HEALTH CARE, SENIOR & LIFE SCIENCES R isks in a health care envi- ronment are normally thought of in terms of gaps in delivery of care that adversely affect patients. For assessing risk in a critical care facility, the National Institutes of Health provides a tool that helps to assess the likelihood and the sever- ity of a possible failure. The tool is a simple rubric through which any conceivable occurrence such as contamination or infection can be evaluated to weigh the likelihood of failure against the magnitude of damage possible in a failure sce- nario. The NIH did not invent this tool, but simply applied an age-old deci- sion-making strategy to healthcare delivery. Beyond health care, the rubric is valuable in facility man- agement, strategic planning and any number of arenas where deci- sions must be weighed and priori- tized to allocate limited resources. In the following paragraphs, I will explain the rubric and apply it to the domain of a facilities director and others responsible for making capital expenditure decisions. The value of this decision-making rubric is in its systematic approach to evaluating decisions around capital replacements. n System failures and capital replacements. Allowing certain assets to age and degenerate to the point of failure can have catastrophic consequences. Failure of other assets may be less impactful, and the consequences may be more manage- able. Faded and discolored carpet, for instance, will likely have man- ageable consequences. It may raise an eyebrow among caregivers and administrators, but the impact is easily calculable and controllable. However, if a hydronic HVAC sys- tem is allowed to fail in service, the consequences could be disastrous. Climate-control interruptions in a health care environment are intol- erable, and remedies will involve displacement of patients and work- ers. If the failure is caused by a ruptured chilled water pipe, leaking water can damage interior finishes and can introduce contamination to an otherwise clean environment. Other impacts will likely involve inflated emergency service costs; inflated costs of fast-track replace- ment of the failed equipment; inter- ruption of care delivery; and loss of goodwill among patients, families and the community. Gauging the severity and the likeli- hood of any potential asset failure is key to making decisions around timely replacement. Our focus for over three decades has been the preparation of facil- ity assessments and capital reserve studies for a variety of property own- ers and operators. In the course of our work, we gauge the urgency of capital needs using a matrix that measures the severity of a failure event against the likelihood of that failure. When appropriately applied, this matrix can legitimize a decision to schedule a capital replacement immediately, or to defer to a later date when funds may be allocated in advance of the need. In this context, we’ll define “urgent” as “important AND very time-sensitive.” To determine urgency, we place a failure event on the matrix accord- ing to its likelihood and its severity. At the intersection of likelihood and severity, we can establish urgency on a scale of low to very high (acute) . If the failure of a major asset is likely to result in death or severe injury, property damage, operational disruption, inflated remedial cost and unknown intangible costs, and if that failure is certain, or likely to occur in the near future, then we would rank that failure event as an acute need that must be addressed immediately. By contrast, those capital needs that are less imminent and less severe rank lower on the urgency scale and can be deferred if funds are scarce. (See Table 1.) To further define the types of costs to be considered in the event of a failure, consider life-safety, property damage, operational disruption, remedial costs, indirect costs and intangible costs. (See Table 2.) With a thorough facility assess- ment and reserve study, where capi- tal replacements are scheduled using an urgency matrix like the one shown here, you can be armed with the information necessary to make eco- nomically sound choices about where to accelerate capital replacements and where to defer. Take a walk around your facility and plot each capital asset on this matrix with thoughtful evaluation of its likelihood of failure and the severity of such a failure. Consider each roof, generator, local and central HVAC system, windows, overhead doors, asphalt paving, each water heater, each elevator, entry door sys- tems – and the list goes on. Everything has a finite useful life. Expect it, and plan for it. s INSIDE Innovation communities are sought-after destinations for life science companies. Life science hubs lead the innovation charge as they foster collaboration. Life sciences Collaborating PAGE 9 PAGE 11 The location of medical office buildings is strategic, often close to hospitals. MOB delivery PAGE 7 April 2024 Rob Milam CEO, zumBrunnen Inc. Consider capital replacement strategy