As reimbursement transitions from volume to value, health systems’ approaches to facility master planning must change fundamentally as well. Utilization is dropping, and clinical space that used to drive revenues is increasingly viewed as a cost center.
Such planning goes far beyond facilities and capital assets: Future business success will depend on adjusting not just space allocation, but also data acquisition processes, clinical practices and workflows along the entire care continuum— even, in some cases, a system’s identity. The transition from volume to value and the increasing collaboration coming with it also raise the question not only of what facility investments to make, but whether each asset demands continued investment at all. Asset divestiture will be as important as asset acquisition.
The current master planning challenge, then, is to retool existing care platforms to prepare for future value-based revenues while continuing to thrive in a world in which some revenues are still derived from traditional fee-for-service avenues.
High-impact master planning should:
- Maximize system opportunities
- Optimize operational processes to increase capacity
- Focus investment on the lowest-cost care platforms
- Evaluate facility and real estate strategies, including leasing vs. owning
- Prioritize investments—and identify where to stop investing
A COLLECTION OF BUILDINGS DOES NOT A HOSPITAL SYSTEM MAKE
Kurt Salmon helps hospitals and systems understand how their capital investments will play out across the entire care delivery continuum. Our integrated approach also considers facility locations, information technology, strategic acquisitions or divestitures, physical plant investments, and more in the context of the desired care delivery approach.
Kurt Salmon approaches facility master planning by first examining the market’s target population and current penetration, then performing proprietary demand analyses to project future use rates and market share given existing and future partnerships as well as demographic trends.
From there, we provide a comprehensive evaluation of existing asset availability and needs and advice on future asset distribution, including operational and revenue cost implications. Our five-year financial models illustrate the impact of hypothetical actions on cash flow and margins, helping hospitals and networks make the most strategic and financially sound decisions.
These plans are always completed in the broader context of overall strategy. A hospital seeking to join a new system, for example, may need to make certain capital investments to present itself as an attractive acquisition, but may choose to hold off on others and ask an acquirer to make them.
TODAY’S MASTER PLANNING TRANSITIONS TO TOMORROW’S POPULATION HEALTH
A West Coast health care network had accumulated a random collection of capital assets and services over years of acquisitions and development. It needed to optimize care delivery for a regional population that is expected to double to 2 million over the next 10 years.
Kurt Salmon’s analysis revealed that even with projected growth, two submarkets would have excess beds and service assets if utilization rate targets are achieved, while another submarket would have a dearth of basic care resources. Kurt Salmon laid out a master plan to distribute high-complexity services among select “destination program” locations, transition three acute-care facilities to ambulatory care and develop new care partnerships.
With better-managed care and 30% of clinic visits expected to move to digital channels, the network will be able to reduce its total unique site count by one-third and lower operating and capital costs over the next 10 years while improving care delivery. The master plan is designed to evolve with changing reimbursements and to support the network’s transition to population health.
SIDEBAR: KURT SALMON BENEFITS
Kurt Salmon’s integrated Health Care Group applies strategy, facilities and IT consulting to every master planning project. Our teams take a long-lens view, looking at the whole care delivery picture and then deploying resources to address any gaps. Cross-system financial modeling helps ensure that all decisions support both near-term and long-term business success.