Cost model: PFI hospitals

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Capital investment is pouring into the NHS and the prognosis for improved performance is good. In this month鈥檚 cost model examine the aims of the hospital programme, probe design issues, and break down the price of adding a trauma unit to an existing hospital

Introduction

The NHS鈥� largest ever building programme is in full swing, addressing demand for radical improvements in healthcare delivery in the acute and primary healthcare sectors. Recent research, published by the Nuffield Trust, shows that the NHS has the capacity to improve and that foundations are in place for long-term progress. The principal objectives of the NHS Plan, which is driving the current investment and which runs until 2010, are:

To reduce waiting times
To provide universal access to high quality healthcare
To increase the capacity of diagnostic and preventative medicine
To take advantage of methods of service delivery provided by new technologies, innovative ways of working or alternative sources such as the private sector.

The implications for a capital build programme are significant. Under a spend programme worth more than 拢11bn, 100 large hospital schemes are should be open by 2010, together with a new generation of Diagnostic and Treatment Centres. The NHS Plan also involves the private sector in the provision of DTCs contracted specifically to provide elective surgery to reduce waiting lists.
With the introduction of a partnering approach to procuring capital works worth 拢1-25m, Procure 21, the NHS鈥� management of medium-scale capital projects is also being overhauled. As a supplement to previous articles on the PFI, DLE focuses in this cost model on smaller-scale hospital development.
Challenges facing the NHS
In the short and medium terms, the NHS will have to deal with challenges in three main areas:

Growth in demand Demand grows inexorably, driven by demographics and rising expectations. Some PFI schemes have experienced growth in output of more than 20% since opening. Despite substantial investment in online services, primary care and day-care capacity, a further 10,000 beds are planned to be delivered by 2010, although there are concerns as to whether such an increase can be delivered and staffed within the programme.
Changing user expectations A more patient-centred health service has implications for the NHS Estate in terms of the facilities provided, the clarity of their organisation and the environment provided for staff, patients and visitors.
The NHS estate NHS property totals 25 million m² with a replacement value of 拢72bn. Although 30% of the value of the estate is less than 15 years old, 25% of it predates the NHS and much of the rest has been developed in a piecemeal fashion, making it difficult to improve internal environments or to introduce new methods of treatment or flexible working.

Affordability and funding
Under current funding arrangements, NHS hospital trusts and the soon-to-be-operational foundation trusts obtain their revenue from healthcare commissioners such as primary care trusts (PCTs). NHS hospital trusts are paid in accordance with a fixed regional tariff, on the basis of the number of medical procedures undertaken. Healthcare commissioners are very powerful project stakeholders, providing capital and revenue support.
Health commissioning need, which defines the range and number of procedures required in a proposed hospital is defined by PCTs and determines the range of services needed and the revenue they will generate. This drives detailed health planning, capital budgets and the design itself. Affordability is the key benchmark in the business case process.
This planning process works by translating health commissioning need into a functional requirement based on area and cost. It is used to calculate capital cost to demonstrate that affordability criteria have been met. Although significant capital is now available for investment, it remains scarce and the preparation of a business case involves competition between trusts for resources.
In addition to capital cost, the business case process is also concerned with life cycle costs, the quality of the implementation plan and risk management 鈥� particularly to manage 鈥渙ptimism bias鈥�, the risk that project teams set inadequate briefs, budgets and programmes.
Because hospital design is so detailed, a system of estimating floor areas and costs by function has evolved to enable the financial assessment of clinical needs ahead of the completion of detailed design work.
Some of the principal stages of the assessment, justification, approval and implementation procedures in the NHS, which apply to England and Wales, are detailed below:

Strategic outline case (SOC) Demonstrating the need for a health investment, presenting options and establishing the case in the context of a wider estates strategy. This assessment will be made ahead of any detailed work and involves risks in assessing the overall functional requirements.
Outline business case (OBC) Identifying the preferred option, confirming the affordbility, value and flexibility of the solution together with expected benefits. This assessment is based on early stage design work and will provide a more accurate assessment of the design solution.
Full business case (FBC) The full business case presents the detailed case for project approval and will include details of the scheme, its management and plans to realise expected benefits. FBC approval fixes the capital budget. On a Procure 21 scheme, it is prepared ahead of detailed design, whereas on a PFI project, being prepared just ahead of financial close, the FBC will involve the commitment of a considerable contractor resource.

Key business case criteria
At all business case stages, there are three key questions that determine the feasibility of a proposal:

Do the proposed functions meet the medical need?
Do the proposed functions generate sufficient revenue to fund the scheme?
Can the functions be provided within the capital budget?

Failure to meet these criteria will result in the business case needing to be reworked or at worst, abandoned, all involving abortive costs and the risk of not meeting NHS Plan timescales.
The most critical decisions are made at an early stage in the absence of significant detail. In order to facilitate this process, cost and area information based on standard definitions of functional requirements have been developed by NHS Estates, published as health building notes and departmental cost allowances.
Vital cost planning skills
Application of this information, which was designed for use on 1000-bed general hospitals, is a highly skilled process that requires an understanding of clinical processes and the range of clinical and support accommodation required, an appreciation of how requirements might differ as a result of case load, and awareness of how technical innovation might supersede standard NHS advice.
The key issues to consider in preparing early stage function-based cost advice include:

The experience to work with health planners to optimise accommodation schedules.
Understanding the basis of the NHS standards, to be able to adapt the results to meet the specific circumstances of caseload or changing medical practice.
Ensuring that all necessary ancillary requirements and circulation is provided in support of the required functionality
Taking into account the implications of the site and its effects on layout, procurement, programme and the allocation of risk, which will affect the on-cost allowances applied to standard departmental cost allowances.
The ability to identify opportunities for reducing overall floor area
Optimising space allowances, critical dimensions, circulation and adjacency
The ability to communicate effectively the cost drivers affecting a scheme.

Trends in healthcare delivery
Healthcare delivery methods have a significant influence on design. With the rate of change in healthcare accelerating 鈥� the role of healthcare design in enabling or blocking changes in medical practice will become an increasingly significant issue. Key trends in present and future healthcare delivery include the following:

Specialisation and multidisciplinary working Delivery of healthcare has become increasingly specialised, within the acute sector, with resources being concentrated in dedicated departments in large centralised hospitals. In parallel with this trend, in some areas of elective care, departmental barriers are being broken down to provide more patient focused healthcare. This approach can be seen most clearly in the Diagnostic and Treatment Centre (DTC) model for diagnostic work and day surgery.
Care in the community Greater emphasis is also being placed on care in the community, and demand for this element of patient-focused healthcare is being supported by further investment in community hospitals and facilities for Partnership Trusts, designed to deliver integrated health and social care.
Development of new patient pathways The patient pathway describes the sequence of events involved in a medical procedure. In traditionally managed hospitals the pathways of emergency, elective and chronic patients can cross as a result of the shared use of common facilities and staff, potentially causing constraints on capacity, cancellations, and lengthening waiting lists. Using the DTC model, new pathways are being designed to deliver specific strands of treatment, such as elective medicine, making effective use of emerging medical technologies to provide a more efficient and reliable service.
Consumerism Consumerism in the NHS involves providing a patient-centred service. This agenda has direct effects on buildings used by clinical and non-clinical staff, while also dealing with issues of ease of access and spatial arrangements for visitors, together with improvements to patient accommodation and facilities. For example,services such as mobile TVs and telephones have been introduced as part of a PPP scheme.
The consumerism agenda has increased capital costs by at least 12-13% overall, driven by quality enhancements and an increase in area allowances. As with all aspects of NHS investment, the priority of the quality of patients鈥� experience has to pass affordability hurdles, and these requirements may adversely affect the extent to which consumerism can be delivered.
Information and medical technology I&MT鈥檚 role in the delivery of healthcare will continue to grow significantly as technologies currently in use in America are adopted in the UK. Areas such as imaging and diagnostics are being developed at all levels of care. The NHS National Programme for IT has a planned expenditure of 拢5bn over the next five years for projects including online bookings and patient notes.
The greater use of medical technologies will over time have an effect on room sizes, layouts, IT infrastructure and building services requirements. For example, the introduction of robotics is anticipated to require a 50% increase in operating theatre floor area.
Design and cost drivers
Healthcare buildings are highly complex, supporting a large and varied workforce, high-tech equipment and a bewildering array of functions, departments and user groups. Well designed and managed, hospital buildings help to support the work of frontline staff, provide an appropriate environment for patients and can contribute to improved clinical outcomes.
CABE鈥檚 campaign
Because of the size of the investment programme and the impact of the NHS as a construction client, CABE has been running a campaign to improve the quality of UK health building design, most recently through the 鈥淗ealthy Hospitals鈥� consultation. Key areas identified by CABE include:
Balancing clinical requirements with the needs of staff and patients
Making best use of the site in urban design terms
Providing high quality landscape and external environments
Creating high quality space, particularly in public areas
Ensuring the legibility and ease of access.

CABE has been highly critical of some recent hospital designs, and although the primary challenges concern the efficient delivery of required functions within strict affordability criteria, the needs of patients and of those who treat and look after them are paramount. Civic design issues also need careful consideration, as hospital buildings can make a significant impact on their surroundings.
Hospital organisation
The organisation of clinical and non-clinical activities has a considerable effect on the efficiency, affordability and effectiveness of a hospital. An outline design should ideally be prepared in close consultation with user groups to account for the specific implications of clinical workload.
Organisation and layout have significant effects on the operation of a hospital, including: Departmental organisation Distributing department functions, such as a radiology unit, into departments which generate high demand, such as accident and emergency, can contribute to reducing travel distances and reduce pressure on hospital circulation.
Dedicated resources Alternative healthcare models such as DTCs depend on the availability of dedicated facilities such as operating suites, which can involve some duplication of space, equipment and circulation.
Effective day-to-day operation Elements of building design which contribute to the smooth running of a hospital include:

Sizing and location of facilities to prevent operational gridlock
Appropriate departmental adjacencies
Minimising journey times for staff and patients and the correct sizing of corridors
Clarity of layout including ease of navigation for patients and visitors
Segregation of public/clinical circulation routes
Security and access control without compromising staff鈥檚 work.

Affordability
As space requirements are the primary cost driver in healthcare design, the spatial implication of proposed treatment pathways and requirements for circulation, non-clinical and administrative support areas can have a significant effect on affordability, including running cost implications, which need to be assessed in the context of a trust鈥檚 revenue streams.
Costs can be partially controlled by optimising the use of shared resources such as consulting rooms, using multi-function clinical space or applying flow-line principles in operating suites and DTCs. However, these changes will affect the patients and medical teams, and have to be fully understood before being adopted.
The effect of inadequate space allowances is well known and has been illustrated in some of the earliest PFI schemes. Adequate space in wards, waiting areas, corridors and for storage are particularly important in providing a good working environment, a high quality patient experience and contributing to positive patient outcomes, including infection control.
Other areas where affordability issues need to be resolved include equipment requirements, which can often exceed their budgets and which in turn affect room sizes and layouts.
Flexibility
Requirements for flexibility in healthcare space planning are driven by the need to increase useable space and to accommodate clinical change, which subject to affordability, need to be built into a scheme鈥檚 design. However, because of the specialist requirements of many medical disciplines and budgetary constraints, loose-fit design is a difficult objective to meet. The key approaches to achieving flexibility are:

Use of a small number of room size modules. Examination and treatment rooms should be designed and equipped to accommodate as many procedures as possible. With multifunction space, storage becomes critical and in particular must be accessible from outside of individual rooms.
Providing universal clinical space for medical departments and specialisms
Achieving greater flexibility in the use of clean treatment space to undertake a wider range of procedures, including diagnostic and treatment work.

Management of cross-infection
Management of cross-infection is a growing problem, costing the NHS 拢1bn a year, exacerbated by a large number of elderly long-stay hospital patients. A range of design approaches affecting space planning, ventilation, finishes and sanitary installations can control cross-infection.

Bed spacing of 3.6 m or more between bed centres is necessary to control common air-borne infections
Use of segregated clean and dirty corridors, controlled pressure regimes and high efficiency filters to prevent the air-bourne transmission of infection. Large schemes with a deep plan can generate particular challenges for mechanical systems
Selection of finishes that are robust and resistant to aggressive cleaning regimes
Provision of hand-washing or sterilisation facilities next to beds to improve hygiene.

Patient experience
Patients who spend a long time in hospital can be strongly influenced by their surroundings as well as by their care. Increasingly, the impact of elements of building design upon a patient鈥檚 experience and recovery are recognised and measured. CABE in particular are campaigning for wider consideration of the therapeutic elements of design. The main ways in which hospital buildings can contribute, which are not unique to healthcare buildings are:

Minimising patient and visitor stress by providing an attractive environment, clear layouts and easy navigation
Housing beds in single rooms or small bays of four to provide choice and appropriate levels of privacy
Providing a degree of control over a patient鈥檚 immediate environment
Providing visual simulation through external views, artwork etc
Providing a high quality, relaxing environment through the use of colour, acoustics, artwork, detailing and the 鈥済reening鈥� and planting of hospitals
Investment in a high quality working environment is increasingly recognised as being associated with faster recovery, and also motivates doctors, nurses and non-clinical staff.

Staff needs 
Over 1.2 million people work in the NHS and the bulk of expenditure is on revenue costs related to staff and treatment. Staff are scarce, so recruitment and retention of people is a key issue. Research by CABE and the Royal College of Nursing has demonstrated how important working environments are to attract and motivate staff.
One of the most effective staff motivators is efficient working practice. Elements of design that can support this include:

Smaller wards which group patients by medical condition
Wards with good sight lines and storage
Direct front- and back-of-house circulation routes
Good quality working environments
Good quality staff areas

Other initiatives to address staff needs include PFIs to provide low-cost key worker housing.
Procurement
The NHS controls one of the government鈥檚 largest capital budgets and, as a result, has been the focus on initiatives to improve the performance of NHS trusts as best practice clients. Although the PFI has been the main vehicle for delivering large-scale capital investment into the NHS, Procure 21 has been introduced to provide a prime contracting route for the delivery of medium-scale hospital projects.
The biggest success of the PFI has been to deliver a new-build hospital programme and to increase the certainty of delivery. However, there have been problems, notably with bed capacity and management of support services on early schemes. However, feedback from the managers of completed hospitals presently suggests high levels of satisfaction with buildings and their management regime.
Procure 21 is being rolled out nationally during 2003-2004, based on 12 principal supply chain partner-led (PSCP) teams. Use of Procure 21 is not mandatory, but based on evidence from pilot projects, the anticipated benefits of Procure 21 are expected to be considerable and include:

Use of standard processes
Use of established integrated design and construction teams with experience and continuity of hospital-based workload
Simplified appointment of the PSCP at an early project stage, avoiding the costs and delays of the OJ process
Single point responsibility provided by the PSCP
Involvement of the project team with clinicians and user groups
Cost and time certainty provided by a guaranteed maxiumum price based on 80% design and market testing
Effective management of supply chains, including performance measurement and benchmarking

The initial challenge for Procure 21 is to get NHS trusts to change design teams and appoint a PSCP-led team at the earliest stage. With the roll-out starting as foundation hospital trusts win greater independence, Procure 21 will need to deliver clear benefits to secure wide adoption.
In the procurement of healthcare projects, the following high level issues are vital to ensure the successful delivery of the project:

Client management Strong management by a client representative is needed to manage users, stakeholders and to ensure the project vision is delivered
Briefing and consultation Commitment to a staff consultation to develop an effective solution, reduce the potential for change at a later date and maximise the motivation levels. Consultation is vital if changes in practice or organisation are being proposed.
Mobilisation of hospital trust resources to contribute to the outline business case
Integration of design and clinical service strategies, based on involvement of designers and skilled technical advisors
Active management, by the PSCP, of the design and approvals process to ensure delivery.
Control of affordability at all stages 鈥� particularly in connection with initial assessments of area and cost and with equipment budgets as the project proceeds
Detailed co-ordination of design information
Early involvement of the PSCP and specialist contractors in the planning, phasing and co-ordination of building works.

Acknowledgements

Davis Langdon & Everest would like to thank Nic Allen of Devereux Architects and Richard Harrington of Architects, Nightingale Associates for their assistance in the production of this cost model.