Common Healthcare Construction Budgeting Pitfalls and how to Avoid Them

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The panel discussion featured experts Tom Gaunt (FreightTrain), Liz Callahan (City of Hope), John Stiles (Ohio State University Wexner Medical Center), and Cory Gaarde (IMEG). They tackled key budgetary challenges in healthcare construction, with a focus on the activation phase, communication strategies, and inflationary pressures.

Activation and FitUp: Streamlining Project Management

Tom Gaunt introduced FitUp, FreightTrain’s project management tool designed for the activation phase of healthcare construction. This phase involves deploying capital assets to bring a facility to full operational status. Gaunt stressed that missteps during activation can result in costly delays and inefficiencies, highlighting the importance of meticulous planning and tracking.

Inflation’s Impact on Healthcare Construction

Rising costs due to inflation and supply chain disruptions are significantly impacting healthcare construction projects. Materials, labor, and services are becoming more expensive, which forces healthcare organizations to make tough financial decisions. The panel emphasized the need for long-term investments, even when immediate financial pressures make delaying upgrades tempting. Delaying critical improvements could result in even larger operational issues in the future.

Hidden Costs of Technology

Corey Gaarde noted that capital budgets often account for the IT infrastructure without considering the operational expenses associated with deploying systems to new facilities. Not only are costs for additional licenses overlooked, but leadership often assumes that the IT team tasked with managing the current applications environment can also manage the necessary additions to EPIC and other systems required in the new space. The panel cited an example of changing the room numbers in the system. While that seems like a minor thing, the estimated cost of doing this for one project was $500,000. Corey reminded the audience that these costs are not optional and will need to be dealt with, so it is wise to include them in the initial project budget.

The Critical Role of Communication

Liz Callahan highlighted the importance of transparent, consistent communication in managing healthcare construction projects. Keeping stakeholders informed, particularly in unpredictable times like the COVID-19 pandemic, helps navigate issues such as delays and supply chain disruptions. Increased communication allows teams to adjust and problem-solve in real-time, keeping projects on track.

Thorough Planning for Activation and Transition

Proper planning for the activation and transition phases is crucial. These phases bring a facility from construction to full operational status, and inadequate preparation can lead to operational inefficiencies that negatively impact patient care. The panel stressed that activation should never be an afterthought and must be integrated into the early stages of project planning to avoid last-minute chaos.

Taking a Long-Term Strategic View

The session also emphasized the importance of taking a long-term strategic view when planning healthcare construction projects. While inflation and supply chain issues demand immediate attention, decisions made today should consider their impact on the facility’s future operations. Investments in infrastructure now, even under tight budgets, help future-proof facilities and ensure they remain adaptable to changing needs.

Key Takeaways for Healthcare Construction and Activation

  1. Plan for Inflation and Rising Costs: As construction costs rise, healthcare organizations must make strategic financial decisions. Deferring investments may seem like a short-term solution but can lead to bigger problems later.
  2. Communication is Key: Transparent communication throughout the project ensures all stakeholders are aligned, helping to identify issues early and keep projects moving forward.
  3. Thorough Activation Planning: Activation and transition phases require careful early planning to ensure that capital assets are deployed smoothly and systems are integrated without disruptions.
  4. Agile Leadership and Decision-Making: Leaders must act decisively in the face of challenges like inflation and supply chain disruptions. Delayed decisions can lead to increased costs and prolonged timelines.
  5. Future-Proofing Facilities: Taking a long-term view ensures that today’s investments help healthcare facilities remain flexible and adaptable, avoiding larger operational challenges in the future.

By focusing on these key areas, healthcare organizations can better navigate the financial and operational challenges of construction projects and ensure their facilities are prepared for future demands.

Budget Checklist

Project Costs:

  • Temporary signage
  • Enabling costs – Construction, FF&E, and moves
  • Supplemental staffing
  • Temporary walkways
  • Temporary work for patient experience
  • Roadway management
  • New ideas
  • User changes
  • Interest on debt / Financing costs
  • Development resources
  • Marketing and Communication resources
  • Room re-numbering

Activation & Transition:

  • Design tools to manage the activation and transition work
  • Consultant costs
  • Internal staffing resources
  • 3rd party warehouse and associated logistics labor costs
  • Website creation
  • Creation of educational materials
  • Educational training
  • Technology staffing to support project technology build
  • Simulation / Day in the Life activities
  • Internal staffing to cover staff involved in activities
  • Early hires
  • Initial load-in of departmental supplies (EVS / Facilities /
  • Supply chain stocking
  • All misc supplies
  • Nutrition – Trays/cutlery
  • Surgery – Instrumentation
  • Wayfinding and signage updates (site and interior)

Operational Costs (one-time versus ongoing):

  • Temporary utilities
  • Utilities turnover
  • Security ahead of go-live
  • EVS Services ahead of go-live
  • Facilities services – Commissioning and ahead of go-live
  • Terminal cleans
  • Decommissioning (clear out, clean up, secure)
  • Technology staffing to support ongoing technology implemented in the project
  • Ongoing staff resourcing to support initiatives developed in the project (marketing and communications)
  • Translating new project initiatives back to legacy facilities