Healthcare is a large part of a rural community’s economy. Threatening the overall economic viability would have a severe ripple effect throughout the community, and in an era of increasingly limited resources, many pieces would need to be juggled to make this happen.
In order to deliver value, the first element of design consideration is in the design of the process. The most important element was a recognition that in order to be successful, multiple perspectives would need to be considered, often simultaneously. CVH hired three advisors to help with the initial planning: Stroudwater Associates to do strategic and business planners, The Neenan Company for departmental space planning, site assessments, and design-build services, and Dougherty Mortgage for access to financing. The second element of the process design was collaboration by the three firms, along with the CVH stakeholders, to work as a team through the evaluation of market conditions, strategic planning and project implementation. As advisors, the three firm’s collected and evaluated market data, conceived of alternative operational strategies and facility solutions within a sustainable financing threshold. Then engaged CVH stakeholders – physicians, staff, the board, and executive leadership-in the process through a day long facilitated planning session to coalesce alignment for an ideal solution. The goal, to engage stakeholders in understanding their market data, market capture, possible strategies for growing and enhancing patient care service lines, forecasted financial modeling of operations to support expanded and new services within a sustainable capital budget, space needs to deliver care, and financing options. As one might expect, this is a full agenda met initially with apprehension by the stakeholders.
The Collaborative Design meeting was held in a community meeting room with over stakeholders 30 in attendance. Many were openly wary of sitting through a full day of consulting reports, but early on, they became engaged in team exercises, group reporting, and collective learning. The orthopedic surgeon confessed at the conclusion of the meeting: “I told the surgical staff I’d likely be back in 30 minutes, as I was as excited about this required event as I was about having my routine endoscopy…I’ve participated in a lot of meetings in my careers, and this was the best ever.” This sentiment was broadly shared and the result from this process: Dr. Sinnott’s, Dennis Zielinski’s and The Board’s vision now had a broad base of support.
The vision for the facility and the practical manifestation of that vision went through multiple iterations. Through the teaming of Stroudwater, Neenan, Dougherty, and CVH, each scenario was tested and retested against the strategic, financial, and operational goals. The models to evaluate various solutions were designed to be flexible and manipulated quickly, a process that saves a tremendous amount of time, increases engagement, and reduces the costs of misunderstanding and re-work furthering value. Designers use the market information to drive space needs, adjacencies are evaluated for operating cost savings, capital and operations are modeled financially and tested against the debt capacity and long term sustainability. All of this in real time with the stakeholders present. Playing “what if” scenarios out and seeing the financial results, for example, ensures that the design solution remains feasible.
This approach to planning was validated through a successful financing of the facility via the US Department of Housing and Urban Developments (“HUD”) Office of Insured Healthcare Facilities – 242 mortgage insurance program. This mortgage insurance program places the full faith of the US treasury as guarantor of the debt financing for qualified hospitals that results in a cost of capital drastically below what a rural hospital like CVH could get on its own. HUD staff are experienced hospital operators and bankers, and through their thorough review, they complimented CVH on how the facility was designed to: increase patient throughput while reducing FTE’s per patient encounter; respond to the market’s healthcare needs; all within a sustainable capital budget and financing. Collaboration by the three consulting firms who all have significant experience with HUD’s mortgage insurance program provided for an expedited mortgage insurance approval which allowed CVH to access year end 2010 expiring Build America Bonds. A program brought forth by the Obama administration created under the American Recovery and Reinvestment Act to stimulate the economy. This further reduced the costs of barrowing to CVH bringing the net interest rate to 3.65%. A tremendous value at the time when taxable debt was trading at 5.5% to 7%.
The Triple Aim’s value formula—better care for populations, better quality and at lower per capita costs—is playing out in both the public and private market. Rural communities play an important role, through the provision of primary care, diagnostic and outpatient services, in improving health and managing total spend. CVH’s facility investment has positioned it for success in this environment. The service area population is receiving better care with the recruitment of Internal Medicine physician Dr. Douglas Crane to the campus, with expanded and more easily accessible outpatient diagnostics, private patient rooms, all at a lower costs with staff because of departmental adjacencies being able to cover more than one modality of care., therefore being less idle and more productive and all funded at an incredibly low interest rate of 3.65%.
Volumes per service line have increased across the board, representing an increase in CVH market capture. Service area patients are now electing to get care locally rather than driving out of the service area. With enhanced market capture of its service area population Coquille Valley is better positioned to be managing the overall health of its region positioning CVH for coming population health management, the ultimate goal in moving from Volume to Value.