DEVELOPMENT SCENARIOS

 

 

 

 

This section documents the development scenario deliverables for the project, including capital estimates and evaluation matrices.

 

DEVELOPMENT SCENARIOS

SUMMARY

Scenario 1 maximizes the Building B for clinical function using the efficient Hybrid Convergent universal clinic layout.

 

Building B

Levels 2 and 3 are renovated for clinical use. Level 1 is renovated for clinical use, office use, and other functions such as cafe, pharmacy, and a clinical suite for employee health and dental with a private courtyard entrance. The lower level accommodates faculty academic centers, administrative offices, building functions, and the current imaging department.

Building B Expansion

This scenario requires the Eye Center program to be redistributed on Building B Level 2: In order to maximize the universal clinic layout, the Eye Center program shifts into the Building B expansion. Level 3 is dedicated to the Pain clinic and procedure suite. This department requires stringent architectural separation due to the procedures being performed in this space. The natural separation of the expansion is the ideal location for this department.

Building A

In this scenario, Building A will no longer be required for ambulatory clinics, MOSCs, or faculty academic offices after 2026. Though the BluePacific real estate group recommends purchasing Building A for strategic reasons, we have taken it out of the capital estimations for the purpose of this master plan.

Building C

All current clinics and offices in Building C will be absorbed into the Building B and Building B expansion. Building C will be demolished in 2021.

Off-Site Offices

In order to create space for adequately sized renovation footprints, some temporary off-site offices are required. In this scenario, Neurology and Neurosurgery academic offices and Cardiology academic offices will be relocated to a temporary facility until 2025. After that, these academic offices will be right-sized and accommodated within the Building B.

Other Precepts

In order to accommodate all the space needs for clinics and offices, some space allocation concessions are required:

 

MOSCs- Currently MOSCs are provided with 120nsf per office, 56nsf per workstation, and an overall DGSF grossing factor of 60%.

Scenario 1 requires a decrease in space allotted to 40nsf per workstation, a 45% grossing factor, and a 50% reduction of private offices to shared offices.

 

Faculty Academic Centers- Currently faculty are provided with 120nsf per office, 56nsf per workstation, and an overall DGSF grossing factor of 100%. Scenario 1 requires a decrease in space allotted to 40nsf per workstation and a 75% reduction of private offices to shared offices. The grossing factor remains 100%.

Scenario 1B only differs from Scenario 1 in the phasing approach to Building B renovation: All Building B renovations begin after completion of the Building B Expansion project.

Clinical DGSF

Hybrid Convergent Layout

+21K

DGSF Temporary Off-site Officing

$381 M

Cumulative Capital

Estimated Total Project Cost and Occupancy Cost

SCENARIO 1 PHASING: GANTT CHART

2018

2019

2020

2021

2022

2023

2024

2025

Building B Expansion  $62M

Relocation Assumptions

Vacate + Demolish Building A  $500K

Complete Building B Renovation                                               $220M

  • Phased development across 7 years

  • 300,000 impacted BGSF

  • 1 year (estimated)

  • (-33,000) BGSF

  • 2 years (estimated)

  • +54,000 BGSF

  • includes 2nd & 3rd floor TI

  • Neurology Clinics and Faculty

  • Neurosurgery Clinics

  • PM&R Therapies (clinics remain)

  • Cardiology (half of faculty relocating to North Addition)

2026

2027

2028

2029

2030

Vacate Building A

  • 1 years (estimated)

  • (-66,000) impacted BGSF

SCENARIO 1 PHASING: ANIMATION

PHASE 1

Pre Construction Relocations

Temporary Relocation

Neuro Academic Offices

Cardio Academic Offices

Permanent Relocation

PM&R Therapies and Academic Offices

Building B Level 3 Consolidation

Shift Ortho and Imaging academic offices to create a clear renovation footprint at Building B level 3 north

PHASE 2

Construction/Renovation

ACC Expansion

Building B Levels 1 & 3 Partial Renovation

Move (Permanent):

Ohpth Clinic/Offices

Pain Clinic

Cardiology Clinic

Surgery Clinic/Offices

Transplant Clinic/Offices

Emp Health Clinic/Offices

Dental Clinic/Offices

Move (Temporary):

CTS&C Clinic/Offices and Vascular Clinic move into former Cardio Clinic (unrenovated)

OB/GYN Clinic and Offices shifted to former Ohpthalmology Clinic (unrenovated) to create clear renovation footprint Building B level 2 north

Building C Demolished

PHASE 3

Renovation

Building B Level 2 Partial Renovation

Move (Permanent):

Fam Prac Clinic/Offices 

Int Med Clinic/Offices 

Vascular Clinic/Offices

Move (Temporary):

CTS&C Clinic and Offices move in to former Fam Prac clinic (unrenovated).

PHASE 4

Renovation

Building B Levels 1 & 3 Partial Renovation

Move (Permanent):

Imaging Offices

Urology Offices

Pain Offices

Cardiology Offices

Admin Offices

Move (Temporary):

Ortho Offices

Ortho and PM&R Clinics

PHASE 5

Renovation

Building B Levels 1 & 3 Partial Renovation

Move (Permanent):

Ortho & PM&R Clinic/Offices

CTS&C Clinic/Offices 

OB/GYN Clinic/Offices 

Urology Clinic

Neuro Offices

PHASE 6

Renovation

Building B Level 2 Partial Renovation

Move (Permanent):

ENT Clinic/Offices

Pediatrics Clinic/Offices

Adult IV Infusion

Building A Lease Terminated

FINANCIAL DEVELOPMENT SCENARIOS

To guide the BluePacific Ambulatory Master Planning effort, a financial assessment was completed modeling varying revenue and cost drivers of alternative master planning scenarios. Each scenario utilized a long-term projection through 2030 (12 years) and calculated the cumulative financial impact. The goal of this assessment to identify an optimal scenario that mitigates occupancy and capital expenditure while providing adequate space and capacity to meet projected patient activity.

OVERVIEW

Through the master planning process, three distinct scenarios were developed and reviewed with the BluePacific Steering Committee (supporting details and test fit diagrams can be found on this page):

 

  • Scenario 1 – Clinical, Support and Academic consolidation into Building B while vacating Building A and Building C

  • Scenario 2 – Clinical consolidation into Building B while converting Building A to officing for Clinical Support and Academic functions

  • Scenario 3 – Building B receives partial renovations to continue medical specialty services while surgical specialties will be relocated into a new Ambulatory Surgery Center (ASC) destination

 

Each scenario has unique phasing and capital cost implications that were sensitivity tested over a 12-year timeline.  The following graph represents the cumulative financial performance of each scenario as defined by the following calculation: 

 

Cumulative Contribution Margin – Cumulative Facility Based Cost (Occupancy + Capital)

*DRAFT – final capital estimates are under further refinement.  Financial performance metric selected to represent a comprehensive performance indicator of revenue with increased volumes, occupancy cost variances and capital expenditure over the projected timeline.

From this financial analysis, Scenario 1 – ‘Building B Consolidation’ is the financially preferred direction with a favorable 12-year cumulative variance from the alternative Scenarios 2 and 3 ranging from ($35M-$93M); (Occupancy and Capital cost detailed provided below in the ‘Key Inputs’ section).  As this was a financially driven assessment, activation of the preferred direction requires further considerations:

 

  • Organizational strategic drivers and synergetic opportunities (development of incremental OP ORs)

  • Phasing and future flexibility

  • Incremental capacity if growth accelerates beyond projected estimates

  • Operational value of consolidated clinical support and academic officing

APPROACH

A bifurcated effort was pursued to understand and differentiate varying levels of cost between alternative master planning scenarios. The two types of cost that were focused on throughout this effort include Capital Cost and Occupancy Cost (defined below). Detailed operational cost (e.g. staff ratio changes, enhancements to productivity, supply cost, etc.) were not assessed throughout this effort due to the preference to remain at a higher master planning altitude and current labor contractual agreements.

 

Capital Cost – cost associated with master planning phases, identified as ‘Total Project Cost’ and applied to zones of space based on the renovation/development level required

 

Occupancy Cost – defined as any expense that is required to keep space ‘online’ and available for use, this excludes operating cost required to provide clinical, support or administrative services. Total annual cost was compiled and divided by ‘Useable SF’ to establish an annual cost per useable SF.

Total project cost estimates are per Building Gross Square Foot (BGSF) and have been calibrated to the market. Cost are in current dollars – 2018 valuation.  Modeling efforts escalated project cost by 4% per year by assumed scenario phasing developments

       

Once baseline costs were established, the following equation was utilized to integrate a revenue metric to provide a comprehensive approach that considers the impact of incremental patient activity over the projected horizon:

 

Cumulative Contribution Margin – Cumulative Facility Based Cost (Occupancy + Capital)

 

Contribution Margin – a financial indicator derived from [Direct Revenue – Direct Cost].  This indicator was utilized to focus on ‘direct operations’ and exclude indirect cost and UC Health system overhead.  Contribution margin was calculated as an aggregate variable, agnostic of service line performance to avoid preferential facility-based solutions.  See ‘Contribution Margin Qualifying Section’ for additional detail.

CONTRIBUTION MARGIN QUALIFYING PROCESS

Qualifying factors of direct cost and revenue:

  • Services received from Revenue Centers in the Building B, Building A and Building C Buildings. Surgical Day Care, Physical Medicine & Rehabilitation treatment and Chemo infusion are excluded.

  • All activity in the clinics (provider visits, procedures, treatments, vaccines, etc.) has been included. Also included are activities performed in non-clinic departments (lab tests, diagnostic imaging, etc.) for clinic patients. 

  • Estimated net revenue is based on Total Charges multiplied by the actual payments/gross revenue percentage for all activity for qualified visits.

  • Medical Center direct department costs (salary & benefits, supplies, equipment maintenance, instruments, purchased services, office supplies, equipment depreciation, mail, conference registrations, travel, central sterile supply, clinical engineering services, cafeteria services, parking, telephone) are included.

 

Overview of establishing the baseline contribution margin per ambulatory visit:

  • For the 254,615 Clinic Department visits, clinic and ancillary services performed July 2017 through May 2018 in the Building A, Building C and Building B buildings are included. Excluded are Same Day Surgery, Rehabilitation treatments and Chemotherapy administration.

  • The Average Clinic Visit Direct Contribution Margin is ($139). The components are: Average Net Revenue = $139; Average Direct Cost = $278. 

  • The Average Ancillaries Direct Contribution Margin is $202. The components are: Average Net Revenue = $316; Average Direct Cost = $114. 

  • The Average Total Direct Contribution Margin per ambulatory visit is $63. The components are: Average Net Revenue = $455; Average Direct Cost = $392.

EVALUATION MATRIX
Scenario 1.1
Building B Clinical Consolidation,
No Building A
Scenario 2.1
Building B Clinical Consolidation +
Building A
Scenario 3.1
Building B Partial Renovation Surgical Specialties to ASC

ACC

ACC Exp

Glassrock

Cypress

ASC

FSSB/ Off site

Maximized for clinical use

Gut Renovation on ACC Levels 2 & 3

Partial Renovation Levels 1 & LL

Eye Center second floor program located in ACC expansion. Third floor reserved for non-ophthalmology clinic uses.

Lease terminated (post ACC renovation)

Clinical moves to ACC

Academic offices and MOSCs move to ACC

Building Demolished

N/A

Some academic offices temporarily relocated for renovation. Neuro academic offices relocated permanently.

Level 3 light renovation of existing offices

Level 2 maximized for clinical use

Level 1 partial renovation for offices and clinics

Lower level partial renovation to offices

Eye Center program accommodated as shown in current test fits. Third and second floor of expansion reserved for non-ophthalmology clinic uses.

Lease terminated (post ACC renovation and ASC Construction)

Clinical moves to ACC

In-clinic MOSCs move to ACC

Out-of-clinic MOSCSs accommodated in ACC “Center Chairs” or Glassrock

Academic accommodated in ACC “Center Chairs” or Glassrock

Building Demolished

Universal Clinic Modules Implemented in ASC for Surgical Specialty departments: Ortho, ENT, Pain, Surgery, Transplant, Urology, Diagnostic Imaging (2030 Projection - 130k visits, excluding DI), Vascular and Vascular Lab

N/A

Maximized for clinical use

Gut Renovation on ACC Levels 2 & 3

Partial Renovation Levels 1 & LL

Eye Center program accommodated as shown in current test fits. Third and second floor of expansion reserved for non-ophthalmology clinic uses.

Purchased for Academic Offices and/or out-of-clinic MOSCs

Clinical moves to ACC

Academic offices and MOSCs move to ACC and Glassrock

Building Demolished

N/A

N/A