Building for a better hospital.

Value-adding
management & design of healthcare real estate
Johan van der Zwart

Abstract
Recent deregulation of laws on hospital real estate in the Netherlands implies
that healthcare institutions have more opportunities to make independent
accommodation choices, but at the same time have themselves become

responsible for the risks associated with the investment. In addition,

accommodation costs have become an integral part of the costs of healthcare.
This sheds new light on the alignment between the organisation of healthcare
and accommodation: care institutions themselves bear the risk of recouping
their investment in real estate and high accommodation costs lead to higher
rates for healthcare compared to competing institutions.
In this thesis, the ideas and concepts of Corporate Real Estate Management
(CREM) are examined in terms of the contribution they could make to the
processof accommodation decision by using recent cases in Dutch hospitals.
CREM can be defined as the management of the real estate portfolio of a
corporation by aligning the portfolio and services with the needs of the core
business in order to obtain maximum added value for the business and an
optimal contribution to the overall performance of the organisation. This
definition assumes that accommodation can add value to the organisation and
contribute to its overall achievement. Elaborating on the added value of real
estate in addition to quantifying these added values and making them
applicable to hospital real estate management is therefore central to this
study. The added values determine the transition between the different phases
in the cycle of the initiation, design, construction and occupancy of the
accommodation. In addition, the added value of real estate functions as a
common language between the disciplines involved in the design and
construction of hospital accommodation, such as the healthcare institution,
healthcare manager, real estate manager and architect.
In four sub-studies (1) Context, (2) Management, (3) Value and, (4) Design
several concepts that contribute to a more informed decision-making on
accommodation aligned with the organisation of healthcare are made
applicable by elaboratingon, and connecting, existing conceptual frameworks.
Conceptual models fromdifferent disciplines are aligned in order to achieve an
integral approach by both organisation and accommodation management. In
addition to the conclusions and recommendations of the separate studies (14), the final result is a toolbox (PART 5) that can be used to support a
decision-making process that results in a better informed real estate strategy.
The instruments are tested by an assessment of recently completed hospital
construction projects.
The context of hospital real estate
The context in which hospitals have to make long-term decisions on their
investment in accommodation is determined by political, demographic,

economic, social and technological factors. Hospitals need to determine their

position in relation to these environmental factors on the one hand and the
interests of their internal and external stakeholders on the other. Contextmapping (Figure 2) is an instrument to analyse these stakeholder interests,
the factors relating to the external environment and sector-specific trends and
scenarios.
The analysis of the hospital sector shows that recent changes in the political
context has led to hospitals having to determine their own strengths and
opportunities, thereby also taking responsibility for the risks and threats in
recouping their investment in accommodation. The transfer of responsibilities
implies that the real estate-related risks are transferred too, which immediately
has implications for the financial position of the organisation and the access to
loans and venture capital. Organisations must maintain reasonable access to
the financial markets at all times in order to be ableto invest when necessary.
Since the deregulation of investment decisions and the implementation of
integrated rates in healthcare, hospitals have become more aware of their
competitive position in the healthcare market as well as their position inthe
region. In addition, the influence of various external stakeholders has
changed.The decrease of the governments direct influence on investment
decisions andthe related capacity of healthcare institutions meant an
increasing influence ofhealth insurance companies in purchasing healthcare
(capacity) and banks in the financing of accommodation investment.
Consequences of the changing context of accommodation decisions for
hospitals are: a new positioning of the hospital within the community with
associated location choices; need for accommodation choices that contribute
to labour-saving innovations; need to add value by real estate tothe
organisation and; possibilities for anticipating changes in the organisation of
healthcare.
Managing hospital real estate
How hospital real estate can be optimally aligned to organisational objectives
is examined by paralleling existing conceptual models of CREM models that
controlthe quality of the organisational processes. The basic conceptual
model for this is an abstraction of the European Foundation for Quality
Management (EFQM) model in four steps: (1) stakeholders objectives, (2) the
organisations key issues for success, (3) managing the organisations
structure and resources; (4) improvement of the primary process. The plando-check-act cycle as common ground in quality management is also included
in this basic conceptual model.

The meta-model (Figure 3) shows how the parallel management of

organisation and accommodation in three sequential steps (context, value and
management) results in the design of a process (4) and a building (8) in four
steps of alignment between:(A) the outcomes for stakeholders (1) and the
perspectives on real estate (5); (B) the organisations key issues for success
(2) and the added value of real estate (6); (C) managing structure and
resources (3) and managing real estate (7);(D) the primary process (4), and
the design of the building (8).
In the integrating framework, the steps at the level of the organisation are
completed by the steps of the EFQM model. The strategic, financial, functional
and physical perspectives on real estate (5) can be positioned parallel to the
stakeholders objectives (1) that are described in the EFQM-INK model. In this
way stakeholder management is part of the organisational management and
is translated into real estate perspectives on CREM. The perspectives on real
estate are translated into real estate added values (6) as the common
language that in all phases of the real estate lifecycle can be assessed. This
concept of adding value by real estate is connected to the key issues for
success (2) that result from the demands and wishes of society, employees,
customers and the organisations management at an organisational level.
Both the key issues for success and the added values of real estate provide
input into the change management process of the organisation (3) and its real
estate (7). The organisations change management (3) is directed by
leadership and is about policy & management of the resources, including
human resources and real estate. In this part of the model, different resources
for production have to be balanced against each other. This results in a
process that has to be implemented in a physical environment.
In this model, the Designing an Accommodation strategy (DAS)-Frame is the
basis for real estate change management (7). In an iterative process a match
is made between demand and supply, now and in the future, resulting in a
building which can support organisational primary processes. Paralleling the
management of accommodation with organisational change thus leads
logically to a step-by-step plan for the transformation of the accommodation.
Both the processes and the building are compared with the stakeholder
demands and related perspectives on real estate.
In addition, a five-point scale for all items in the integrating framework is
developed for a triple assessment on the stage of development of the
organisation andits accommodation decisions. This triple assessment of the
organisation and accommodation shows where the organisation stands, how

real estate is controlled and the pursued level of ambition with a

corresponding focus on product, process, system, chain or society.
Adding value through hospital real estate
Value is defined in this study as the valued performance of a product or
service that contributes to the achievement of the goals set by the
stakeholders. As a consequence, value depends on the (subjective)
assessment of the stakeholders. Added values of real estate have to be
defined in advance (ex-ante) to pre-set the goals of the stakeholders in order
to be able to test them afterwards (ex-post) in the design.
The research into the added values of hospital real estate shows that the
conceptof adding value through real estate fits the practice of hospitals that
have recently designed and constructed a new hospital building. Applying the
added values of real estate from the CREM literature to the construction of
new hospitals in the Netherlands has resulted in a sector-specific definition of
the added values of hospital real estate and a categorisation into three
clusters. The first cluster consists of user-values suchas the promotion of
organisational culture and patient and employee satisfaction.This cluster is
followed by the more tactically oriented production-values such as improving
productivity, reducing accommodation costs and the flexibility to adapt the
physical environment to new healthcare processes. The third cluster consists
of future- values, e.g. the image of the building, sustainability, real estate
related risks and the opportunities to use the financial value of real estate for
financing primary processes.
In addition to defining the added values of hospital real estate, the valueimpact- matrix (Table 3) has been developed that links nine types of added
value (Table 2)to the interests and needs of the stakeholders by four
perspectives on real estate: strategic, financial, functional and physical. The
value-impact-matrix was developed to support the alignment between the
organisations key issues for success, theadded values of real estate and
stakeholders different perspectives of real estate. This instrument makes it
possible to highlight the added values of real estate from different
perspectives on real estate (strategic, financial, functional and physical). Table
4 shows an example of possible connections between one of the values
patient satisfaction and healing environment to four different perspectives.
Hospital real estate design assessment

Only those design decisions that are incorporated into the final design
contributeto achieving the objectives set, so the translation of accommodation
targets intothe architectural design is a crucial step in achieving added value
by real estate. In addition to defining these values in advance, applying added
value as a framework also requires an assessment to measure these values
in the design and use phase. Different analytical drawing techniques used in
this part of the research show how the attainment of these values in the
architectural design can be tested for different aspects of patient satisfaction.
Pre-set values are visualised and different design solutions compared. In
particular techniques that come from space syntax provide opportunities to
study aspects of user-value in the architectural design drawings. The results
are promising, despite the fact that PART 4 of the study is a first exploration of
the possibilities of design-assessment. The graphs that can be produced
seem to give good insight into the consequences of spatial design, although
the analyses are still indicative and as yet unvalidated. More validating
research is needed to examine the extent to which the results of the analyses
are representative in the physicalbuilt environment of hospitals. This is
possible by comparing the results of design assessment with measures of
user experiences in actual buildings, e.g. by building-in- use studies or socalled Post-Occupancy Evaluations (POE).
Toolbox to support value adding management & design
One of the results of this research is the design of a toolbox that can
contribute tothe decision-making regarding accommodation for hospitals. This
toolbox providesa structure for the context, value, design and management of
accommodation and is intended as a reference for the alignment between real
estate and the organisationof healthcare. The instruments can be used
independently of each other, but canalso be combined. As such, the toolbox
provides guidelines for the distribution of responsibilities and tasks between
the hospital board, real estate manager, healthcare managers and architects
in various phases of occupancy, initiative and design.
Existing frameworks as the starting point
The case studies demonstrate the usefulness of the conceptual models of
CREM in matching accommodation for hospitals and the organisation of
healthcare. The model for context-mapping provides a starting point for getting
a grip on the position of real estate in the dynamic context of hospitals. The
arrangement of different conceptual models in the meta-model and the link to
the EFQM model as an abstract description of the organisation results in a
roadmap in which the accommodation and organisation of healthcare can be

coordinated iteratively. While the meta-model at the level of the CEO provides
an overview and outline of the considerations to be made, the integrating
framework is a comprehensive tool for real estate managers to further
elaborate on these various steps. Generic values from the literature are
discussed and translated into the sector-specific added value of hospital real
estate. In addition, design assessment makes it possible to test various
aspects of pre-set values already before the design is actually constructed.
Transdisciplinary approach to accommodation and organisation of
healthcare
Another important contribution made by this research to the scientific debate
is making the link between existing CREM models and conceptual frameworks
from quality management and spatial quality. The toolbox supports decisions
on real estate for hospitals in making connections between existing knowledge
from different disciplines. The addition to existing frameworks is therefore
aimed at connecting the various disciplines, creating a new basis in which
every professional such asreal estate managers, healthcare managers,
medical specialists and the hospital board can contribute to a better balance
between accommodation and healthcare.On a conceptual level common
principles from real estate management and the organisation of healthcare
are aligned in the meta-model in four steps (context, value, manage, design).
On a practical level the added values of real estate are to be regarded as a
common language between the different disciplines.
Focus on quality of organisation, accommodation and spatial design
The connection between the disciplines and conceptual models is found by
lookingat the quality of both the organisation, accommodation management
and spatial design. First, quality models are used to conceptualise,
characterise and describethe organisation and its processes. In addition,
existing models from the CREM literature are positioned relative to each other
by using two basic principles of quality management and in this way implicitly
looking at the quality of the accommodation parallel to the organisation and its
primary processes. How the added value of real estate can be connected to
spatial quality is then examined. The classification of added value in uservalue, production-value and future-value turns out to be a useful clustering.
This opens a window to considering the added value of real estate as the
realisation of quality, as perceived by the stakeholders. With this in mind,
consciously managing and integrating the added values of real estate with a
focus on the quality of the organisation, accommodation and spatial design
can be seen as the answer to the main research question of this thesis.

Recommendations
In the dynamic context in which hospitals make real estate investments, the
hospital board as central stakeholder is responsible for balancing the interests
of the different stakeholders; the establishment of accommodation goals; the
alignment of accommodation goals to the organisations mission and vision;
and the assessment of whether all these goals are achieved in the design of
the hospital building.
1. An integrated development of organisational management and real
estate management is recommended in order to align accommodation
management to the vision, mission and goals of the hospital
organisation.
2. Managing hospital accommodation requires a balanced analysis of the
potential added value of real estate. Important values include: uservalues such as improving the organisational culture and satisfaction of
patients and employees; production-values such as reducing
accommodation costs and increasing productivity and use-flexibility;
future-values such as reducing real estate risks and increasing financial
possibilities, supporting the image of the organisation and
sustainability.
3. Managing hospital accommodation requires careful consideration of the
interests, preferences and requirements of all stakeholders and
perspectives on strategic choices, financial considerations, user
perspective and the physical possibilities of real estate.
4. Achieving added value from real estate requires the ex-ante formulation
of accommodation targets and ex-post assessment of whether these
objectives have been met. This assessment of accommodation goals in
an architectural design demands pre-construction design research by
floor plan analysis in which the values are made visible and
measurable and as such part of the design decision process.

Keywords
Corporate Real Estate Management, CREM, healthcare, hospital, design
assessment

http://abe.tudelft.nl/index.php/facultyarchitecture/article/view/vanderzwart