Using operational data to construct a strategic plan for your facility

Hello, everyone, and welcome. My name is Regina Constantino, and I will be today's moderator. Welcome to Ashley's webinar, one plus one equals three, using operational data to construct a strategic plan for your facility presented by Britley. Thank you so much for joining. Before we get started, I'd like to go over some housekeeping rules. This presentation is being recorded, and it will be available on demand after the webinar, and you'll be notified via email once it's ready. We also invite you to participate and ask questions via the q and a window. We'll answer your questions at the end of the presentation. I'd like now to introduce our speaker, Mark Mullogel, strategic account executive at Brightly Software or Siemens Company. Mark will lead us today and we'll take a deeper dive into the key performance metrics and how we can leverage operational data to support a more strategic view of infrastructure investment. I now pass it over to you, Mark. Thank you. Thank you, Regina. I appreciate the introduction. I appreciate everybody joining today. Understand that everybody is very, very busy these days. We all have a lot on her plate. So having a few minutes to spend with you today to talk about strategic infrastructure investment. I very much appreciate that. As you can see on the screen, I like to start off this conversation. Usually with the question to to the audience. Does it does everybody know what this machine is? The answer is this is the first MRI machine in nineteen seventy seven. Doctor Demadien, on the left, successfully did the first complete body scan. And one answer to this question in the past was it's a medieval torture device. Not true. It's a piece of clinical equipment from the seventies. But I always start out the conversation because when we talk about aging infrastructure, And we talk about strategic planning for the facility. I like to remind everybody that in every other technology space, whether it's information technology, the automotive industry, clinical engineering, computing. We have the concept of of planned obsolescence. It's normal for us to invest in new technology. Now we would never use this piece of clinical equipment today. But as many of the folks on the call know, we have infrastructure equipment in our hospitals today. In some cases, it's much older than this. So I hope that sets the stage for changing the culture, changing the way we think about infrastructure investment. In terms of an agenda, there's four sections of the presentation. I won't go through all of the details here. But I do wanna set the stage and talk a little bit about the macroeconomics that we're seeing in health care today. Gonna bring back a presentation that some of you may have seen. We're gonna talk about buckets, and we're gonna talk about understanding the cost buckets. Not gonna be the same presentation that you might have seen in the past, but I do wanna reference some key elements and how we use that data to build a strategic investment plan. By the numbers, we're gonna talk a little bit about the relationship between operational budgets and capital budgets. And then transformation, how do we take this forward with with our leadership? Then my name is Mark Mocle, all of my contact information available in the presentation, which will be shared with you with brightly software, a Siemens company. Some of you may know me from the past. I was part of the facility health incorporated organization and development of the Origin and Strategic Asset Management Platform. So strategic asset management, what is it? I I think it's very important to define this concept, and it's the management of the maintenance. This is my favorite definition. And what's important about this is I say often that managing a facility is different maintaining a facility. And oftentimes, even within ashy and within all of our membership, we we're so over burdened with the technical requirements of maintaining the building, maintaining the environment of care, handling all of the compliance issues, It's hard sometimes to step back and realize there's a management element. There's budgeting. There's forecasting. There's strategic relationship that we need to develop with C Suite. And for that reason, we talk about this as a people, process, and technology. It's not just software, It's not just process. It involves cultural elements. How do we want to manage the facility going forward? Some of you may know this is enterprise asset management. In my mind, they're very much interchangeable, but both speak to the strategic nature of what we're trying to accomplish here. In terms of of maturity, how do we how do we eat this elephant? I love this concept of the hierarchy of maturity. And for those of you that have had any psychology, sociology type training, or if you're into that kind of thing, Maslaw developed what's called the hierarchy of needs. For people. And it starts with food and shelter, and it goes all the way up to self fulfillment. And the the hierarchy of needs suggests that we can't be fulfilled as human beings if we're tired and hungry and we don't have shelter. And so if we apply that same type of maturity scale to asset management, we start first at that foundational level. Do we have a basic understanding of what assets are in our building? Are we managing the building? Are we compliant with accreditation requirements? And then we you know, if we have that basic block, and tackling in place, then are we focused on productivity? Do we know where we can gain efficiencies and how we can perform better? And then we look at benchmarking. How do we compare to other hospitals in our health systems? How does our health system compare to other hospitals maybe in the country or health systems. And then we talk about prioritization. Do we have enough data now that we can prioritize investments proactively in terms of risk. How do we mitigate risk to the facility? We can't fix everything. There's not enough money to do everything that we want. But how can we engage our leadership? Leading up to then strategic asset management, maximum performance. We know what our energy consumption is. We know what we need to do to decarbonize. We have optimized capital planning processes. All of these definitions on the right That's our vision. That's where we wanna be. This hierarchy of maturity helps us to understand how do we get there. How do we go from being reactive to preventative to proactive and predictive in how we manage our facilities? As many of you have heard, and we talked about brightly as a software company, we are part of the Siemens family. And just to talk about that vision, Everybody knows or I think many people know Siemens has a lot of technology solutions, building automation, building management, security, fire alarm, and so on, and so forth. Ultimately, we want to connect all the way up to, including that that data that's available through those advanced systems. So that helps you understand our our relationship. From a brief introduction of brightly, who are we? What do we do? We're we really have two different technology suites that we bring to the market. The first is called the Works Hub, and that is our computerized maintenance management system that's been specifically designed for the healthcare environment. Meaning, It's constructed to deal with the compliance elements that we all know are unique to the healthcare environment. That is our baseline solution, that's going to fulfill those foundational needs that we talked about. It's the day to day heartbeat of the facility. Making sure we're doing our work orders, our preventive maintenance, our rounding, all of the inspection testing and maintenance that's required to to to run these hospitals and stay, you know, with deemed status through accreditation. The second platform excuse me, and really the focus of this presentation is called Origin. This is a think of it as a Fitbit that sits on top of the CMS. This is the strategic planning data, and we're focused on mitigating risk. How much deferred maintenance do we have? How much capital should we be investing in the facility? How much preventive maintenance should we be doing? How is that affecting the life cycle of our equipment? This is that that medium layer that that replaces the spreadsheets for those of you that are excuse me, using SharePoint or using spreadsheets to manage your capital planning. Origin is a solution that fills that void. When we put these two together, that's the one plus one three. Now it is important to note we're talking here about the works of, which is our CMS system. Origin, as a strategic asset management platform, can interface with any CMS. So the point I wanna make here, the foundational elements, the day to day management of the facility. The asset inventory, all of those things, it's important regardless of what solution you're using from a CMS perspective. So I would encourage you though to look at those foundational elements. Do you know what you have in the building today? And can you see how you're performing in that day to day maintenance and management. Origin then is gonna bring that strategic intelligence. So that's the one plus one equals three, and we'll dive into a little bit of data here. What we're seeing now on a national level for all of this sites that we've surveyed. And we're looking at close to a hundred million square feet of space and over a hundred and seventeen thousand major mechanical electrical plumbing assets. And what our data is showing is that about forty six percent of those assets are in deferred status. Now what does that mean? Deferred status means those assets have exceeded industry expected useful life and should be considered a replacement. Now, not all of those assets are in imminent failure mode. In fact, some of them, maybe you're performing quite well because they've been well maintained. Maybe there's been some significant capital investment made to keep those assets current. You know, it's an air handler with a new coil, a new fan wall, those types of things, But the point is, we wanna isolate and understand what is the overall age and condition of the building and how do we track that? What's important to note here is this average in our database was about forty one percent on the front end of COVID. So we are seeing an uptick and an increase in the age of plant or the deferred maintenance levels across the country. What this allows us to do, one final point before I go to the next slide, if you look in the middle of the screen, what it allows us to do is to create a trajectory. Over the next ten years, as an average, what type of investment should we be making and how will that affect the level of deferred maintenance? You see here as an average, it can be anywhere from say three, three fifty, a square foot, up to six or seven dollars a square foot, we can use that information to create strategic level investment or or at least to empower strategic level investment discussions with the c suite. This is an example of a customer. This is not a real customer location in Maine, but we have we have created a database with some real customer data just wanna maintain confidentiality, of course, of those sites. So please don't think the map is directing you in the right direction. But what this shows is for a typical seven hospitals system, we're seeing about three point three million square feet, about seventeen hundred major capital assets, but in this case, through this system, sixty five percent of those assets are in deferred status. What that tells me in looking at the data, this is an organization that has historically lacked the ability or maybe lacked the processes to sufficiently invest in that infrastructure over time. The point being that every hospital has its own fingerprint, It has its own location, its own size, its own culture. But when we look at it this way, we can actually start to identify you know, good, better, best, if you will, and we can also see areas of improvement. And what's important, I won't show you here, is when we dive down, we look at each site. We can actually compare hospital one to hospital two and so on and so forth. So forth. The point here is to create that more collaborative engagement with the leadership and use the data to guide the discussion versus subjective opinion. So setting the stage, in terms of the financial situation, very quickly, what is infrastructure? In this case, we're focusing on repair and replacement utility infrastructure. So it's gonna be the major mechanical electrical plumbing, the life safety elements, We do look at the building facade, glazing, and roofing. We consider those to be infrastructure assets. Civil engineering assets, structural steel, parking garages, those types of things, very important from a capital planning perspective, But those are usually tracked as separate building projects. So what the data that we're showing here, we're really focusing on all the stuff that's bolted to the structure. It's the pumps. It's the heat exchangers, the air handlers, all of the equipment that makes the facility function. But when you talk with your c fine. What do you mean by infrastructure so that your your using the same language, if you will, when you talk about investment needs. So very quickly, from a historical perspective, some of you may have seen this in other presentations. Prior to COVID, Ashi did some studies and they published information. This is back in twenty seventeen, The date is valid through, say, twenty fifteen. I know that's ancient history in some regards, but what's important to note here is that in the twenty years preceding the COVID pandemic, we were already seeing trends showing a a relative lack of investment in infrastructure. Now there's lots of reasons. Organization didn't have the money. Organizations didn't understand the needs. The buildings are just getting older, whatever you might wanna say. Before COVID, we were on that that trajectory. Based on data I I pulled from Becker's hospital review, just in the last couple of days. The current average age of plant now is trending close to twelve years. So if you compare that to the ashy data above, we were at about ten point five to ten point seven five, you know, say five years ago. What this is telling us is we are continuing to age. The infrastructure's continuing to age. For those of you unfamiliar with the age of plant, statistic. It's a simple financial analysis. It it's it's the value of the equipment that's in deferred status. Meaning, it's it's It's been written off financially, if you will. It's been depreciated financially, but it still sits in the building. So it's the ratio of how many assets are sitting in the building today that have already been fully financially depreciated, but we're still physically using them. So this just tells us we have more and more equipment in the facility that's exceeded, it's expected, used to life, and it's exceeded its financial depreciation life as well. So that's one significant data point. The impact of the COVID pandemic is real. We're all seeing it financially. Speaking of that, when we look at the macroeconomic trends, I monitor the Kaufman Hall Flash report. For those of you that don't know about that, it's a publicly available report. It's a publication about the financial status of the of the health care industry. And what the data is showing is we're starting to see a little bit of improved performance in March and April. Some organizations are reporting fewer losses, if you will. But the overall trend through the pandemic and now post pandemic, everybody's familiar with supply chain issues, everybody's familiar with inflation, all the things that we're dealing with. What this data is suggesting is that we are continuing to run with a high percentage of hospitals and health systems in the country that are reporting negative operating margins. So that's just significant. I think everybody knows that. But it's important that we keep that in mind when we frame the rest of the conversation. Different reasons, different months, you'll see you know, you'll see trends in in the the baseline, the high labor costs of nursing, the long lead times for critical items sophistic, you know, electrical breakers. Nobody can seem to find those these days. There's lots of different things that are impacting us. I think everybody's aware of that. But again, we wanna keep that in mind. Third element, which is very, very interesting for those of you that may not be familiar, There's up to sixty one hospitals or health systems in the United States that the CEOs have signed decarbonization pledges. Up to and including the White House decarbonization pledge. And what these CEOs and CFOs are committing to is a significant and carbon footprint by twenty thirty. Well, those of us in the facilities world know that five years from now is not a long time to make significant changes in infrastructure. I point this out simply to say, of this of the systems that have been listed, And I know many of the folks at these groups, and I'm trying to work with them to understand what type of investment is required or would be required to significantly affect energy consumption, or reduce carbon footprint. Those two don't always go hand in hand. Right? I think a lot of the engineers on the in on the call will understand that. But no matter what, it's going to take significant capital investment dramatically change our infrastructure as it is today. So you put all those three things together, historical lack of investment, aging infrastructure, a difficult financial situation for our hospitals and health systems, yet we desire to make transformational change in our infrastructure. That's a perfect storm, folks. And so we have to come at this from a new approach and think about how do we build business plans that really document the dollars and cents that are gonna come into play here. Shameless plug here. I just published an article in HFM Magazine last month, A lot of the things that we just talked about, and we'll talk about through the rest of this presentation. I've outlined those all here. Ashie, thank you for giving me the opportunity to publish this information. For all of the members here, I would encourage you that's a free download. Please take a look at this. It's just another way of telling the story that we're talking about today, and I hope you find it helpful. The conclusions of this front end, it's really three points. The infrastructure has been aging. We know that. Financial projections suggest it's not gonna get any better. It's going to be more difficult to get capital budgets and operational budgets approved. Not easier. There is no when we get through this, we'll be back to normal. The new normal is going to be difficult for us all. So we're looking again at transformational thinking. How do we engage our leadership in a different way? So that leads us to the buckets' conversation. I'm gonna spend a couple of seconds just read making sure you understand the different buckets and how we're looking at those, and then I wanna talk about those financial relationships. So couple of years ago, I did a presentation at Ashey with Matt Dean from Novant, Jonathan Flannery, from Ashey, and we introduced this concept of the buckets. And the important thing that we really wanna focus on here is if you look at the middle buckets, the blue buckets, all of the compliance. All of the energy costs, all of the preventive maintenance, whether you're using OEM or AEM, general operations, snow removal, There's a long, long list of things that we have to do no matter how many patients are in the building. So we look at those as nondiscretionary fixed cost. It's really important to understand how much money out of your budget is committed to these nondiscretionary fixed costs. The yellow buckets then focus on the unplanned variable costs. Basically, break fix, work orders, asset failures. These are things that happen. We have to react to them. You know, if a pump starts leaking, we have to fix it. If an air handler crashes, we have to fix it. If a boiler goes down on Christmas Eve, we have to fix it. The point of this is it's variable because it depends on the age of the equipment. It depends on how the equipment's being maintained. Depends on our staff's ability to run it efficiently. It depends on a lot of things, but everybody on this call has seen situations where We have an emergent failure. We have an emergent situation. It's very inefficient spend, and it's very, very disruptive to operations, but it is nondiscretionary. So it's important again for us to understand how much we're spending in those buckets. The green buckets then represent what I call the budget battleground. This is everything that's left. This is the stuff that we would like to do if we had the time and the money and the resources to do it. This is investment in new technology. This is thermo scans for the roof. Different reliability centered maintenance, things that we can do. This is proactive capital, where we are consciously choosing to upgrade or replace assets before they fail because we can do so in an efficient well coordinated manner. Oftentimes, though, we negotiate the whole budget, and the point of this here is to highlight that we really wanna understand these different buckets. The next bucket that we talk about, and I have mentioned already, How many of our assets are in deferred status? And a lot of folks are hesitant to report this information to the leadership. Because sometimes there's a fear that it it it's punitive. Right? If we have a high number of assets and deferred status somehow, we're not doing our jobs as a facility leader. Couldn't be further from the truth. Communication deferred maintenance and objectively defining the the status of these systems that shows that we are managing our facility properly. We know what we need, and that sets up, again, a different type of discussion with the leadership. In summary, as we see more assets in deferred status, I look at it not as deferred maintenance. I actually wanna call it deferred investment. This is money that we should have put into the facility in the past, for whatever reason, it wasn't done. So we now track that as a debt. It's a debt that has to be repaid. You'll never see it on the balance sheet. The CFO isn't tracking it, but we all understand that each time we defer money from the hospital, from the you know, from an air handler and we go buy an MRI instead, we're actually borrowing from the life of the facility fund other projects. Eventually, that debt has to be repaid somehow. Right? The relationship then quickly What we know to be the fact is that as we reduce our discretionary spend over time, we defer capital investment. We use that money to do other things. As that deferred maintenance bucket continues to increase, Eventually, it overwhelms our ability to do strategic planning. So as I like to say, if if if we let the building go far enough, We don't have to do strategic planning anymore. The building will do it for us in the in in the form of unplanned repairs and emergent failures. Now this is a bit dramatic, but I think everybody on the call has had different experiences. You know, think of a car that's got a hundred and fifty thousand miles on it. It's running great. Until it doesn't. It's fine around town, but you may not wanna drive to California with your family if you're from the Midwest like I am. So again, understanding that is important. The trend then that we see is given a fixed budget line over time, if we lose the green buckets, if we if we fail to to or shouldn't say we fail. If we don't have the ability to make those investments in the proactive things that actually improve the building, eventually we get overwhelmed. And again, that deferred maintenance is just going to continue to pile on, more firefighting, more reactive work. So I'm gonna stop now and talk then about the operational budget. A lot of our customers and a lot of the market feedback I hear, it isn't the capital. The capital's an issue. We know that. A lot of organizations have frozen their capital, but Excuse me. I get a lot of people then that ask me, what about the operational side? So I wanna drill in here a little bit further on the operational side and talk about some different ways to look at those buckets and understand the relationship. So you see here, I've taken the blue and the yellow buckets and I've split them out in a different way. Specifically, if we isolate utilities, Utilities is a mandatory fixed cost. We have to pay our electric bill and our gas bill. And then we have our direct labor. So we have our staffing, you know, up to and including the the management team. We have direct labor that we use for compliance and and preventive maintenance and so on, but then we also rely on purchase services. So these three elements within your operational budget, utilities, direct labor, and purchase services. All of those things together represent your full operational budget. And I would include purchase services. I would include the purchase of spare parts and things like that. But think about this operationally. Understanding the difference between direct labor and purchase services cost is a key key element and I'll show you why here in a second. The point of this type of analysis, you're building essentially an income statement for your facility. There's a theoretical floor that you cannot reduce costs further because everything under this floor is mandatory. So having a well documented identification of where the money's flowing in your facility so that you can talk to your CFO and say, you know, you wanna cut here, you wanna cut there, but this is mandatory work. We have to do it for accreditation, so on and so forth. And then the green buckets come on top of that, and that's where we seek to optimize the budget. So again, the budget battleground begins at that floor. Now we have to show our leaders that everything we're doing in the yellow and blue buckets We're doing it as efficiently as possible. That comes back to our CMS systems. That comes back to our strategic asset management systems. It's very important to show we are being good stewards, and we're doing that work as efficiently as we can, but it is mandatory work. And then we can have the discretionary budget discussion separately. That's that's I think where we optimize the budget. Now why am I separating labor from purchase services? This is the age old game that we've all had to play and it becomes very important when we talk about staff reduction. So I'm gonna show you some data here. Now you always have to be careful in presenting data This is an answer. It is not the answer. And my point here is, this is a study that a friend of mine dot Steven Call out at Washington State University did a study. This is a sample set of twelve hospitals. And if you look down the bottom, From an operational standpoint, you see some dollars per square foot. Now in this hospital system, Forty eight percent of the operational budget is being spent on outsourced professional services. Twenty three percent on labor, and then thirty percent on the utilities. So utilities are utilities. Right? The reason this is important is because the leadership in in this group is putting continued pressure to reduce FTEs, but that's not where the money's being spent. We all know that every time we cut FTEs on mandatory workload, we now have to outsource that. And oftentimes, we're gonna pay a premium, two to three times higher than our internal labor rates. So we see people outsourcing things like ice machine cleaning and fire door inspections. And I'm not saying whether that's good or bad. There's a lot of other factors we have to take in to put in into account. But if we continue to reduce our FTEs internally and we're now spending more money externally, it's very important to be able to present that picture back to the CFO. I've seen a lot of cases where actually hiring more staff if that staff is available can actually save the organization a lot of money. The next thing we wanna look at, if you understand in your organization, all of these different buckets and how that money's flowing, then it's important to look at the deferred maintenance and look for ways to determine how is my deferred maintenance affecting these things. Well, if I have forty and fifty year old assets, my energy spend is likely going to be higher than if I were using newer technology. If I'm seeing a high, you know, be again, because of deferred maintenance, maybe my unscheduled break fix workload is significantly higher than it should be. The point here is not to say there's a right or wrong answer. But again, we wanna focus on understanding how the money's flowing and it'll change the way that you can engage hopefully and collaborate with with your non facility leadership. So hopefully, that makes a lot of sense to everybody. I'm throwing a lot of conceptual stuff. I do wanna dig in now and look at some specific numbers as it relates to the relation between all of these things. I'm gonna keep an eye on my time here. Okay. One thirty. So looking this is another cross section of the buckets. Right? Kinda going back to that original footprint. And I highlight, again, the works of an origin, CMS and Origin. This data exists in your system somewhere. Whether it's in your CMS system, maybe you have You're using a technology suite to track your energy bills. However you do it, use your fingers and your toes if you have to. But understanding again, what are your dollars per square foot, what are your spend levels in each of these areas? Now why is that important? I'm gonna focus on the relationship here between preventive maintenance as an operational spend, deferred maintenance, as a facility debt, and capital replacement. There is a relationship here, and we're gonna investigate that. The reality is as you build your business plan, there there are relationships across the board, energy versus staffing. Break fix versus age of plant. So on and so forth. Like, we don't have time today to go into all of those. But again, I just encourage you to think about not just going into the budget season, you know, what what can I get next year? How do I put date in front of the leadership that they're gonna pay attention to? So using our origin data and taking that national footprint and then standardizing down and just saying per million square feet. So these are Again, it's an answer. It's not the answer, but it's very, very statistically repeatable. When I walk into a a facility that I've never seen before, I'm gonna use these numbers as an initial baseline of what I expect to see in terms of deferred maintenance. So per millions, per million square feet of acute space, so think of a typical million square foot campus, main hospital plus supporting infrastructure, We're gonna see about thirteen hundred tier one assets, major NEP assets. About a hundred and forty million dollars in total replacement value for those thirteen hundred assets. And if we follow the historical trend on deferred maintenance, about fifty six million of that is going to be in deferred status. So that's a that's kind of a a guideline of what I would expect to see. That translates into a capital need, an annual repair and replacement capital need of somewhere between three and six million dollars annually. That level of spend over ten years per year. So three dollars per year for ten years, Sorry, three hours per square per year. If you follow the math, we're projecting out where do we wanna be ten years from now. That's an awesome conversation to have with your CFO. What is an acceptable level of deferred maintenance? People ask me that all the time. There is not a right There is not a right or wrong answer. It depends on what's in deferred maintenance. It may be okay to have fifty percent of the assets in deferred status. But I don't like to see generators, automatic transfer switches, fire alarm systems, and so on. So again, knowing what is in deferred status just adds more credibility to the discussion. Okay, Mark. That's great. Now let's talk about the operational side. So based on our data, it's would cost anywhere from five hundred thousand to a million dollars per year to fully fund the preventive maintenance of those thirteen hundred assets. So this is filter changes, lubrication, monthly generator tests, all of the different things that we have to do to maintain that equipment. Why is it five hundred thousand to a million? Because it ranges considerably based on where you are in the country. Are you using internal label labor or external labor? But again, You can answer that for your facility. But if we just look at these numbers, it creates an interesting discussion. JLL published a study about five years ago, and so it's a little bit dated, but the quality of this analysis is awesome. And what they did is they talked about the financial benefits of preventive maintenance. In terms of how does it impact the expected useful life of equipment, And as you can see here in this diagram, each different asset type has a different requirement. So we start to see things like d x units and chillers We know those are high maintenance items. Right? They require preventive maintenance. Manufacturers expected useful life depends on what. The manufacturer assumes that you're going to do all of the maintenance. You know, General Motors, if you buy a car, They expect you to follow all of those recommended service intervals in order to get the maximum life expectancy of your vehicle. What JLL showed here is that There's a significant reduction in expected useful life based on whether or not that preventive maintenance is performed. Now what we did in our models is I we just took a straight line twenty percent. So what would happen if we could model a twenty percent change in the expected useful life of all the assets in a hospital. How would that impact the capital needs. So that's what we're gonna talk about here. So on the top line, what we did is we took a it's about a million square foot portfolio. And we said, let's just assume that we're doing zero percent. We're not gonna do any preventive maintenance. Now that's not realistic. We know that we're going to do some. But let's just use this as a model. For this hospital, if we have zero preventive maintenance, we would have a ten year capital need, a hundred million dollars. That's just based on the age and condition of the equipment and using that twenty percent shortened life cycle as a standard. If we run the same analysis against those assets, and we assume perfect preventive maintenance, we're gonna do everything a hundred percent right you see our ten year capital needs are seventy eight million. So simply by changing the expected useful life of each asset in the portfolio, we've impacted our ten year capital needs by almost twenty million dollars. A little bit over twenty million dollars. That's huge. So when we take those numbers, and we then tie it to a return on investment type calculation. What we're saying here is five hundred thousand dollars a year in dedicated operational spend to do preventive maintenance is going to impact about two and a half million dollar a year in capital need. So it took the ten years. We turned it into one year. No matter how you slice it, What we're talking about is increasing operational spend at a time when capital is scarce is actually one of the best financial decisions an organization can make. I think a lot of people on the call probably experienced this during COVID. We lost capital. And then we reduced head count. And I say this carefully, and I say it seriously, it was probably one of the worst financial decisions we could have made as an industry because at a time when we don't have that capital, we should have been doubling down on the maintenance and doing everything we can protect the life cycle of the equipment that we do have. So it's often a difficult conversation to have. But again, we work with each one of our clients in these cases to understand how can we develop that relationship. There are some buildings that are so far gone They're so aged. They have such a high level of deferred maintenance, that there really isn't enough PM to change it. So then we have to have master planning discussions. Do we keep this building? Do we tear it down? Do we do a major renovation? So on and so forth. But again, we want that to be a more collaborative discussion than a competitive one. And then we have the new bucket, the sustainability bucket. I bring that back to the table because this is the new game in town. I'm aware of organizations that have done studies. What would it actually cost them to or what would they have to spend in order to achieve the ESG goals that have been committed by their organization? And if you look at a typical ten to twelve hospital type system, that investment can be upwards of forty to fifty million dollars And in some cases, it actually increases operational spend because we're moving from natural gas to electricity. And in some parts of the country, that's a more expensive operation. Right? Gas is cheaper than electricity in some parts of the country. So my point of this is This is a direction that we're going, but I use this little analogy. Right? There's a light at the end of the tunnel. Now that light could be the exit to the tunnel, but it could also be the headlight on the train that's coming down the tracks. I think ESG is coming down the tracks. And I'm not talking about the political elements of it and all of that stuff. It is a reality that we have to face today along with the hardening of our facilities against natural disasters, the changing healthcare environment there's a lot of strategic things that we're being asked to do. We cannot achieve those goals if we don't also address the infrastructure. So that's my point here. Can we use ESG? With credibility, with sincerity, and with integrity, can we identify ES g projects where we can reduce energy consumption, we can decarbonize, we can harden the facility, but also direct that money against deferred maintenance. The worst possible scenario here is that we we start to have failing assets. We run to fail. We lose the opportunity to engineer in a better, more efficient solution. So I think these two buckets go hand in hand. Anytime we can link infrastructure repair and replacement, Tag it as an ESG project, promote the decarbonization. Whatever the mission of your organization is, let's use that as an opportunity to start offsetting some of the aging equipment. So we're not just replacing air handler twenty one anymore. We're replacing the air handler that serves the surgery suite with a unit that's going to have an x percent energy savings, so on and so forth. It's it's a little bit of marketing, a little bit of sales, but again, it's a different way to dialogue. And if we have the numbers behind it, we can have that conversation objectively. So final section here transformation, and then we'll leave a few minutes for questions. The three questions that we're really framing up here, how much should be invested in the facility to properly maintain it. Right? Capital, we know those numbers. Operational, we know those numbers. Each site, each facility director. I would encourage you to do a forensic audit, a financial audit, of your books, where are you spending the money? Is that spend mandatory or is it discretionary? And what's the relationship between doing it in source and outsource. It's it's it's not sexy work, and it's not always easy. But if you start to build that triangle, if you will, and understand that money, now we can have a really different conversation. Second question is, where do we make that investment to mitigate risk. Well, again, we wanna focus on life safety. That's a huge risk element. We wanna focus on energy. We wanna focus on decarbonization. We wanna focus on hardening of the facility. Right? The natural disasters are heading us harder and harder. So understanding where we need to invest, we should not be renovating the visitors lobby if we have generators that are in an exposed environmental situation subject to flooding. Those types of things, those are real and difficult conversations to have, but it all speaks to the risk ranking and the prioritization prioritization of that invest. And then the third piece, which is really, really key, and this is something that we track in our origin platform. How do we document these improvements? How do we show that the three million dollars a year is actually impacting the health of the facility? How much did we reduce the deferred maintenance? How high how much did we increase the health score of our facility? How much energy did we save? If we can have this feedback loop and show our non facility leadership that we're being good stewards of the precious financial resources they're giving to us Now we're in an upward spiral. Now we're building trust and we're gaining momentum. So the first step then is, again, coming back to the hierarchy of needs. We really have to establish that foundation. Deferred maintenance is a strategy. There are some organizations that are run to fail. That is a strategy. I don't agree with it. I don't think it's a good strategy, but some people wanna run that way. So understand how what's important to the to to the facility? How do we want to manage? Again, coming back to strategic asset management. I think communicating that strategy and getting buy in one way or the other with the leadership. Do we wanna be run to fail? No. Do we wanna be preventative? Yes. Do we wanna be predictive? Yes. Well, that's a great way to engage the leadership. Leverage the work that you've already done. Focus on the inventory. Do you have an accurate inventory of your assets? I walk into a surprising number of facilities that don't have a clear line of sight to the equipment in the building. Peter drucker, famous quote here, you can't manage what you can't measure. So by all means, if you if you don't have good visibility to what's in your building, make every effort to do so. Either internally, hire an external firm, do an FCA, whatever is needed, Without that baseline accuracy, it's very, very difficult to do anything else that we talked about. And then understand the buckets as best you can. You know, again, use your fingers and your toes. Use your CMS system. Use a platform like Origin. Draw it on the whiteboard. Whatever it is, take the time and go through and understand it. You might be surprised. I was working with one hospital down in Texas, and we did that. We just sat in a room for half a day, and we started compiling the costs. Fire alarm testing. Rounding of exit signs, fire extinguishers, fire doors, generator test. We've put through the whole list and just started writing down numbers. How much are we spending here? And just in that simple little act, we saw this huge number on the fire alarm And it's like, that doesn't seem right. And so just that simple act triggered an action for somebody to go look at that, And it turns out the contract was fine, but the money was being misappropriated within the finance system. So it looked incorrect. But that type of engagement, y y y. Why are we spending that kinda money on the fire alarm? Why are we spending that kinda money here? Again, it's just it's a different management technique. Right? Understand the tolerance for risk. This is really the credibility to value transition, communicating deferred maintenance with the non facility leadership. What is an acceptable level of risk? How does our deferred maintenance compare to others? Where do we wanna be? All of those types things type of things. But again, aligning here with submission, the vision, and the values, presenting the data credibly and objectively in financial terms. Most CFOs don't understand air handlers, and heat exchangers, and chillers, and and they don't care. And I don't mean they don't care about the facility. They actually do, but they care in a different way. They understand the money side of it. They understand revenue, and they understand patient, you know, patient care. So I think we need to meet them where they are, not where we want them to be, and present this data again in a real way. Seek first to understand, then to be understood. Ask your CFO. What type of information would be helpful for you to make better decisions. And then do everything you can to build that information and present it to them in a way that they can easily understand. Take them on a tour of your facility. Show them what a chiller is and what it does. Show them how difficult it is to get cold, air conditioned, aired in a patient room on a hot summer day. Look for any way you can to engage that leadership. And then ultimately partner with the leadership. This is where we wanna get at the top of of the pyramid, the optimized strategic asset management. This is what gets us a seat at the big table. Share the business plan. Share the results. Here's your income statement, if you will. Here's how you're spending your money today. Here are the decisions that you've made to try to make that spend as efficient as possible, but then also talk about the reality. Here's where we're gonna be at five years or ten years if we don't do something different. As my friend, Matt likes to say down at Novant, give them options, not problems, or ultimatums. I think the most important takeaway here is as facility folks, it's not really our place to tell the CFO did they make the right decision in purchasing that MRI instead of purchasing the air handler? We always feel slighted when that happens, but our job isn't to question that decision. Our question is to give them the data so that they can make the best decision possible. We may not always win. The CFO may still buy the MRI. But at least we've put the data on the table that shows there is a cost to not funding the air handler. And that cost is gonna show up in increasing deferred maintenance in the facility. I think a lot of CFOs today, if they choose not to invest in the facility, It's a freebie. Right? If I buy the MRI, I get return on investment. If I buy if I put it in the facility, I get nothing. Well, that's not quite true. When that air handler fails, there's gonna be a negative ROI associated with that. So again, preach into the choir with with this community, but Hopefully, you understand my point here. Let's give them the data. Let's give them every every opportunity to make a better decision for the facility. So I'll stop here for a second and open the floor up to questions. It looks like we're about ten minutes ahead of the hour, so We've got a little bit of time. Regina, I don't know if any questions came in on the chat, but I want to certainly open up the floor. If you have questions or comments, please share them with us. Yes, Mark. We do have a few. First one is based on your research, do you see hospitals increasing budgets with aging infrastructure and or assets, or cutting and staying flat on budgets during these times. What I'm seeing in most cases is with aging well, let me let me back up. I have not seen organizations specifically and consciously choose to increase budgets with the knowledge that the infrastructure is aging. But having said that, we do know that in the age in the aging facilities, that nondiscretionary workload continues to go up. Right? It it's just a natural order of things. What we also see in aging infrastructure is very often it's not a single building. Right? It's an older facility that's had a lot of different buildings stuck together. The biggest demand driver on operational spend, actually isn't square footage. As she's been struggling with this for years, it's the asset density. It's the asset density within the square footage that increases the workload, not just the square footage. So a million square feet. I know I painted some broad pictures of here's what I would expect to see in a million square feet, but the reality is how that million square feet is configured will will determine those budgets. So the answer to the question is, I I'm not seeing organizations proactively increasing budgets. We do see some with data, we see some organizations pay more attention to the capital spend. But right now in today's world, everybody is hammering those operational budgets. Just due to the to the financial situation. So anything you can do to put that data out there and use that to to at least protect the budgets that you have is probably a good play. I hope that answers your question. Who whoever asked that. There are no other questions, so I do open it up on the floor if anyone does wanna request the questions through the chat. Just while we're waiting to see Fingles come in, we did have a question come in not regarding what the presentation itself but for the recording. So just to let everybody know that the presentation will be shared with everyone in a few days you can look out for it in your email. It will be sent with the link from Brightly Software. So, look out for that. Okay. Thank you, Regina. A couple of things before we wrap up here. I know we're getting close. I appreciate the the the the last question that came over, and I'll tie one more bow around that. This isn't easy folks. It takes a dedicated effort to to do that forensic audit to dig in and think about your facility in financial terms in the middle of having to do with all the engineering stuff that's going on around us. So I would encourage you to reach out, you know, reach out to me if you have follow-up questions. Go read that article in HFM magazine. You know, by any means necessary, if we can help educate on just how we can do this, I think we can make a big difference. There's a second part to this webinar, just again, little bit of a shameless plug, but to advertise as we as we lead up to Ashey, We're gonna do a presentation here at the end of July. It's called the boil from the boiler room to the board room. I'm gonna take these concepts that we talked about today go kinda one level higher. How do we sell the value of infrastructure? How do we create that need How does a CFO look at? What is a cost center? What's in your CFO's mind when they think about facilities? We've all heard it. It's a cost center. And there's no ROI and infrastructure. I respectfully disagree with that, and I'm gonna try to talk about that in the next webinar. So I do hope you can join us at the end of July. Also, we will be at Ashey. Look for us in booth six twenty seven. You'll see the brightly booth. It's hard to miss. And then I wanted to let you know that Matthew or Matt Steam, Jonathan Plannery and I will be speaking at Ashey. We have a breakout session on Monday, August seventh. We're gonna take a lot of the same concept I would encourage you to come there. It's not to just hear me and not to see some of the content, but Matt Steen, in particular, is is quite progressive in terms of the work that he's doing in his health system. I rely on him a lot for input myself, but we really wanna present this, not, is it just a PowerPoint presentation, but it's a discussion. And Jonathan has a great perspective from an ashy from an ashy perspective or ashy point of view. So encourage you to come. Let's have a dialogue. I think the best thing we can do here is to keep keep the conversation going. So I appreciate that. Last thing, folks. I mentioned this isn't easy. The budget battleground continues. I I didn't mean for it to sound all doom and gloom at the front end. There's but there are some significant challenges ahead, but also some significant significant opportunities. So in the meantime, I encourage you never give up. Don't quit the fight. All of you have very, very important roles in our health system, and it's very much appreciated. The work that you do and the value of the work that you do. So I encourage you keep fighting a good fight. And that's all I have, Regina, and team. So I wanna thank everybody for attending. I hope this has been helpful, informative. Please don't hesitate to reach out if you have any further questions or if I can help you in any way. I appreciate your time today. Bradley.