California Pacific Medical Center

Shared risk, shared rewards┬áMembers of California Pacific Medical CenterÔÇÖs building team explain their integrated approach to project delivery to Jenn Monroe.  California Pacific Medical Center knows well the benefits of innovation and integration in the delivery of healthcare services. Based in San Francisco, CPMC has been named one of the top 50 hospitals in the United States by Leapfrog Group for the past three years. It is one of only five hospitals nationwide to earn the honor three years in a row.┬áAccording to Geoffrey Nelson, director of enterprise development, CPMCÔÇÖs patient-focused vision allowed it to emerge successfully from two decades of ÔÇ£relentlessÔÇØ hospital consolidation in San Francisco. ÔÇ£CPMC found a way to take the best of an existing hospital, link it into a system, improve services and eliminate waste,ÔÇØ he says.In 1994, the destruction caused by the Northridge earthquake led the California state senate to pass a law that requires all hospitals to either close or retrofit/rebuild older facilities to be operational following a major earthquake. At the time, CPMC had three campusesÔÇöCalifornia, Pacific and Davies (the St. LukeÔÇÖs campus was added in 2007). It decided to retrofit the Davies campus and consolidate the other two into a new, state-of-the-art facility at the site of the Cathedral Hill Hotel and Office Building. ÔÇ£Cathedral Hill Hospital is the first ÔÇÿpositiveÔÇÖ consolidation,ÔÇØ Nelson says. ÔÇ£ItÔÇÖs being done on the hospitalÔÇÖs terms.ÔÇØ These terms, however, are not typical. CPMCÔÇÖs new, one million square foot, $1.7 billion facility is being designed and will be built using an integrated project delivery model developed by its parent organization, Sutter Health. David Long, the Sutter Health program manager assigned to CPMC, says that years of capital projects coming in over budget and behind schedule led the organization to find a better way. ÔÇ£We want to deliver projects in an integrated fashion,ÔÇØ he says. ÔÇ£We needed to do something different from traditional project delivery.ÔÇØ Sutter Health, which operates 46 acute care facilities in Northern California, looked to apply lean principles and concepts to building projects. It translated lean ideas into an organizational philosophy based on ÔÇ£five big ideas: collaborate; increase relatedness; projects as a network of commitments; tightly couple learning with action; and optimize the whole.ÔÇØIn 2005 Sutter Health held a summit, which drew more than 200 representatives from contractors, subcontractors and architects in Northern California, to discuss its new approach to construction projects. Boldt Construction was selected as the contractor for the Cathedral Health Hospital project. ÔÇ£It was like a dream come true,ÔÇØ says Paul Reiser, corporate vice president of productivity and quality for Boldt. ÔÇ£WeÔÇÖve been trying to drive this into the construction industry for the last 10 years. We were ready for this.ÔÇØUsing lean required a significant shift away from traditional models, methods and thinking. Long says it is CPMCÔÇÖs dedication to its mission statementÔÇöwhich says it will provide high-quality, cost-effective healthcare service in a compassionate and respectful environment, supported and stimulated by education and researchÔÇöthat allowed the new approach. ÔÇ£It is the basis by which this building is being built,ÔÇØ Long says. ÔÇ£Without CPMCÔÇÖs commitment to the pursuit of excellence, we would not be in the position to do this significantly large project in this manner.ÔÇ£They had the vision to support us,ÔÇØ he continues. ÔÇ£It was a huge leap of faith; we were asking them to do something counter-intuitive to the industry.ÔÇØ Nelson says the lean concepts first were applied to hospital operations in the face of impending budget overages and the need to innovate. This led to CPMC being able to drop 400,000 square feet from the new facility plan. ÔÇ£We changed how we cycle patients through and looked at how to bring services to patients instead of moving patients around,ÔÇØ he explains.From this came the application of lean to the hospital design. ÔÇ£Unlike manufacturing,ÔÇØ Long says, ÔÇ£weÔÇÖre designing and building prototypes every single time.ÔÇØ Traditional contracts do not support lean thinking in delivery of projectsÔÇöthereÔÇÖs no incentive to stick to the budget or the scheduleÔÇöso the CPMC team wrote its own, which moves away from transactional to relational contracting. ÔÇ£ItÔÇÖs an integrated form of agreement,ÔÇØ Long says. ÔÇ£It changes the way we think about the contract. WeÔÇÖre all sharing risk and sharing reward. WeÔÇÖre moving toward how we can collectively deliver a project with decreasing costs and increasing value.ÔÇØOne key to a successful relational contract is a risk-sharing pool. All the building partnersÔÇöthe architect, the contractor and the key subcontractorsÔÇöagree to take 75 percent of their profit. The remaining 25 percent is kept in a co-managed shared-risk pool. Another change in thinking is that the cost influences the design instead of the other way around. Long calls this ÔÇ£target value design.ÔÇØ Additionally, the partners made a collective agreement on the cost and fixed the fee. Unlike traditional projects, as the project becomes more detailed, the overall cost decreases. ÔÇ£This incentivized everyone, because if the cost goes down, the profit goes up,ÔÇØ Long says. To help inject innovation into the new facility, CPMC is turning to its team members to find future technology that promises to become the standard. For example, electricians have been asked to find out what will be the industry standard for efficient lighting in the next three years. ÔÇ£Because of the relational contract, if it doesnÔÇÖt become standard, then we share that decision,ÔÇØ Long says. ÔÇ£WeÔÇÖre relieving the fear from the project delivery team.ÔÇØThis team is all co-located on one floor at CPMC. They have two meetings each week with representatives from all the players in the room, a strategy that helps to continually drive the lean philosophy into the project, Reiser says. ÔÇ£WeÔÇÖre a very diverse organization, and that makes the job of cultural transformation even more of a challenge,ÔÇØ he says. ÔÇ£We can never let up on driving lean thinking into the culture. We all come from the traditional adversarial background, but when you walk on this floor, itÔÇÖs like one company.ÔÇØ ÔÇô Editorial research by Vincent Kielty┬á