The Business of Facilities Management

Benchmarking

Agenda1. Introduction

Ed Tinsley

2. ASHE Benchmarking Ed Tinsley

3. ASHE/IFMA MOU “Why the need for Change”Ed Tinsley/Todd Wilkening

4. IFMA Benchmarking Tactics & “How to Use”Shari Epstein

5. 2010 IFMA Survey HighlightsShari Epstein/Todd Wilkening

6. Real Life Example of How to Use this InformationTodd Wilkening

7. Lessons Learned, Questions & AnswersAll

What is Benchmarking?1. Identifying a comparable

standard.

2. Testing yourself against that standard.

3. Using the process to improve efficiency and increase quality.

Other Benchmarking Programs• Statistical Analysis Only

• Indexed to Patient Discharges or Patient Days

• Not Specific to a Particular Facility

• Does not Identify Variances or their Cause

• Not Useful in Resolving Variances

• Not Widely Accepted by Facility Managers

• “Double-Edged Sword”

Performance Benchmarking Metric

Distribution, All U.S. Hospitals

Top 10% Top 25% Median Bottom 25% Bottom 10%

Operating Margin 11.8% 6.9% 2.9% -1.1% -6.3%

Expense per CMAED $14,700 $7,600 $5,700 $4,800 $4,200

Revenue per FTE $164,300 $143,900 $123,100 $102,500 $90,500

Occupancy Rate, Staffed Beds 78.1% 69.1% 55.1% 40.5% 25.6%

Days Accounts Receivable 39.7 48.6 58.7 73.1 91.9

Days On-Hand Inventory 2.32 3.99 6.14 8.24 10.75

Adjusted Average Length of Stay (Days) 2.37 2.76 3.12 3.66 4.51

Source: Almanac of Hospital Financial and Operating Indicators, 2007

available from www.ingenixonline.com

Benchmark Studies can be a “Double-Edged Sword”

• Magazine Article in Healthcare Purchasing News, March 2001 by Todd Shields

• “Downsizing should never be taken lightly, or enacted in an unbridled, compulsive way…”

• “Cutting back too many workers can result in a burst of turnover due to burnout…”

• “Ultimately, customer satisfaction starts to fall if downsizing is done inappropriately…”

• “After consultants come in, nine of out ten times the recommend something smaller…”

You can pay me now or you can pay me

later.

How Many FTE’s do I Need?

• As Little as Possible?• Same as Last Year?• Whatever the Administrator

Says?• Whatever a Consultant Says?• Same as a Your Competitor?• 20,000 SF per FTE?• It Depends on Many Factors

ASHE Benchmarking Tool

• Excel Workbook

• 3 to 4 Hours to Complete

• User’s Manual Has Not Been Developed

• 48 Facilities in Database

• Recommendations Based on Adjusted Database Averages

• Compares Recommended Costs to Actual Costs

Case Study Comparison

• Does not Include Janitorial

• Does not Include Security

• Includes Grounds

• Does Not Include Biomedical Equipment Maintenance

Comparison of ASHE Tool to NEHES Results

Using the ASHE Tool

• Use the Tool Safely

• Complete the Workbook

• Enter in Actual Staffing and Costs

• Identify Variances

• Consider Other Sources of Information

• Develop a Plan

• Implement the Plan

• Evaluate the Plan

• Modify the Plan

ASHE’s Next Steps

• Realignment with IFMA Data

• User’s Manual

• Web Rollout

• ASHE Trademark

• Regional and Chapter Conferences

• Selling the “C Level” with IFMA

Values and LanguageReal Estate & Construction World

– Cost or unit per Square Foot = /sq. ft.

Facilities/Environmental Management World– Cost or unit = /dkthm, /kwh, /gal, etc.– Cost or unit = /gallon, /vial, /bag, – Pay back

CEOs/CFOs World– Cost per adjusted discharge/patient day, etc– Patient care volumes, procedures, etc.– Return on investment (ROI) – Time Value of Money (TVM)– Cash Flow– Strategic, Political, Branding and Image, Marketing

FMs Language

KWH Per Square Foot

0.00

5.00

10.00

15.00

20.00

25.00

30.00

2003 2004 2005 Average

Time Period

KW

H

Hospital A

Hospital B

Hospital C

Hospital D

Hospital E

Hospital F

Hospital G

Hospital H

Hospital I

Hospital J

An Executive Quote on Value

"The value, at the end of the day, has to translate to revenue or cost. The ultimate value has to be described in common-sense business terms." John Hill, Siemens Business Services

Value: How does one define it?

Without a concerted effort to show the business, in terms it understands and what your department is doing to further the business' goals, the chances of having any say down the road about the future of your department will begin to slim.

-Allen Benard

Six Sigma

Inputs match Outputs

process defects

Use Per Adjusted Patient Day

Cost per Adjusted Patient Day

$0.00

$10.00

$20.00

$30.00

$40.00

$50.00

$60.00

$70.00

$80.00

2003 2004 2005 Average

Do

llars

Time Period

Electric Value/Cost Per Adjusted Patient Day

Hospital A

Hospital B

Hospital C

Hospital D

Hospital E

Hospital F

Hospital G

Hospital H

Hospital I

Hospital J

Importance

- Financial impact- Adds opportunity- Strengthened leverage

- Perception as an expense department diminish - Increased net worth as a business partner

Fast-Cycle Benchmarking

• Figure out what you’re looking for• Benchmark companies roughly at your level• Study the system rather than one technique• If you’re benchmarking a system, adapt

what you see rather than simply copying it• Remember why you’re doing it

Challenges in FM Benchmarking

• Commitment High participation level and willingness to provide

what is requested• Data Is data available, accurate and accessible?• Variability of infrastructure, operations Must be defined prior to making comparisons• Valid comparisons Need to normalize data (e.g. climate zones, EUI,

rating systems)

Beyond the Data

• Are FM departments structured differently?

• What does the FM supply chain look like and does it deliver?

• Are corporate social responsibility and environmental management tied to FM?

• What is the approach to investment and longer-term life-cycle issues?

Facility Region

Hospital by Region

Facility Setting

Facility Age

Facility Size

Hospital Staff

Financial Matrix

Adjusted Patient Days

This figure is used as a way to

standardize the per unit measure

between hospitals allowing for

more valid comparisons. Adjusted

patient days is calculated by dividing

total charges by inpatient charges,

then multiplied by the number of

inpatient days and admissions.

(Gross Revenue/Inpatient Revenue) x Inpatient Patient Days.

Adjusted Discharges Adjusted discharges is a calculation that adjusts the number of discharges (hospitalizations) to reflect the impact of both inpatient and outpatient volume. The formula is as follows: (Total Gross Revenue/Inpatient Gross Revenue) x Discharges (or days). For this report, we used adjusted discharges as a means to compare costs.

Total Adjusted Patient Days

Total Adjusted Discharges

•

Utility Cost by Square Foot

Utility Cost by Adjusted Discharge

Utility Cost by Region and Type

Utility by Building Age

Utility Cost Impact

Utility Drivers for Change

Energy Management Practices

Preventive vs. Repair Maintenance

Clinical Engineering

In-house versus Contracted

Environmental Services Cost

Environmental Services Costs by Type and Age

Application to Real Life

Financial Overview

Capital Investment - $259,772.00

Utility Rebates - $34,703

Department of Commerce – 50% subsidy of financing interest costs for first 5 years – Find the money!

Positive Cash Flow every year of program– Cash Flow – Year 1; +$79,101 - Value– Cumulative Cash Flow – Year 20; $1,199,902 -

Value

Annualized Return on Investment (ROI)– 23.10%

Financial Performance

The Outcome

Our project cost $12.92/sq.ft. – Reduction operating expenses of

$2.98/sq.ft• Building size of 20,109 sq. ft.

Our project cost $12.92/sq.ft.– Increase in patient revenue (value) of

$2.32/patient day• Annual avg. patient day volume of

25,842

What we just did…

Turned the focus away from “expense” and onto added “value” (revenue).– Expenses

• at the expense of, at the sacrifice of; to the detriment of: quantity at the expense of quality.

– Value • Value is that quality of anything which

renders it desirable or useful.

Environmental Impact*From Reduction in Electricity and Natural Gas Consumption

Reduction in harmful emissions:– Benefits to Human Health - Value– Benefits to Environment- Value

Reduction in greenhouse gases and air/water pollutants: - Value– Carbon Dioxide (Global Climate Change) – 480,458 lbs/yr – Sulfur Dioxide (acid rain) – 1,520 lbs/yr – Nitrogen Oxide (smog and human health) – 760 lbs/yr – Mercury (air/water pollution and human health) – 6,568 milligrams/yr

Carbon Dioxide Equivalent Comparison:– 66 Acres of Trees Sequestered - Value– 42 Cars on the Road – Value

Improved Community HealthShown Compassion

Source: U.S. Department of Energy and U.S. Environmental Protection Agency

Thank you