility comprised of many building varying in age, mechanical and structural infrastructure and size. Shrinking reimbursement usually precludes the simplest solution of building all new space and moving in, thereby abandoning older facilities. More likely approaches involve a smaller amount of added new space and significant alteration of existing space. This process is usually complicated by the fact that the space is presently occupied and hospital operations must continue without interruption. The result is an area-by-area checkerboard multi-phase project that must be carefully conceived, planned and executed.  

     It is essential to begin by developing a clear vision of what the facility will look like and how it will function at the end of the project. Therefore, before embarking on a significant renovation or addition project, a Master Facility Plan should be developed. The Master Planning process should be an extension of the organization’s Strategic Planning process; therefore, a solid Strategic Plan should be developed before embarking on a major building modernization program. However hesitant you are to spend the time and money necessary to carefully complete these planning exercises, you must resist the temptation to quickly satisfy the pent up demand for more or better space until you understand the longer-term consequences of the decisions you are about to make. Placing structures or improving and expanding departments in what has often turned out to be the wrong place have wasted countless precious dollars. 

 Given the serious cost of construction improvements, prudence dictates the modest investment in a qualified planning consultant to ensure that the large expenditures are justified and that the individual pieces fit within the well conceived whole. Almost all architectural firms offer Master Planning services but they are usually not the best choice for this task. Firms that specialize in only Planning and which have no interest in developing the unnecessary “mega-project” and its commensurate architectural design fees are a better choice. Such planning firms usually employ experienced architects on their staff but do not participate in the actual construction process. They will give more objective advice on how much facility you will need and do a better job of adaptively reusing existing space. The planning consultant will distribute questionnaires, conduct interviews and examine operating statistics of all departments. Participation of as wide a group as is possible is essential in order to produce “buy-in” from key stakeholders in the eventual full plan. The resulting data will allow for the capacity analysis of key functional areas. Very often it is discovered that a long simmering “facility issue” is in fact solvable by adjusting scheduling or hours of operation at low or no additional cost. National trends will be tailored and applied for your particular region and area demographics will be used together with gathered internal data to project future required departmental capacities. The plan needs to be flexible and must allow for adjustments for changing circumstances.

 The next step is to select an architect who will be able to bring the plan to life. The process I use in selecting architects has several distinct steps. In smaller projects I commonly work with architects who already have a good track record at the institution. For larger projects the hospital may wish to engage a firm with a larger staff to quickly complete the large amount of detail work, have specialized skills as well take advantage of their greater breath of knowledge and experience in solving similar problems. Choosing the right architect is not as easy as, say, buying a new car. With a car you pretty much know exactly what you are buying; you can “kick the tires” and take it for a test drive. There is little left to the imagination. Buying architectural services it is not as simple. No two projects are alike; each differs in scope, site location, existing conditions, budget, competitive environment, and owner’s preferences. The fact is, with architecture, unlike an automobile, you really don’t know what you have bought until you have already bought it and paid for it in advance. Glossy brochures are not good indicator of architectural quality. Get recommendations from your planner and others. Ask for a list of projects similar in scope as you are contemplating. It is common for firms to have “star” quality advance persons who are great at giving dazzling presentations, who then turn the work over to much less qualified staffers who actually do your work. Ask for a list and the resumes of the team members who will actually work on your project. Pay particular attention to the key players: the designer, the planner, the project manager and the interior designer. Be certain to ask for an actual tour of recently completed work (within the last 2 or 3 years) successfully performed by the proposed team. It is common for firms to have solid work in their portfolio that was done by staff who are no longer with the firm, so these projects are not really representative of the firm’s current experience and talent. Also, examples of work done in the distant past may no longer be relevant to the state of art in the particular healthcare discipline you are improving. The firm must show genuine interest in your organization and demonstrate a good understanding of your Master Plan. The size and experience of the architectural firm should fit with your organization. A firm with most of its experience in large urban medical centers would probably not be a good fit for a small community hospital and vice versa.  For larger projects ask for “artists conception” sketches to get a feel for an architect’s vision for your institution. 

The resulting construction services are delivered via several distinct methods. Each method has its advantages and disadvantages.  The most traditional method is the submission by general contractors of fixed price lump sum bids based upon a fully developed set of architectural and engineering documents. Ordinarily, this method provides the highest degree of competition and with it the lowest prices for a given amount of work. In this scenario, the architect has established high standards of quality in his design and specifications, and acts to ensure full compliance on the part of the builder. So the result can be the best quality for the lowest price. The disadvantage of this method is the longer time and up front money required to develop a fully detailed set of plans, and the fact that you really don’t know what your project will cost until the day the bids are opened. It is possible you will have the unpleasant experience of having your architect design a “ Cadillac” project that does not fit your “Chevy” budget. 

 Another method is the Design-Build method, which can deliver the finished project faster and provide construction costs in advance of committing any dollars. However in this method many decisions are taken out of the hands of the owner, requested changes are costly and quality usually suffers. Another method is Construction Management wherein the CM firm acts as a General Contractor / Owner’s Representative for a fee based on project cost. This is a sensible approach on larger projects since the CM can deliver most of the benefits of the two previous methods along with valuable advice on phasing and other construction issues during the design phase. 

The construction process can disrupt normal hospital operations and so a carefully conceived phasing plan must be developed early in the design process to ensure uninterrupted patient care, income and public access. Temporary facilities for dislocated departments will usually be necessary and the costs for these moves must be included in your project. Some departments may need to move several times during the project. Early, complete and continuous communication with Administration and all departments is essential. Staff will be more than willing to endure temporary discomforts if they clearly understand the full benefits of the finished project and the reasons why they are being inconvenienced. 

 I have had success in closing half of a patient bed unit at a time to accomplish a total makeover of the unit. This is more expensive than being able to empty the unit, work on it and move back in. You may not have that luxury. There may come a time in an occupied nursing unit renovation when you are working in a common area, i.e., the nurses station, when you must decide if you will close the entire unit for a short while or you will have to relocate to a patient room as the nurses station. The expected patient census during the active phase may dictate which approach you should take.


I hope I have offered some worthwhile advice of use to you in your upcoming or ongoing facility improvements. The decisions you make involve relatively large sums of money and perhaps have far reaching consequences. I wish you a successful and satisfying result.

The author has 15 years experience in healthcare facility management and is currently the Vice president of Morgan Construction Enterprises, Inc