A Framework kf for Calculating l the Return on Investment of Evidence Based Design CHD Pebble Meeting September 16, 2008 Blair L. Sadler, JD Past President/CEO Rady Children s Hospital, San Diego Senior Fellow, Institute for Healthcare Improvement Board Member, Center for Health Design Learning Objectives Understand why calculating an ROI is a key ingredient in your organization s strategic and business success Learn how to use a return on investment framework (ROI) to measure the impact of an evidence based design innovation 1
ONE DEFINITION OF EVIDENCE- BASED DESIGN Evidence-based design is the deliberate attempt to base building decisions on the best available evidence with the goal of achieving the best possible outcomes for patients, families and staff while improving i utilization i of resources The Good News There is significant evidence published in peer reviewed journals that shows a relationship between environmental evidence based design interventions and improved safety/quality outcomes for patients, families and staff This is true whether looking at existing health care environments (low cost, high impact) or building new ones (higher cost, high impact) 2
The Bad News Most hospital leaders do not understand the powerful connection between evidence based design and their overall strategic and business objectives These leaders and their boards do not realize the compelling business case in support of evidence based design innovations because they do not understand the positive impact on operating cost savings and revenue enhancements Why Calculating the ROI of an EBD Innovation is So Important It is the Language CEOs Understand The Fable Hospital Story Balancing One Time Capital Costs with On-going Operating Savings 3
Recent Events Strengthen the Revenue Side of the Business Case CMS Pay for Performance NQF Never Events CMS No Payment for Certain Harm and Infections Other Payers Are Following HCAPS survey Raising the Patient Satisfaction Bar Hospitals will no longer charge for harm they cause, regardless of the payer THE NEW REALITY REQUIRES A NEW VALUE PROPOSITION Today s reality---- ----hospitals face greater transparency around patient + workforce safety/quality issues Evidence-Based Design innovations are more likely to be accepted and implemented if there is a measurable ROI 4
A Proposed ROI Framework 1. Describe the current scope of the problem in your facility 2. Identify your improvement target goal 3. Identify the number of patients and their associated hospital charges with specific hospital acquired infections 4. Outline specific clinical and administrative strategies used to reach target goal and identify associated costs 5. Identify specific evidence-based design strategies to reach target goal and identify associated costs Problem Summary and Improvement Opportunity Outcome Number of Cases Number who died Mortality Rate Average Length of Stay Cost HAI No HAI Difference 5
Intervention Costs Intervention Provide 100% single patient rooms Separate sink for staff in patient room Alcohol-based gel devices Clinical + Administrative interventions Total Intervention Costs Initial cost Life cycle cost Increased SF with associated housekeeping, energy, replacement furnishings costs Increased operational plumbing maintenance costs Replacement and maintenance costs and gel refill costs Training costs Calculations/Comments Single -patient rooms are now the standard. However, these rooms are estimated to be SF larger resulting in an average increase of SF for an average inpatient unit, which could increase life cycle operational costs. Separate staff sinks are now standard for new hospital construction. There may be minimal increased life cycle operational costs. Initial cost = total number of devices per room X number of rooms Include all incremental operating costs Revenue Improvement through Cost Avoidance Outcome Target Calculations Cost Avoidance Decrease HAIs by % or cases Total Cost Avoidance Identify the total number of cases to be eliminated and multiply times the average increased cost for patients with an infection Expressed in dollars Expressed in dollars 6
Return on Investment Equation Variables Initial, First Two Year Life Five Year Life Year Cycle Point Point Total cost avoidance Total intervention costs Savings CONCLUSION Calculating the ROI of an evidence based design intervention will increase the probability of its sustained implementation A persuasive ROI can help your organization achieve strategic and business success through market differentiation and lower operating costs 7
Selected References Berry, Parker, Coile, Hamilton, O Neill, & Sadler (2004) The Business Case for Building Better Buildings, Frontiers in Health Services Management, 21(1), 3-21. Sadler, DuBose, & Zimring (2008) The Business Case for Building Better Hospitals through Evidence-Based Design, Health Environments Research & Design Journal, 1(3) ) 22-39. Zimring, Augenbroe, Malone, & Sadler (2008) Implementing Healthcare Excellence: The Vital Role of the CEO in Evidence-Based Design, Health Environments Research & Design Journal, 1(3) ) 7-21. Ulrich, Zimring et al. (2008) A Review of the Research Literature on Evidence-Based Health Care Design, Health Environments Research & Design Journal, 1(3) 61-125. 125. Nachri & Center for Health Design (2008) Evidence for Innovation: Transforming Children s Healthcare Through the Physical Environment, www.children shospitals.net and www.healthdesign.org APPENDIX 8
From Ideas to Action: Ask Question #6 1. Urgency/Need? 2. Appropriateness of Solution? 3. Relative Cost per Square Foot? 4. Overall Financial Impact? 5. Sources of Funds? 6. Incorporate Evidence-based Design? Ten Steps to Implement Evidence-based Design (1-5) 1. Create a multidisciplinary team and develop a clear vision that includes measurable quality improvement goals 2. Select an architect with experience in Evidence-based Design and a proven track record of at least one successful healthcare project (ask for evidence of which team members are EDAC certified) 3. Identify Evidence-based Design interventions and select them 4. Evaluate current practice and develop a baseline for each (e.g. infections, transfers, employee turnover) (develop baseline costs) 5. Set measurable post occupancy improvement targets and get buy in from all key stakeholders 9
Ten Steps to Implement Evidence-based Design (6-10) 6. Incorporate design improvements into capital and operating budgets approved by the board 7. Widely communicate improvement targets internally and externally 8. Track and report progress 9. Continually incorporate new evidence-based design strategies t 10. Publish your results! 10