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FEBRUARY 2013

CAPITALPROJECTSOLUTIONS

In This Issue
Incorporating Building Intelligence Into Your Strategic Facilities Master Plan

Capital Project Solutions is a monthly electronic newsletter published by KLMK Group, Inc and is intended to provide healthcare owners with information on critical project factors that impact the success of their capital projects. We welcome your comments and feedback.

Incorporating Building Intelligence Into Your Strategic Facilities Master Plan


The healthcare industry in recent years has deployed aggressive growth strategies through acquisitions and mergers to compete in the reform era. With new partners comes growth in facility assets that are spread across a more diverse geographic footprint. Conducting a Strategic Facilities Master Plan is a proper response to ensuring highest and best use of all facility assets and best positioning of services along the continuum of care in your market area. One important ingredient in today's Strategic Facilities Master Plan that cannot be overlooked is a strategy for Building Intelligence. Before we lose the C-Suite and other non-facility focused readers, let's put some economic context around this topic. In this era of reform, hospitals have aggressively evaluated and deployed cost cutting measures in response to declining reimbursement from the government as well as insurers. Since there is only so much margin contribution you can squeeze out of the supply chain, staff reduction and contract negotiations, careful examination of other line items becomes a must. With hospitals naturally being energy use hogs, there is opportunity through Building Intelligence to enhance monitoring and management capabilities and thus achieve energy reduction consistently over time. According to the US EPA, for every $1 saved, it can produce $20 of revenue in a non-profit hospital and $10 of revenue in a medical office building. Now do we have your attention?

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FEBRUARY 2013

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Defining Building Intelligence We have all heard the phrase "smart building", which is similar to other building or facility buzz words such as intelligent, green, high performance, energy-efficient etc. There is a reason this is such a part of today's vernacular. In addition to increased sustainability interests and rising energy and operational costs, the real estate industry, like healthcare, is experiencing significant change as it crosses a technology chasm. As a result, there is great fragmentation due to innovation, new partnerships, mergers, acquisitions, and the smart grid. The noise level is high and the messaging from vendors, the media and trade shows, can be confusing when trying to sort through what is the right path for your organization. At the turn of the millennium, we were all told that smart facilities were about high speed internet. Then, in the subsequent years, it was a parade of new issues such as occupant experience, energy, sustainability and electronic security. Fads or issues in the industry can be distracting as to the "smart" thing to do which is developing an overall strategy. All of the aforementioned issues are real and important influences in what we will call an intelligent facility and must be addressed as interrelated parts of the entire approach. In addition to the trends and issues of the day, there are some immediate and even startling topics that may require triage, such as remote access intrusion or "hacking" of facility systems. This was communicated in a recent online article titled: "We're going to blow up your boiler: Critical bug threatens hospital systems 21,000 vulnerable systems found on the Internet, used by hospitals, banks, others." With a holistic approach, an intelligent facility ultimately becomes a "data driven" facility and the strategy must continually work towards the ability to get, analyze and act on data. That data will range from sensor inputs indicating relative humidity, temperature and isolation room pressures; to energy and utility usage; to the thousands of data points untapped in nearly every control system including HVAC, lighting, metering, security, conveyance etc. Occupant satisfaction, organizational financial information and other back office data round out the picture. However, leveraging so-called "big data", which is a megatrend in nearly every industry, can't be achieved without the underlying strategy and process to enable it. You will not find any meaningful strategy in a widget or a single vendor solution. Without education, these solutions actually can become distractions along the path to truly unlocking Building Intelligence. You should treat Building Intelligence with the same approach as you do

FEBRUARY 2013

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when developing your strategy for delivering patient care across a diverse population and expanding geographic footprint. Strategy Outline There are three pillars to developing an intelligent facility strategy: 1. People: The strategy has to come from the C-Suite to acknowledge a new way of doing business and to avoid turf battles that prevent progress, slow performance and increase risk. Operational planning and organizational alignment between departments, budgets and process should follow. This is also accompanied by sensitivity and sense of value creation for each of the stakeholder classes. A strategy with better buildings and new technology without some element of change management will fall flat. Buildings: The buildings themselves should have a new set of purchasing standards for all controls systems that reflect the technology realities of the day. This is a written building standards document that is a filter for new design and system replacement and emphasizes open, non-proprietary protocols which allows flexibility now and in the future. Technology: There have been changes in facility technology that have outpaced many of the vendors and supporting organizations in the facilities industry. Included in that change are less expensive, more sophisticated solutions leveraging so-called cloud and big data that can drive operational costs down with far less capital investment.

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FEBRUARY 2013 The Risks of Doing Nothing

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Understanding the foundation for a successful intelligent facility strategy does not mean you will be convinced and hastily move forward in your planning. There always is the option of maintaining status quo or investing in one off strategies that may not reach their full potential across your enterprise. Some of the risks of doing nothing may be: 1. Rising operational costs: Maintenance costs from proprietary systems driven by entrenched vendors, increasing energy and utility costs, increasing head count, generational skills gaps and necessary contingencies keep adding to budget requirements. 2. High capital requirements: Traditional, expensive capital projects can be blunted with new "intelligent" solutions that extend the life of equipment, while premature system failure from manual maintenance methods can create surprise budget busters. 3. Performance risks: Without proper monitoring, data analysis and action the organization risks system failure, prolonged outages, unauthorized remote access, lost revenue, legal exposure and regulatory compliance issues. Benefits of Building Intelligence Conversely, determining to follow guidance on the proper foundation and approach for a facility intelligence strategy can lead to the following benefits: 1. Lower risks: A decrease and/or mitigation of budget creep, generational skills gaps with facility staff, vendor technology lag, hacking exposure, regulatory reporting challenges and clinical and infection risks. 2. Higher asset utilization and improved cost structure: Existing and planned capital investment (assets) is continually reused and also enables permanently lower operational and capital cost structure for facility and systems. 3. Brand enhancement: Better patient and occupant experience, improved financial performance, risk mitigation and documented sustainability and stewardship will accrue to the brand.

FEBRUARY 2013 Leveraging Technology

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Technology plays a crucial role in the realization of the benefits outlined. A proper IT foundation will allow for connectivity as well as smart services to continuously adapt to patient and occupant needs and wants. It is critical that technology planning and execution not limit scalability and flexibility for the future whether for clinical, media, entertainment, security, safety, comfort or convenience. Tactically, facilities should develop or migrate to a neutral, secure technology and connectivity backbone approach along with standards that require all "open" controls systems for all purchases. An "open" systems requirement will provide easier, less expensive access to data points for the owner as well as lowering maintenance costs from previously proprietary service options. However, this does not limit access to nearly all controls manufacturers for full and competitive bidding. Furthermore, open systems will foster the interoperability between systems that may be connected to each other. This approach will permanently lower the cost structure of future systems as well as the overall operating cost. Because each system will eventually plug into a neutral, secure backbone they will be able to interoperate as required or desired and the backbone will allow for "plug and play" additions of future building systems. This flexibility allows the development and management teams to defer certain capital and system decisions to later in the process without financial or schedule impact.

This means that the facility will be empowered to continuously adapt to changing technologies, future service options and desired experiences.

Facility management staff will always have secure access to building controls such as Security, HVAC, lighting, humidity and other comfort, safety and convenience systems to pre-heat and cool or otherwise turn systems on and off as requested by the stakeholders or as required by sensor alarms. Connected sensors can spot faults and trends that spur pro-active work orders or urgent repairs. An intelligent facility can offer dashboards that display usage of energy, water and gas along with individual systems that may be instrumented. This could allow for current or future variable charges by area or department for cost allocation based on actual usage. System integration enabled through the backbone could include a multitude of ever changing experiences such as proximity cards triggering lighting, AV or HVAC systems when staff or patients arrive. These are just some of your options with current technology available.

FEBRUARY 2013 Conclusion

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In addition to these practical and productive examples there are also more immediate reasons to develop a strategy for intelligent/data driven facilities including compliance. A recent case study from cloud vendor Ezenics showed building analytics being leveraged to evaluate facility performance and document reporting for Joint Commission and State Department of Health certification/conformance ACH criteria. Additionally, the article referenced in the introduction reminds us that we already have facilities vulnerable to hacking that are not aligned with IT standards and hence we cannot be content with the status quo. Despite the many buzz words, (smart, intelligent, sustainable, etc.) it all comes back to how to run your business in the most efficient, productive and risk averse way possible while continuously taking advantage of immense amounts of untapped data. By developing and implementing a sound strategy that includes Building Intelligence, you are able to lower your operational costs, save energy, lengthen the life of your assets, increase your security, and provide your occupants and customers with a differentiated experience. A holistic strategy using "open" systems and smart technology design will allow you to be flexible and adaptable for the changes to come. This can be done in both new projects and existing facilities. It's never too late to turn the battleship. Patrick E. Duke, Senior Vice President, KLMK Group Tom Shircliff, Co-Founder, Intelligent Buildings

LEARN MORE.... "Launching a Capital Facility Project, A Guide for Healthcare Leaders" Second Edition, by KLMK Group CEO, John Kemper, provides executives with valuable knowledge for launching, organizing and implementing a new capital facility project. Order Your Copy

KLMK Group, Inc. 7130 Glen Forest Drive Suite 305 Richmond, VA 23226 www.klmkgroup.com mail@klmkgroup.com 804.343.0161

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