correctional healthcare Archives - HCO News

Single Source Model Said to Eliminate Cost Overruns

It’s no secret that the recession has had a major impact on virtually all segments of the construction industry, including the institutional market. But one property developer’s model for hospitals, colleges and other institutions is proving to be especially cost-effective — a welcome relief in these tough times.

Scarborough Properties, which is based in Gibbsboro, N.J., developed a single-source model that essentially ensures that institutions are not on the hook for cost overruns.

“The budget set at the beginning is the total amount paid,” explains Sean Scarborough, president of Scarborough Properties. “The model works because we understand the risk and create value for the institution by insulating it from cost overruns and unnecessary delays. A construction manager would not be financially liable until several months before construction started, long after decisions about budget and design had been made.”

Founded in 1945, Scarborough Properties has developed and owned its own residential and commercial properties, working every element of the development process, marshalling design professionals, construction specialists and banks to build a project the company would own. The firm now owns a wide variety of income-producing properties, such as marinas, retail shopping centers, freestanding pad sites, and single-tenant office buildings.

“We approached (a) project as if we were going to own the building,” recalls Scarborough. “We hire and supervise a professional team including land use lawyers, civil engineers, traffic engineers, architects and structural engineers.

Upon completing the land entitlement process, which typically takes twice the time of actual construction, he says the plans were sent to a variety of contractors for competitive bidding. Following selection of the contractors, Scarborough supervised all aspects of the construction process and simultaneously provided financial management and processed draw requests, lien releases, payment of real estate taxes and various financial reports. Upon completion of the construction, all occupancy permits were secured and the building was ready to go into service.

The single-source model appealed to Shore Memorial Hospital, also in Somers Point, which hired the firm in 2004 to build its cancer center.

Scarborough had contacted the hospital a number of years previous to see if it would consider selling a small piece of property adjacent to a property the hospital owned. Following that meeting, the hospital CEO invited Scarborough back to discuss ideas concerning aspirations for their entire campus.

“The concept grew into a master campus plan, including the development of a new cancer center, surgical pavilion and medical office,” Scarborough says.

Construction began on a $125-million campus expansion in early 2009 with Scarborough overseeing all design, permitting and construction activities. Project improvements include a new hospital entrance, state-of-the-art operating and recovery rooms, a 130,000-square-foot surgical pavilion, 30,000-square-foot medical office building and 650-stall parking garage, connected via an elevated concourse across a public street.

“It will also house the entire Shore Memorial Surgical Services Department, including endoscopy services, cardiovascular imaging and all pre-admission testing services,” says Bob Robertson, Shore Memorial’s administrative director of logistics.

“The project was necessary to replace our current operating rooms, which were constructed in 1976 and in need of upgrades to improve efficiency,” he says. “The new operating rooms will be capable of supporting the latest technology, as well as future surgical advances.”

“The entire process [would normally] be ten years from the planning stage to completion,” Scarborough says. “Actual construction will be approximately 30 months. The rest of the time was consumed by the entitlement process. At this time, the project is expected to be completed in the summer of 2011.”

Performance-Based Approach

Scarborough performed its services under a “pay-for-performance” model where compensation is built around performance milestones. For example, a pre-set fee based upon the magnitude and scope of the project was set. The fee is earned as follows: 25 percent at the completion of submission of governmental approvals, 25 percent upon receipt of approvals, and the balance, 50 percent, earned over the course of construction.

Other benefits of this model include allowing the hospital CEO and top management to regularly sit in on meetings for unvarnished project updates.

“The single-source model is an effective and efficient method of communication in that it eliminates multiple points of contact,” says Robertson. “The hospital’s main communication is with Scarborough Properties, and they in turn communicate with the contractor and subcontractors.”

The single-source model has proven to be successful, Scarborough says, largely because the company manages the team of professionals from the outset. Global costs remain in the forefront of the decision-making process during approvals, design and construction.

“There are many trained competent professionals involved in delivering a complex real estate development project,” says Scarborough. “They all serve a role, but none have global responsibility.”

While some might point to the construction management model as an answer, Scarborough adds that it falls short in terms of managing a global budget.

“For instance, the construction manager is not responsible for the entitlement process or design — often under way for years prior to the ground breaking,” he says.

Future of Model

It would appear that with so many positives pointing towards the single-source model, it would soon become commonplace. But Scarborough doesn’t see this happening any time soon.

“There are few industry professionals that have the skill-set to replicate the model,” he says. “The marketplace — architects, construction managers, attorneys and engineers — to name a few — consider it a disincentive to be controlled in the front end of the process by a professional developer. Too often they want to have control of the owner without financial risk.”

In emphasizing this point, he says construction professionals often work on an hourly basis and expect to be paid whether or not the project is a success. Construction managers often operate on a cost-plus model.

As to why this model has not been thought of before, Scarborough says it is because real estate advisory and development services are often made on a consultancy basis and not a performance-based approach. Scarborough manages the process from the owner’s perspective, just as it does for its own developments.

“The single-source model stands this concept on its head because our entire team works for Scarborough Properties, which is paid based upon performance.”

Lisa Kopochinski is a freelance writer and can be reached at lisakop@sbcglobal.net.

The post Single Source Model Said to Eliminate Cost Overruns appeared first on HCO News.

Cancer Centers a Growth Area for Hospitals, Investors

By 2030, the incidence of cancer in the United States will increase to 45 percent; by 2050, that rate will hit 50 percent. Americans born today have a 40 percent chance of developing the disease and one in three will be diagnosed by age 65.

The healthcare industry is well aware of what some experts are calling the “slow motion” cancer epidemic, and with the demand for oncology care expected to skyrocket 36 percent over the next decade alone, most healthcare systems are scrambling to add cancer care services to their repertoire, either by building new cancer centers on existing hospital campuses or expanding treatment facilities.

“Three of our recent major new medical campus projects have included separate cancer centers and one of our long-term not-for-profit clients is in the planning stages for a new cancer center on their main medical campus,” said John Kemper, CEO of hospital facilities service firm KLMK Group.

The projects include Firelands Regional Medical Center in Sandusky, Ohio; Atrium Medical Center in Middletown, Ohio; Children’s Medical Center in Dallas; and South Jersey Regional Medical Center in Vineland, N.J. In addition, Upper Chesapeake Health in Bel Air, Md. is in the early design phase of a new cancer center and Duke Medicine in Durham, N.C. has a $220 million cancer center under construction.

“We have observed an increase in cancer center construction in both the for-profit and not-for-profit sectors,” he said. “In the past four years, we have worked with clients on five major cancer center projects. We see this particular market sector growing in the future.”

We won’t know how healthcare reform will affect either sector until reforms are deployed but for now, oncology-related construction is booming in both sectors, Kemper said.

A Sea Change

Cancer treatment delivery is undergoing a “sea change,” said Scot Latimer, a healthcare facility planning expert who in January joined investment firm Jones Lang LaSalle’s Capital Asset Strategy segment – a growing part of the company’s National Healthcare Solutions Group that provides services to the healthcare industry ranging from program management, strategic consulting, financial strategy, advisory services and facilities and property management. JLL is known for its financial advising and real estate management, and in 2010 was ranked as the number two-hospital management firm in the U.S.

“The future of cancer care is in the integrated hospital setting,” rather than in the standalone cancer centers that have seen an increase in construction over the last three years, Latimer said. “Most commercial hospitals are trying to integrate specific services that favor providing cancer treatment and providing for co-morbid specialty needs and social services to treat the whole patient.”

JLL recently partnered with Detroit-based Beaumont Hospitals to service an 8.5 million-square-foot hospital facilities and medical real estate portfolio. To gain momentum for this hospital, JLL was said to have the best dividend stocks and share tips, presenting them to investors in order to gain more capital for their new investment. By the same token, investing in healthcare is often thought to be enticing. After all, everyone needs medical care at some point in their lives and almost everyone uses health services of some kind. When it comes to investing in what you know, health stocks, which can range from hospitals to pharmaceutical and insurance companies, certainly qualify. Moreover, thanks to developments in financial technology like apps and online trading platforms, investing in the healthcare industry has never been easier. In developed countries like Germany, healthcare is often valued as a secure investment opportunity. Correspondingly, you can discover a few of the most popular trading apps out there by taking a look at this Investment App Vergleich (Investment app comparison) guide.

Jones Lang LaSalle at Beaumont Hospitals, as it is now called, will provide all of Beaumont’s healthcare facility services including facility management, construction program management, utility operations, energy and sustainability services, property management, biomedical equipment maintenance and service management, lease administration, portfolio strategy and real estate transaction services. The deal involves 5.1 million square feet of acute care hospital space, 1,744-licensed acute care patient beds and 101 owned or leased off-campus patient care or business sites in metro Detroit.

“We do not believe the trend is that cancer centers are replacing traditional hospitals as the number one treatment option,” KLMK’s Kemper said. “Rather, healthcare owners are adjusting their model of care delivery to better meet patient needs. Cancer treatment facilities are being added to supplement the care being provided in the traditional hospital setting.”

Kemper explained that while the cancer centers that many integrated hospitals are building are physically separate from the main hospital structures, they are still part of the integrated model that is allowing hospitals to adjust their care delivery model and supplement the oncology care already available in the hospital.

“More cancer centers are beginning to offer post-treatment options – exercise classes and activities, yoga, massage therapy, counseling and mind-body studios are becoming more common as medical facilities extend the traditional boundaries of healthcare,” Kemper said. “It allows them to maintain relationships with the patients, as well as to meet patient demands for more complementary and alternative approaches to wellness.”

Kemper also noted that separate oncology facilities allow patients to better navigate their treatment while still benefitting from expanded care options.

“A free-standing facility offers a more intimate, comfortable atmosphere for the patient as opposed to a large sterile hospital,” he said. “It is more convenient for the patient to access this type of service from a smaller facility than from a large, sometimes confusing hospital.”

An unexpected driver lies behind the trend toward integrated hospital oncology care – healthcare reform and its changes to reimbursement schemes and treatment delivery.

“As people anticipate reform, they anticipate the winners will be those who can integrate a continuum of care,” said Latimer. “Future reimbursement makes it tougher for them because reimbursement will be reduced in physician-owned and investor-owned places. A lot of freestanding cancer treatment centers are selling to hospitals,” and consequently, “there will be fewer specialty hospitals,” he said.

Despite the trend toward the integrated hospital care model, not all integrated hospitals will win once healthcare reforms come online. Experts predict some of them will be forced to shut down or merge with stronger hospital systems to successfully operate under the new rules.

Last year, Standard & Poor’s’ U.S. not-for-profit healthcare analysts predicted that while the nonprofit care sector will remain stable in the near term, the next four to six years will likely result in consolidations for nonprofit providers who, among other things, are unable to integrate healthcare reforms into their operations, particularly changes to reimbursement schemes and the care delivery system.

The care delivery reforms emphasize standardized care – wherein physicians treat patients according to protocols designed by determining which treatment strategies work most successfully and consistently on the greatest number of patients in order to raise the quality care while reducing expenses. In order to incent doctors to treat patients according to the standard protocol for their particular condition, standardized care reforms will require that all Medicare reimbursements be tied to “quality metrics,” meaning that doctors who do not treat patients according to protocol, or who do follow protocol but get a poor outcome, will not be reimbursed for that care. Many private insurers are introducing similar incentive programs.

Nonprofit vs. For-Profit

For now, the picture looks rosy for for-profit hospitals and healthcare facilities. Investor-owned firms now own 19 percent of hospitals, up from 14 percent in 2004, and that trend didn’t slow down in 2010, a year rife with for-profit takeovers of nonprofit healthcare systems. The top ten hospitals M&As of 2010 were valued at about $3.8 billion and experts predict that trend will accelerate this year.

But whether for-profits will remain profitable once healthcare reforms are introduced is another story. Studies show that for-profit hospitals and healthcare facilities in the U.S. are more expensive, have higher mortality rates, and provide lower-quality care than their nonprofit counterparts. On average, for-profit hospitals cost Medicare 18 percent more than do non-profits, and death rates are 2 percent higher. For-profit renal dialysis centers, two-thirds of which are privately owned, have a 20 percent higher death rate, though their costs are equivalent to non-profit clinics. No data exists on for-profit cancer centers. From this data, it may be summarised that non-profit could be more beneficial to the healthcare system, however, they do struggle to find funds. There is the usda qualifying map that non-profits can look at to see if they are eligible for a loan in their area to help them serve their communities without being taken over by for-profit companies.

“We do not know, definitively, what accounts for for-profit hospital’s higher death rates,” said Harvard Medical School professor Dr. Stephani Woolhandler. “However, relative to private, nonprofit hospitals, for-profits spend less on nursing and more on ancillary costs.”

If for-profit hospitals consistently register negative patient outcomes and churn out higher bills, it is unclear whether Medicare and private insurers will continue to reimburse them.

The post Cancer Centers a Growth Area for Hospitals, Investors appeared first on HCO News.

Tech Companies Help Fund Stanford Hospital Project

PALO ALTO, Calif. — Apple, eBay, Hewlett-Packard, Intel, Intuit and Oracle are donating $150 million to Stanford University’s planned $2 billion new hospital. In return, they will have an active role in creating the facility.

The companies say they are supporting Stanford’s six-year project because high-quality healthcare is among the top factors that helps them recruit and keep top employees healthy and happy.

Stanford Hospital expects to raise at least $400 million in private donations to fund construction of the new facility.

The project, which is awaiting approval by the city of Palo Alto, will have new and expanded intensive care and emergency services and radiology and surgical services next to the emergency department. All rooms will be private. There will be conference and educational facilities, a “garden floor” offering views and dining, and social and spiritual support spaces.

In announcing the Stanford Hospital Corporate Partners Program on Tuesday, hospital president and CEO Amir Dan Rubin called it “an opportunity to collaborate together, for the future of healthcare.”

“We want to leverage technology,” he said. “These are the companies that are shaping our future.”

Work on the facility, which will increase the hospital’s capacity to 600 beds, could begin in 2011 once the project is approved.

The partnership does not guarantee Stanford access to the younger, healthier patient populations at the tech companies; employees will continue to be free to select their own healthcare providers. The companies also have no formal agreement to do work for Stanford.

This is not the first time that corporations and hospitals have worked together. Palo Alto-based HP and El Camino Hospital had a close relationship for several years.

The post Tech Companies Help Fund Stanford Hospital Project appeared first on HCO News.