Building a capital plan for assisted living facilities

Share this article:
Building a capital plan for assisted living facilities
Building a capital plan for assisted living facilities
Organizations that provide medical care serve one of the most vital roles in society today, whether it is a hospital, a doctor's office or an assisted living facility. The mission-critical nature of the equipment and requirements of operating time can make their facilities extremely expensive to operate and maintain. Given today's economy, organizations must look for approaches and strategies that ensure efficiencies are found quickly.

With capital becoming increasingly scarce, organizations are challenged to deploy it as effectively and efficiently as possible to ensure that their facilities are running smoothly over the short term while preparing for the long term. They need to ensure that valuable funds are not spent on the wrong projects. Emergency repairs can be quite costly and the downtime that occurs while repairs are taking place can affect the delivery of critical services. In the medical industry, all of this must be accomplished while continuing to follow federal and state regulations for patient care and assisted living guidelines.

With a continuous influx of residents and with aging facilities and infrastructure, assisted living facilities experience continued “wear and tear”— as soon as one system is fixed, another needs to be replaced and so on. Healthcare facilities are complex in themselves and assisted living facilities are no different.

An additional complexity with assisted living facilities is that the clientele are mainly senior citizens. Providing care for seniors can be even that more complex than the care for other age groups, adding the necessity for specific care and environment as well as investments in the buildings to do so. This continuous investment in improvements means a constant drain on resources and budgets. Therefore, ensuring that a constant outlay is justified and makes a real difference is crucial.

Items that are critical to the life-safety issues in a healthcare facility must be prioritized to the top of the list, and cannot be lost in the chaos of budget cuts. In an assisted living facility, each resident has his or her own private space for the most part. Over the years, these units have become more elaborate and more like a “home away from home.”

It is crucial to ensure that all components of these spaces are properly functioning and meet all standards, as in line with the mission of the organization to provide excellent levels of care for the residents. Accessibility is also a priority for assisted living facilities, based on the demographics of their clients.

Many of these clients are members of the aging “baby boomer” generation, which has created a large influx of demand in this market. These clients want to lead a more independent lifestyle than that of which they would receive at a nursing home. Assisted living facilities can provide them with this lifestyle, but the facilities need to address the reality of their aging clientele and their specific requirements, such as special dietary needs or medical attention. The safety and security of receiving round-the-clock care at an assisted living facility can help to put the residents' (and their families') minds at ease.

Critical projects within the buildings must be identified and prioritized. Defensible data is needed to get those projects funded. Developing an effective long-term capital plan requires an organization to maintain a comprehensive understanding of the entire facility portfolio, determine what improvements are required, prioritize those improvements to align with the overall goals of the organization and finally ensure that the budget is spent as planned.

By employing a capital planning and management software tool to view this information in aggregate from a variety of perspectives — for example, by cost, priority and category — organizations can make better-informed spending decisions and begin to convert facilities data into action plans with achievable deadlines as part of a larger capital plan. While this ability is important for a single facility, it is even more valuable the larger an organization's real estate portfolio becomes.

Building a case for funding capital needs

Most organizations have a five- to 10-year horizon for reviewing their capital requirements. Prioritizing capital projects begins with categorizing identified requirements in this time horizon into major “buckets,” which may also affect funding sources. These categories typically include major operations and maintenance projects including system renewal, strategic capital projects such as construction of a new facility, and mandated projects such as those involving regulatory compliance.

Consistent evaluation criteria must then be created with a consistent process for applying those criteria. Some of the common criteria organizations use in prioritizing requirements, which they may weigh based on relative importance, include: impact on quality of care and relation to code compliance, strategic importance, and accreditation or licensing requirements.

Another common measure used in evaluating spending priorities across different facilities is the Facility Condition Index (FCI), an industry-standard parametric tool used to relatively compare building conditions. The FCI is the ratio of deferred maintenance or problem budget to replacement budget. The FCI is typically applied at the building level, but institutions can develop similar indices at the systems or portfolio level to help prioritize maintenance activities and capital investments.

The capital planning process also often identifies opportunities to bundle similar capital projects.  An organization may bundle projects based on the building system affected, physical location of the project or by trades involved to take advantage of available staff.

Gaining an accurate and comprehensive understanding of an organization's portfolio, and the ability to relatively compare buildings and classes of assets, is critical to developing valid and defensible capital budgets that will be in sync with current and projected regional demands. As budgets are slashed to a fraction of what facility managers require, facility managers are challenged to find ways to address deferred maintenance requirements and capital renewal projects more cost-effective.

Maximizing the value of the assets under stewardship

Organizations that provide medical care have multiple goals for the capital planning process, including ensuring the most effective asset utilization, justifying expenditures to various constituencies, smoothing spikes in spending requirements and making optimal use of finite funds. Most significantly, given their mission, these organizations must maximize the value of the assets under their stewardship and must prioritize those expenditures that support resident care and satisfaction.

Successful capital plans, and their effective execution, enable organizations to reduce both risk and cost, provide facilities that are less expensive to operate, promote better care for the residents and better serve the overall organizational mission.

With increased demand for transparency of information, organizations are increasingly held accountable for their decisions. Facility managers and capital planners must find ways to automate and streamline all workflow that is associated with the collection, storage and reporting of facilities and infrastructure condition information as well as the quantification of deferred maintenance and capital renewal justification.

Organizations without consistent data collection methodologies, centralized databases and tools for funding scenarios analysis are at greater risk for non-compliance, higher insurance premiums and overall exposure to liability. This could have a great impact on their ability to provide the level of care needed for business continuity.

Ameeta Soni is senior vice president of marketing and business development at VFA, Inc., a provider of end-to-end solutions for facilities' capital planning and spend management.

http://www.vfa.com/

Share this article:

Guest Columns

Guest columns are written by long-term care industry experts, ranging from academics and thought leaders to administrators and CEOs.

ALL MCKNIGHT'S BLOGS

More in Guest columns

Positioning for narrowing PAC networks

Positioning for narrowing PAC networks

Variation and growth in post-acute care spending has earned PAC a spot on hospital and health systems' priority list for cost-saving opportunities. The success of new care delivery models — ...

Do you really want to be 'average'?

Do you really want to be 'average'?

A provider client once said to me, "I don't understand all this 'statistical gobbledygook.' Tell me why I should care and how I can actually use this." It was a ...

'The Great Perhaps' in LTC

'The Great Perhaps' in LTC

In post-acute care, particularly the SNF future, it can be "Great" but there are so many "Perhaps" that the definition of what "Great" is going to be is unclear.