Tuesday Feb 24, 2015

Creating and Maintaining Infrastructure in the Capitation Era

written by Garrett Harley, Industry Strategy, Engineering & Construction

I was at the Lean Construction Institute annual conference back in October, and healthcare was well-represented. At one of the keynote sessions, an executive from a major hospital provider spoke about the ins and outs of how his hospital manages the complete asset portfolio from design all the way to operations and maintenance. I had a big question for him, and the Q&A session gave me the floor to ask it:

 “How is capitation influencing your capital spending decisions?” 

 The reply? Without a moment of hesitation, the speaker replied definitively and unapologetically: 

 "It’s not!”

 What? Hold on…did he just say that in making capital spending decisions, capitation is not part of the equation? As in, this huge shift in how healthcare providers make money and assume risk is not going to change capital spending planning or execution (that’s really what the capitation payment model boils down to)? I just couldn’t believe what I had heard.  All I could think about was the traditional definition of the "hospital" (where I go to get well) and how that definition could drastically change under capitation (it's only where I go when I am acutely sick). 

 But the more I thought about it, the more I realized I asked the wrong question. What we need to be talking about is this: Is capitation going to change how providers use the current built environment to service patient care? And does this mean that the current built environment needs to change? 

 Here’s why my first question was the wrong one and how I think healthcare providers should be answering this looming capitation-era question. 

Capitation: Making budgets more predictable

I had asked the healthcare executive about capitation and budget. Thinking about the ins and outs of capitation, when it’s framed as a question about budget, the healthcare executive’s answer was actually quite accurate. Capitated payment systems are based on a payment per person (instead of payment per service provided), and there are several different models, but typically capitation-based payments are expressed in a per member, per month (PMPM) format. Because the provider is no longer relying on a payment per service provided model, with capitation, budgets generally become more predictable (and timely). The payment is fixed—providers get the payments regardless of how much or how little services are rendered.

 The speaker also likely answered this way because the capitation payment model only influences how and when the money is coming in—not what they can or should spend it on. In other words, in the healthcare executive’s mind, capitation just gives him the budgetary boundaries, but it doesn’t make him think about if he’s spending that money on the right things. 

 So, I asked the wrong question. The issue is not about how capitation in and of itself is influencing spending decisions. Rather, it’s about how capitation will change the role of the provider in giving care to patients, and therefore how it will change what the infrastructure looks like—and how healthcare providers plan for that new infrastructure. So, the more important question for healthcare providers today is this:

Is capitation going to change how providers use the current built environment to service patient care? And does this mean that the current built environment needs to change? 

 Even before capitation started gaining steam, the built environment was changing—significantly. In the past, hospital design oftentimes followed hospitality industry trends. But since the economic downturn, construction is focused on efficiency and cost-containment, especially given the reality that the demand for healthcare services is only increasing. 

 Improving patient care should always be the focus of the built model. So if the promise of managed care is seamless integration and access to medical professionals, then this built environment must support it.

 The question I originally asked was designed to make the speaker think of how and where those investments in their physical assets are now going. But, the reality is that if healthcare providers are operating under a capitation model (assuming that capitation is the new normal), then the most profitable hospital would be an empty one. The hospital gets paid based on the patients in the system—not the services it provides.

 Now, let’s apply this logic to the infrastructure discussion. If an empty hospital is a profitable one, then the design, build, and operations of a healthcare facility should have less to do with its serviced population, and more to do with its throughput efficiency.  If the emergency room is the most expensive way to have you come in, then repurposing the existing infrastructure for wellness will reduce costs over time. It is also an efficiency gain—you are reducing the number of people coming through your most expensive resource.   

 This is not to say that patient care is not at the center—it’s just that the definition of “care” has changed. Care now equates to “wellness”—which is closely correlated with throughput efficiency. Wellness is all about providing healthcare services that do everything they can to get the patient well and keep them well (and therefore out of the hospital). To do this successfully, the throughput of the patient in the facility must be a seamless integration of medical professionals and services—backed by an infrastructure that mirrors this same level of seamlessness. And this certainly influences how providers must design, build and operate their healthcare infrastructures. Walkable campuses of integrated services, doctors, labs and pharmacies will become the new normal of care delivery— increasing the specialization and integrating it at the same time.

Integrated infrastructure: For the sake of patients and budgets

Creating an integrated infrastructure not only makes sense for patients’ wellness—it also makes sense for budgets. The reality is that healthcare operating margins are very low—two to three percent is considered an industry average—but many hospitals do lose money. And when margins are so thin, providers are better off focusing on strategies that reduce costs, as those directly go to the bottom line. Perhaps surprisingly, in the long-term, the greater savings opportunity is in improving day-to-day efficiencies.

 For this reason, the new integrated healthcare infrastructure is typically created using existing facilities, leveraging two major tactics: 

Renovate for sustainability: Even old buildings can be modernized with the right energy saving updates; investing in the right IT can actually increase infrastructure efficiency. For example, effective data management and smart systems make hospitals more efficient by preventing opportunities for errors. Improving energy efficiency can also result in large-scale savings over time, while boosting the hospital's efforts toward sustainability.

Redesign the flow: An increasing trend is for design and construction teams to talk with physicians and nurses about ways that facilities can help them to perform better, often by spending less time walking from place to place and more time serving patients. The goal is to reduce the number of trips that nurses and orderlies must make between patients and areas where medicines and linens are kept. 

And with a new infrastructure model comes a whole new reality for those managing the assets: the project management office (PMO). If the goal is integrated care, then the portfolio of assets can and will become even more complex. It’s not just the “big box” hospital that matters now; it’s all of the additional surrounding assets that service the idea of wellness. Therefore, because those assets need to be tightly related to one another for the new wellness mantra to work, it will be even more critical for the PMO to understand an asset’s complete lifecycle within the context of that increasing portfolio. In addition to the assets, the types of projects to manage will become just as diverse. There will be small jobs and big jobs, simple jobs and complex jobs. And with an integrated model, they all should be ultimately viewed together—in other words, planning will become more important than ever in healthcare infrastructure.

 As the complexity of integrated care grows with the “wellness” model, so does the importance of maintaining the portfolio of assets that service wellness. Making capital asset spending decisions that support the wellness model and focus on increasing patient throughput are important to healthcare providers’ success as well as patient outcomes. Integrated project management tools can manage existing asset portfolios to help pursue the right projects and work within budgets to deliver the right infrastructure in this new era of patient care delivery..

Sunday Feb 08, 2015

Managing Change on E&C Projects

Written by Krista Lambert, Director Engineering & Construction Strategy, Oracle

 As the saying goes: change happens. But the recent report from the Economist Intelligence Unit (EIU), Building in Change: Project Construction in Asset-Intensive Industries revealed that for engineering and construction projects, change is not only inevitable, it creates its own set of challenges. According to the report:

  • More than 60% of survey respondents blame unexpected change for at least one-half of all project overruns
  • 55% of the executives surveyed consider their companies as average or below at anticipating change

Clearly, both owners and E&C firms feel that they could vastly improve their ability to manage change. An enterprise-wide project management system not only provides greater visibility and insight into changes, but also improves communication across organizational boundaries, so you can quickly adapt to disruptions in labor, materials, and costs. To find out more, read the article Critical Components to Effective Project Execution in the latest issue of Construction Connection.

Wednesday Feb 04, 2015

Visualization and the Digital Project

written By Garrett Harley, Director, Engineering & Construction Strategy, Oracle

5D virtual construction will transform the construction industry

 Redesign should take place on the computer, not on the construction site.

 5D virtual construction modeling, or 5D BIM (short for building information modeling) enables the various participants of a construction project—from designers and contractors to owners—to visualize and display the entire construction progress sequentially over time, factoring in a critical component: actual and forecasted costs. It has the potential to vastly transform the delivery of projects large and small.

 Here’s how BIM technology has progressed through the years:

3D: Three-dimensional design modeling that enables project visualizations, walkthroughs, clash detection, and item scheduling

4D: 3D modeling plus time, linking the project schedules: resources, tasks, etc.

5D: 4D plus cost, integrating design with estimating, scheduling, and costing

 Leveraging the data available in the 3D BIM model, 5D BIM optimizes construction project management, enabling project team members to visualize the progression of construction activities and the associated costs. Beyond the ability to maximize physical and constructability constraints, 5D virtual construction gives companies the ability to better manage budgets and forecasted expenditures. Understanding construction sequencing can help prevent problems related to constructability and optimize cash flow within the framework of construction sequencing.

 In today’s environment, many E&C companies and some owners have begun to adapt and adopt 5D into their work processes. Recent surveys predict that 100 percent of owners and 80 percent of contractors will use BIM in some way in 2014.

 Currently, there is no standard definition of BIM and many partial or incomplete solutions. Dual standards have been developed by different organizations such as the Industry Foundation Classes (IFC) by the buildingSMART allianceTM and ISO 15926. The number of developers in the BIM space has also grown creating integration issues.

For visualization to drive projects from concept to completion and into operations and maintenance, developers must extend current BIM capabilities. Users need mapping and display capabilities between the embedded construction schedule and the 3D model. They need easy, effective ways to verify clearances, identify design incompatibilities, and detect clash or collision points.

 All construction contractors are currently investing in standalone, specialized niche technology, so now is the time to bring those niche technologies together in an interoperable environment.

 For more information on BIM, read the whitepaper: “Leverage 4D Building Information Modeling (BIM) to Help Meet the Challenges of Infrastructure Growth”

Wednesday Jan 28, 2015

Maximize Lead-to-Contract Performance

Written By Garrett Harley

How much does it cost you to find new projects?

 The engineering and construction industry wastes millions of dollars just seeking new work. On average, companies only win one out of every four jobs they pursue, squandering resources and limiting growth potential. That means a $10 billion company wastes $75 million annually on failed bids.

 In a typical engineering and construction organization, rarely do the teams that prepare the estimates for project bids and the teams that deliver those projects share information. Many geographically distributed companies allow each operating group in the company to bid on projects autonomously—loosing the opportunity to cross-sell services. The lack of collaboration at the very beginning of a project can lead to errors and omissions during project execution, which impacts margins and can lead to future claims.

 With the introduction of Oracle’s Primavera Project Bid and Execution, Oracle is breaking new ground in this key area. This new solution transforms the process, enabling organizations to improve their approach to new business development. Maximizing lead-to-contract performance improves customer connections, increases win rates, reduces the cost of bidding, manages risk, and builds a balanced portfolio of profitable work.

 A formalized approach to bid pursuit will help firms realize opportunities, better use resources and manage risks, which leads to better data assurance, increased business confidence, and higher win rates.

For more information on Oracle’s Primavera Project Bid and Execution, watch the Webcast: Transforming Construction Project Execution.

Wednesday Jan 21, 2015

Is your company ready to successfully execute a business transformation?

Intelligent Utility – January 18, 2015

Author: Guy Barlow, Director of Industry Strategy, Oracle Primavera

For companies that don’t want merely to succeed in the utilities industry but to lead, continual business transformation is a must. It appears, however, that actually achieving this transformation is also one of their most vexing challenges. New research from Oracle Primavera and Forbes, “Making the Change: Planning, Executing and Measuring a Successful Business Transformation,” shows that while the ability to execute transformation is critical to remaining relevant, nearly half of the 534 executives surveyed---from a number of different industries, including utilities---say their organization is only somewhat or not at all ready to successfully execute a business transformation today.

Continual business transformation is crucial for companies to stay ahead of emerging players and maintain a competitive edge. From bringing new offerings to market to embarking on major capital expenditures, business transformation can take countless forms. Many utility companies, however, are struggling with their transformation efforts. Despite strong agreement that business transformation is fundamental to success, 48% of total executives surveyed say their organization is only somewhat or not at all prepared to successfully execute a business transformation today.

Beyond the preparation, it’s the execution of the business transformation initiatives and projects that make or break its success. The most often cited cause for failure in the rollout of a business transformation initiative is inefficient execution (41%), followed by resource and budget constraints (35%). Additionally, top reasons for successful initiatives include support from leadership (51%) and strong, competent execution (48%).

When it comes to tools needed to ensure successful business transformation, respondents from utility companies say that having a summary of all costs associated with transformation initiatives is the single most critical capability (55%). More than half of utility industry respondents (55%) cite inefficient execution as the top reason for transformation failure while noting that the top reason for transformation success is support from leadership (48%). And, those who have successfully implemented transformation initiatives in the last three years say that business transformation met their expectations (47%).

Transformational change in utilities is needed. Given, among other factors, the volatility of commodity pricing, heightened regulatory scrutiny and diminishing talent, boards and executives realize the need for a step-change in their business. And it often depends on the successful planning and execution of strategic initiatives – that is, projects. (…)

Read the complete article here.

Tuesday Aug 12, 2014

The Latest Release of Oracle’s Primavera Unifier Improves Project Lifecycle Management in Four Important Ways

The latest version of Oracle’s Primavera Unifier offers a wide range of enhancements that improve project lifecycle management for capital planning, project delivery, cost control, and other areas. View a webcast that explores how the new release consolidates three previous standalone products—Primavera Project Delivery Management, Primavera Cost Controls, and Primavera Capital Planning—into a single application, Primavera Unifier Project Controls.
Read More

[Read More]

Monday Jul 14, 2014

Managing Change on Engineering & Construction Projects

By Krista Lambert, Engineering and Construction Strategy Director, Oracle

As the saying goes: change happens. But the recent report from the Economist Intelligence Unit (EIU), Building in Change: Project Construction in Asset-Intensive Industries revealed that for engineering and construction projects, change is not only inevitable, it creates its own set of challenges. According to the report:

  • More than 60% of survey respondents blame unexpected change for at least one-half of all project overruns.
  • 55% of the executives surveyed consider their companies as average or below at anticipating change.

Clearly, both owners and EPC firms feel that they could vastly improve their ability to manage change. An enterprise-wide project management system not only provides greater visibility and insight into changes, but also improves communication across organizational boundaries, so you can quickly adapt to cost overruns, scope and schedule and quality impacts. To find out more, read the article Critical Components to Effective Project Execution in the latest issue of Construction Connection.

Tuesday May 13, 2014

Powering Up: How Eskom Is Driving the Largest Infrastructure Program in Africa

Join Eskom CIO Sal Laher to hear firsthand how Eskom–the largest utility in South Africa–has embarked on a transformational journey to implement the largest infrastructure capital investment portfolio in Africa. From actionable metrics through to subcontractor management, Eskom is vastly improving visibility, increasing responsiveness, and driving greater efficiency across a myriad of critical new builds. The utility is creating significant numbers of new jobs and strengthening the delivery of basic services to the people of South Africa in a fast-growing economy. Laher provides information and experiences from Eskom’s own build program.

Watch the keynote presented at Oracle’s Industry Connect here.

Tuesday Apr 29, 2014

New Research: Improved Project Management Is Key to Reducing Infrastructure Risks in Energy, Power, and Chemicals Industries

The process manufacturing industry is confronting significant infrastructure problems that heighten risks to operations and leave executives struggling to bring their ageing facilities into the twenty-first century, according to a new report by the Economist Intelligence Unit and sponsored by Oracle. One executive put the challenge in stark terms, saying "It takes years to build a reputation, but one serious infrastructure failure can destroy it." 

The report, "The Impact of Aging Infrastructure in Process Manufacturing Industries," is based on a recent survey of 366 executives. The research found that aging systems are negatively impacting—sometimes substantially—companies in oil and gas, utilities, chemicals, and natural resource industries. A commanding majority—87 percent of the respondents—said aging infrastructure has impacted operations in the past 3 to 5 years, with 1 in 10 saying they suffered severe consequences that they are still trying to fix.
But as a group, the executives see a way to improve agility and seize new opportunities while protecting customers, employees, operations, and corporate images from costly infrastructure failures. The best solutions involve a blend of technology, project planning, and due diligence, the report stated. The executives added that these elements help organizations identify and resolve problems before crises occur.

Find out how others in the power and energy sector are adapting and developing new strategies to address the issues of ageing infrastructure. Compare your own experiences and strategies against those of your peers with Oracle’s interactive benchmarking test, take the test and receive a complimentary four-page personalized report http://oracleevent.com/18378/edm/img/spacer.gifIt’s a simple 5 minute test that gives you an instant graphical snapshot and recommendations on how to turn your organization’s ageing infrastructure issues into an opportunity.


Read the full article in the EPPM Information In-depth newsletter here.

Thursday Mar 06, 2014

Specialization in the Capital Asset Lifecycle

Taken from the 4th edition of Construction Connection’s digital magazine

Asset-intensive projects, regardless of scope and scale, are under constant pressure to control costs, meet demanding schedules and manage risk. For E&C contractors, one large problematic project could wipe out a year’s worth of profit. The risks to owners and operators are equally bad—ranging from discontented stakeholders to lost revenues.

Yet according to the Building in change: project construction in asset-intensive industries special report[1] prepared by the Economist Intelligence Unit (EIU), over one-third of asset-intensive companies miss their budget (39%) and schedule targets (34%) on major projects at least one-quarter of the time; and more than 60% of respondents blame unexpected change for at least one-half of all project overruns.

No doubt, the lifecycle of a capital asset project is fraught with challenges.

Craig Larson, director of E&C Industry at Oracle, explains, “Owners and project teams need effective ways to manage projects from concept to completion and react with agility to unplanned changes to deliver multiyear projects on budget and schedule.”

Read the full article to learn more about the common platforms and standards that support the lifecycle of a project and the long-term operational efficiency of an organization.



[1] oil and gas, utilities, infrastructure (excluding utilities), chemicals, mining and metals

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