Will Hospital Mergers Impact Your Facility Management Style?

Oct 21 2014

By Megan Headley
Date: September 25, 2014- One of the biggest trends in healthcare today is the continued prevalence of mergers and consolidations among health systems. In August 2013 (the latest available data), the New York Times reported that mergers had skyrocketed over the course of the previous five years, to 105 in 2012. A new report from Bass, Berry & Sims indicates that this trend is poised to continue in 2014 due to “improved clarity as to how the Affordable Care Act will affect businesses and their customers.” As more health systems bring formerly independent hospitals into their portfolio, facilities managers (FMs) are seeing the emergence of what one technology company is calling centralized facility management (CFM).

Centralized Resources “About two years ago we … began tracking a pretty significant trend in the healthcare industry among acquisition and consolidation of hospitals within hospital systems,” explains Tom Willie, CEO of Blue Pillar, an Indianapolis-based provider of energy management systems. “The concept of being a facilities person in a single-site hospital continues to evolve to the potential to having a single-site hospital but also a corporate system that could own dozens of hospital facilities geographically dispersed all across the country.” Willie and his team responded to this trend by developing a capability that Blue Pillar calls CFM, “a concept and name given to a trend that we were seeing in the healthcare space, of large healthcare systems beginning to centralize the oversight of their geographically dispersed facilities.” This centralization, Willie says, comes about for a mix of reasons: assistance in allocating capital among numerous facilities, the desire for greater operational oversight, and the need to monitor and manage energy-efficiency programs. Primarily, however, Willie says that in many cases health systems acquired so many locations so quickly that they sought an onboarding mechanism that would give them a corporate platform and “validity to how they acquired these systems.” “We begin talking to customers about their needs to not only absorb these acquisitions in a way that would streamline their ability to oversee these new properties,” he explains, “but also give the corporate owner the ability to understand best/worst practices; the ability to understand energy spending of locations performing best and worst among their particular assets; and the ability to get visibility into the operations across their entire geographic footprint and to do so in a way where they did not concern themselves with what particular pieces of equipment were in that hospital, whether it be old meters and generators or a brand-new hospital.” Thus CFM was born.

Don Paschal, currently director of plant operations for Winter Park Memorial Hospital in Winter Park, Florida, recalls that his rationale for moving to a CFM system during an earlier stint with Orlando Health, was twofold. “First, we wanted to have complete oversight of our power distribution, especially our emergency power system. Our second need was to meet exacting regulatory documentation on our systems,” he says. The software allowed Paschal’s team to view equipment over multiple locations and provide a concise means of documenting to meet their regulatory requirements.

This centralized approach proved especially valuable in helping Paschal identify the areas where it would prove most rewarding to concentrate energy conservation efforts. Managing the Portfolio In talking with health system customers, Willie heard several concerns repeated — concerns that the consolidation process would begin to address. “Their concerns when they looked internally were that … they looked down at those local facilities and quickly realized that the average age of their facility people was about 50 years old,” he says. “They expected about 50 percent of their facility workforce to retire in the next 10 to 15 years. In addition, they had significant aging infrastructure at those facilities, but the actual facilities themselves were not allocating local budgets to upgrades, because the local facilities preferred to invest in medical equipment and medical capabilities versus facility capabilities. So [the health system’s] desire was to centralize much of that at a corporate level so that capital investments in maintaining the facilities and protecting themselves against a retiring workforce could be done in a way that will allow them to stand the test of time.”

That focus on protecting property makes even more sense when applied against the Bass, Berry & Sims outlook report that states that the rising demand for facility and equipment improvement is a top strategic driver of many of today’s mergers and acquisitions. “As competition among healthcare providers intensifies, offering better facilities and equipment to patients becomes a differentiating factor and gives these companies a competitive edge over their peers,” the report states. “One of the reasons why stand-alone hospitals feel the need to consolidate is the new reimbursement systems that favor clinical integration. Gaining economies and efficiencies of scale through consolidation helps hospitals cope with rising compliance costs and decreasing reimbursements from government programs. Providers will become more profitable if measures are taken to increase efficiency.”

Products such as the software offered by Blue Pillar give corporate managers the ability to, as Willie explains it, “oversee, monitor, measure, score, best/worst practices ad prioritize capital replacement projects, all through a centralized system that then talks down to the local systems within the facility.” However, this consolidated view of a wide range of facilities requires a new generation of managers to float the line between operations personnel and the C suite. “Growth through consolidation will require a team of facility directors/administrators and higher [positions] to manage the whole and deliver to senior executives on a corporate or a systems level,” Paschal suggests. “This would best be served by facility professionals and offers up further opportunities for our career path.” About the Author Megan Headley is a freelance writer with 10 years of experience writing about the built environment. She can be reached atrmheadley3@gmail.com, or connect with her at www.linkedin.com/in/meganheadley

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One of the biggest trends in healthcare today...mergers and consolidations among health systems.