• Focusing on Facilities for Sustainable Cost Savings

    By Laura Ramos Hegwer Mar 26, 2019

    By implementing a campus consolidation, leaders at Boston Medical Center have saved millions of dollars per year on facility costs while substantially increasing patient volume.

    Main article: Who Should Own a Healthcare Organization's Cost Transformation Efforts?

    Facilities are an area where organizations can sustain transformative cost savings. As with most initiatives, accountability is key. 

    Cost Transformation_Robert Biggio“What I see too often across the industry is that we promote the cost savings from these projects, but we often don’t hold ourselves accountable for taking those savings out of the budget,” says Robert Biggio (pictured at right), senior vice president for facilities and support services at Boston Medical Center (BMC). Yet doing just that is critical to gain credibility with board members and senior leaders and to keep the momentum going, he says.

    At BMC, leaders have achieved approximately $25 million in annual operating savings by consolidating two campuses (the previous Boston City Hospital and Boston University Hospital campuses) to avoid duplicate functions. Some departments now share space, such as an outpatient clinic that has pull-down beds so that it can be used as a sleep center in the evenings.

    In all, leaders reduced BMC’s footprint by 400,000 square feet while increasing overall patient volume by 21 percent. And after selling the vacated real estate for approximately $160 million, they were able to cover half of the cost of a $325 million campus redesign project. 

    As part of the redesign, leaders embarked on several strategies that reduced costs while also making their campus greener and more resilient. The changes include the 2017 addition of a combined heat and power plant (also known as a cogeneration, or cogen, plant), which allows the hospital to produce its own electricity and heat. If the electric grid goes down, the plant can generate enough heat and power to keep BMC’s inpatient units running for months.

    Grants and incentive payments from state and local governments made it feasible for the safety-net hospital to cover the $15 million cost of installing the cogen plant. So far, the investment is paying off: The cogen plant annually saves BMC $1.5 million in heating and energy costs.

    Biggio says finance leaders should offer financial-modeling support to help nonfinance leaders, like facility managers, understand the potential ROI of their initiatives. “Too many facility managers rely on data that is provided by vendors who are trying to sell a particular product or project, and they often don’t have the financial background to do the analysis themselves,” he says.

    Laura Ramos Hegwer is a freelance writer and editor based in Lake Bluff, Ill.

    Interviewed for this article: Robert Biggio, senior vice president for facilities and support services, Boston Medical Center, Boston.