Speaker 1: Kirk Kaiser
Speaker 2: Mickey Eberts
Speaker 3: Danielle Young
Speaker 4: Art Huber
Speaker 1 (00:00):
Glad you could join us on FM After Hours, the ultimate podcast for all things facility management. We’re here to take you on a journey into the ever-changing world of fm. Don’t forget to check out our gracious sponsor, remediate your trusted partner in fire and life safety, compliance and Granger for the ones who get it done. And with that, let’s dive in.
Speaker 2 (00:21):
Welcome back to FM After Hours show. Today’s an exciting day for a couple of reasons. Number one, today we are filming our fourth show and what’s really cool is we actually had some people listen and watch the first
Speaker 3 (00:34):
Three.
Speaker 2 (00:34):
Wow. Thank you very much for doing that. Well, I paid them. You keep paying them. They’re your family members. That’s right. That’s right. Yeah. Keep paying ’em. Please keep watching and tell your friends so it’ll help us grow. Another really exciting reason why, another reason why I’m excited is we have a second sponsor. So first sponsor, remediate, answer to all your life safety needs. Second sponsor is Granger, so that’s fantastic. Awesome. Yeah, very good. So my name’s Mickey Eberts. I’m joined by my colleagues, art Huber, Danielle Young and Kirk Kaiser. On our last show we talked about insourcing versus outsourcing. Awesome show. If you didn’t see it, you got to go back and watch it because there was a lot of tension. So I’m just going to frame it, take a second to frame it up with my ducks. Keep my hands down and I’m not doing it. So I got art on this side. Me on this side. The bell rings quick. TKO, I took ’em out. It’s so funny. We’ve been go back and watch it 20 years. We’re walking out to the truck and he says, you got me on that one. You got it. Didn’t happen. All right. Yeah, just kidding. Watch the show. Let me know who you think won
Speaker 2 (01:46):
For today, our episode today, we’re going to talk about finance and healthcare and facilities management says an important topic. We’re going to try to provide some education around that topic and I’ll turn it over to Kirk and Danielle to facilitate the discussion.
Speaker 1 (02:00):
Sounds good. Well, why don’t we just dive in first and define what finance is when you talk about healthcare. Right, right.
Speaker 4 (02:08):
Well, I think there’s a couple ways that we’re going to talk about it. I mean, it’s not just mean finance, obviously we’re defining it. It can mean a whole bunch of stuff. It could be mean investments. I mean, that’s not what we’ll be talking about.
Speaker 3 (02:19):
However,
Speaker 4 (02:19):
We will touch on things like that because it’s what the CFO does, it has that impact on him or her. So you need to be aware when you’re doing things within your organization what the impact could be. So from my perspective, the finance means a couple of things. One is the money you use within your department FM to spend to do the things you need to do to get your job done, from salaries to materials to contracts, whatever you do, you need money to get that done. And that’s one piece of finance. So it’s budgets, budgeting for that kind of opportunity. The second one is the capital side, as we will talk probably at length at that too.
Speaker 4 (03:07):
And it’s a different piece of money and we will get into all that, but it’s different money than the money you use in operating. And we’ll probably have some lively conversation about operating versus capital because that gets different by depending on who your CFO is or your financial leader is. So from that perspective, it’s what you use to do your job. But the other part of finance, we’ll talk some of at least is how the hospital operates within the finance world and how that impacts what you can or can’t do as a facilities manager. Right?
Speaker 1 (03:42):
Yeah, I think that’s huge. I mean, from someone who’s always serviced the hospital environment learning quickly, is this a capital item? Is this an operating item? Because that dictates a lot. So it’ll be fun to dive into that. But that second piece you just said about how the hospital looks at it will be fun to do.
Speaker 2 (04:01):
Yeah, and it was eyeopening to me when I started understanding the bigger financial picture within hospitals. So I’ll just give you an example. One of the organizations that we both worked at, you would do a capital budget and in most places I worked at the connection between capital and operating. They were far apart. So capital was looked at long-term, we’re investing for the future, we’re buying assets, things like that. This particular organization, they would connect the amount of capital they allocated to their performance. And so if you have a bad month, you go to the capital committee, they’re locking the dollars up. Now you can use that to your advantage if you’re smart. But it took me a long time to what I don’t understand this, right? If you don’t invest in your buildings over the long term, you’re going to have problems. So I think that was an interesting,
Speaker 4 (05:04):
Yeah, and that piece of the financial picture is what the CFO does, right? Both capital and operating as we call it, are on the financial documents and they’re tied together. It doesn’t feel like it when you’re sitting in this seat Mickey was talking about and you’re plugging away and you’re doing your budgets, you don’t think they’re that important. But if you buy something capital, let’s say you buy a million dollars something, you got to pay for it. It’s not coming out of nothing. It’s like you got to pay for it. Is you going to pay it over time? Is it coming out of cash? And this CFO is managing all this stuff. And so if you have a bad operating month, you might lock down spending, which includes capital, which you’re saying, well, I got this budget. You said I had this million dollars to spend. Well, you don’t have it right now.
Speaker 2 (05:53):
Yeah, you got to hit the other budget to get the
Speaker 4 (05:56):
Capital
Speaker 2 (05:56):
Budget.
Speaker 4 (05:57):
Understanding that becomes a really important part of your job. And I think in prior, I’m sure in the prior sessions we did, we kept mentioning finance and said how important it’s to know and have that acumen within your set of tools in your tool belt that you got to understand that otherwise you’re kind of going blind.
Speaker 1 (06:15):
So how aware are facility managers of that? Is that something that they’re clued in or they’re not clued in, they
Speaker 4 (06:22):
Don’t teach you it? It’s really up to you at least the beginning. And again, we’ve talked about a lot about relationships, right? With the cfo, C-N-O-C-E-O, whoever you’re talking about. But the C FFO can be a resource or depending on the size of the organization, you could have a whole bunch of people underneath the CFO that you can build relationships. And they’re all really smart finance people. They might not have a clue about FM at all, but they know how finance works and you can go to them and get an education on some of this stuff, understand how they tie together, understand what they’re dealing with on a monthly basis. So those relationships can become key. And if you can get the CFO and get that relationship, that’s the best. But there’s a lot of people underneath that person that can give you education you need, but you just don’t know that stuff coming in. And we talked about my background being a finance or MBA, I’m sorry, bachelor’s degree in finance, and that’s where my information came from. It wasn’t because I was a FM guy and got an FM degree, I got a bachelor’s degree in business and that’s where I got that information, not from working in a hospital in the FM department.
Speaker 4 (07:32):
That’s not where it came from or up the chain. As I said, when I first introduced myself, I was a custodian, didn’t learn it there either. I was just doing the work. So it was an important part of my education to get that finance understanding. And did I get it on school? Absolutely not. I mean, come on. It’s getting the understanding the basics so you understand what the word capital versus operating means. And then you go and talk to the person in the finance department, understand how they define it. One of the terms that you should earn learn really quickly is gap. The app stands for generally acceptable accounting principles. They better be operating that way. But you would think that’s a set of rules and guidelines. That’s like anything else, like joint commission. It’s clearly defined and you know exactly what to do. There’s always wiggle room.
Speaker 4 (08:23):
And when Mickey was talking about capital versus the operating and that those lines get blurred sometimes. And you mentioned, what is it when I’m trying to do a project for some of these fms out there, which kind of money are they talking about? Well, it might be both because you can define it how you want to within gap, but there’s some definitions in there you can play with. It’s like, okay, if it’s going to last two years and it’s over whatever the CFO has set as the capital threshold, then you have this opportunity to call it capital. Well, that takes it out. That operating budget of yours that you have limits on that you can’t spend unless you got the budget. Well then you can go to the capital committee to get this money. If you can put it in that category, which Mickey and I used to do a lot of, try to get it into capital not coming out of your operating budget.
Speaker 2 (09:17):
Well, and the thresholds are different. So in a lot of places, facility managers or directors can only sign POS or only sign agreements up to 500 bucks a thousand bucks. You can’t do a lot with that. So if you get it into that capital threshold and every organization has its definition, it might be $1,500 and it extends the life of the asset or it’s related to technology, or it might be 5,000, it might be 10,000. They may have rules when you bundle things.
Speaker 4 (09:51):
Well, for example, you might get a contract for maintenance on a piece of equipment that you just bought and they’ll capitalize it.
Speaker 1 (10:01):
Is that though the CFO making that decision or is that you taking it in there underneath that auspices?
Speaker 2 (10:08):
So this is why it’s important to know. So I’m going to go back to a couple of things. First, your question, just my take on some of the stuff art said. So one, I don’t think most facility managers understand the intricacies of finance the way it would benefit them. There are some, but most don’t. For all the reasons ART said, you don’t learn it. It’s hard to learn it on the job. Go back to the relationships with the CFO. One of the best ways to have a relationship with A CFO is understand it. And so when you’re structuring to get something done and you have the ability to say, okay, if I put this in operating, I put this in capital, oh wait, I can slide this one year maintenance agreement inside this capital, which is going to help the operating budget. You can take that idea to the cfo. Okay, so now what did you just do? One, you’re going to impress your CFO because he or she’s not going to think you’re going to understand that. Two, you’re going to gain credibility. And three, you just helped your organization because if it’s out of operating and into capital and you can get the funds. Now you got wiggle room in your operating budget,
Speaker 4 (11:17):
But be careful with that. Take it from you. Well, that is one thing. We talked about that last time
Speaker 4 (11:23):
Quite a bit, right? But the other part is you’re going to be, well normally because I was on the executive council and on that executive council, we sat and decided all the capital that was going to get approved every month we had this meeting and somebody brought stuff forward. Well, everybody’s in the room, so I’m just going to make a scenario. Mickey comes into the room with a new chiller and a one year maintenance agreement that’s a hundred thousand dollars. And he’s bundling that to make it a 1.1 million project. Sitting across the table is Danielle, she’s the director of pharmacy. She’s coming through with a proposal for a new machine that automates the pharmaceutical processing thing. It’s going to save labor and all these things she’s going to, but there’s only, I’m going to make up numbers. There’s only 1 million of $1.1 million available this month.
Speaker 4 (12:13):
He just asked for the whole thing. She only needs a hundred thousand. Well, he took the a hundred thousand out of that operating and took it out of his operating, put it in there. If she’s understanding this thing, she’s going to say, whoa, whoa, whoa, whoa, whoa, whoa. You took that a hundred thousand I could have used for my new piece of equipment. So you got to understand all those things. And people are sitting in the room understanding those things of CNOs in there. I mean, everyone understands this. So you got to be careful what you’re doing and you’re helping the organization unless you’re taking somebody else’s money.
Speaker 1 (12:46):
So when you get in that room, and typically a hospital likes customer facing things, they typically don’t like things that can’t be seen, right? It’s just the brutal reality of what it is. Brutal reality. So what is the best way to set up your argument for why you should do something if you’re in that room and everybody’s got all these other things that are customer facing and you have something that’s a chiller or something else is
Speaker 4 (13:10):
It starts at the beginning of the process of the budget year. I mean every year you do a new budget actually, depending on how the organization is structured, how aggressive they are, how good of a CFO, they might do a five year plan
Speaker 4 (13:26):
Rather than a one year plan. And you go, so you go in the planning process and you create all these budgets, everybody puts in a budget. And that was one of the things I was thinking about when I thought you were talking about something else when you first mentioned it, but was the surprises you run into as your first time through this process. Everybody submits a budget, both capital and operating at the beginning of the year, and the CFO gets all these, he sends out the forms, everybody fills ’em in and send ’em. I can remember numbers. Well, our budget for the hospital operating is a hundred million dollars. Let’s say smaller place. We have submitted budgets for 2 billion.
Speaker 4 (14:07):
What everybody just tries to just throw all this stuff on the wall and see what’s going to stick. So then if it’s that bad, you go through this gut wrenching process to get it down to the 100 million you got not the 2 billion, right? Well, the same thing happens in capital. Like Danielle and her pharmacy robot is going to be $5 million and his chiller’s 2 million and the CNO, she’s got a whole list of new medical equipment she needs and they got their X-ray, all that stuff going on and all the submissions come in at a hundred million dollars worth of capital. And their CCF goes, yeah, we have 50 million this year to spend. So that’s where the process starts. So the idea that you present your capital as a critical thing that it hits within that 50 million when they prioritize and you put it on a schedule even, I mean, it says, okay, I’m going to spend my money because the CFO wants to know this. Why does he want to know or she want to know this? Because that’s when they start paying for it and start depreciating it. So all this kind of stuff happens within the CFO’s world, the CFM guy to say, I just need the million dollars for the chiller.
Speaker 2 (15:18):
Yeah, that’s what they’re thinking about. All they’re thinking about is if I don’t get this chiller right, and that’s not a bad thing. But what we really did, I think really well was we understood the process and we used the process to our advantage. So we made a capital list, we broke it up by month and we went every month. Well, so first year fiscal year, your hospital, I’m
Speaker 4 (15:43):
Just thinking, I’m sorry, I was thinking about that whole billion dollars versus a hundred million that you have the capital. And so one of the things you had to do, I couldn’t help him laughing, is you prioritize everything, put 1, 2, 3, everything came in as a one. Then you’re sitting there with a billion dollars worth of ones.
Speaker 2 (16:04):
But so we didn’t do that. Life safety stuff went up here. Mechanical stuff went maybe as a two unless it was surgery or things like that. And we followed the process and we showed up at every capital meeting and we made a presentation on everything from a million dollar life safety issue to we need new forklifts. So what happens is the year goes on, you’re making all these presentations. When people in the organization find out that we’re not performing well, they stopped showing up so they’re not making their presentations. So every year he would come to me three months before the fiscal year ended and goes, if we get all this, can you actually execute on it? And so our fiscal year ended in September. And so June I would get $4 million or 5 million of capital when the whole hospital’s budget was 50 million. And you just have to go, right? You have to have a plan.
Speaker 4 (17:05):
You have to have a plan. And one of the things, again, building relationships, it’s just I can’t emphasize that enough in this process in the whole FM world. So your colleagues are seeing you present and when, again, I’m going to use Danielle’s robot for doing medication distributions, she needs your help because she’s got to install that thing. She’s going to have to put money in her budget for the installation and the operating and the utilities. If it’s a utility hog, like a MRI might be or some other piece of equipment in surgery, but she knows she needs your help to sit there next to when it’s her turn and say, yep, we’ve considered all this stuff into her budget. She needs a data drop. Yeah, right? Sure. Does she have the space? She needs a new room. I mean all those things.
Speaker 4 (17:59):
So you’re now partners with all of them and you need to help them. And if you build that relationship when it comes time for your chiller, you’ve talked to her about, Hey, if we don’t have this chiller, your robot’s going down, you’re talking to the nurse that if we don’t have this chiller, the cooling in your patient rooms isn’t going to work. And you just do these things and build these relationships with them so they understand why you’re asking for a chiller. It’s like not customer facing, like you said, it’s back there in the boiler room or the mechanical rooms never see it. You guys just keep it going, please. That’s the look. I said, Hey, this thing’s 30 years old, it can’t do it anymore. We’re running on bailing wire and chewing gum. We need to replace it finally, and you got to support me now.
Speaker 2 (18:48):
And
Speaker 4 (18:48):
That’s build that relationship
Speaker 2 (18:50):
And everybody’s excited about the new pharmacy machine. Everybody’s excited about the MRI because it drives revenue.
Speaker 2 (18:59):
So you also have to understand that when as a facility manager, when you go to do your presentation, in their minds, everybody’s going, shit, here goes mine. And they know nothing about what you’re talking about. So not only do you have to understand the financial component, you have to be a good salesperson. You have to be able to present, and you have to be able to do it quickly because you don’t have much time. It’s not like you get, it’s a four hour presentation. You’re going to present potentially 10 million worth of stuff in 30 minutes, 45 minutes. So you’ve got to be on point, right?
Speaker 1 (19:37):
So in building that budget, in that capital, let’s say the operating side on the capital side that you’re going to go take in, what does that process look like? I mean, we talked about it here as the end result of what you want to get to, but how do you go through prioritizing things with risk or benchmarking or what do you end up doing to go build that? So you can have the best presentation in there, right?
Speaker 4 (20:02):
Well, depending on how much you understand about the finance stuff, and that’s why we believe it’s a key component of your education, of your tool belt. One of the things or one of the processes that most CFOs use, let’s talk operating first. You just get sent out last year’s budget that you did budget, not actual, and then some comparison to how you’re doing, and then a form to fill out for next year. Spreadsheets usually, I mean, everybody use spreadsheets. That’s all they use. They got these tools now though, that finance like NetSuite or some of these things, they use a spreadsheet, but it’s fancier looking in plugs in the numbers and red lights go off when you’ve gone above the amount you’re supposed to hit kind of different tools, but it’s a tool of some kind they send out that you just resubmit and then justifying.
Speaker 4 (20:55):
I’ve seen some very sophisticated where you go line by line, you got labor, you got materials, and materials are broken down, and utilities and utilities are broken down. And every one of those online items you fill out comparing it to last year. And CFO wants, again, depending on the organization, depending on the year, he or she may say, we are increasing our budget 3% this year. So nothing when you submit this, it can’t be over 3% higher than last year. They may do that, of course, and they may tell us, you guys get no more or you got to cut or you got to cut because we it for,
Speaker 2 (21:35):
That’s how we’re getting to 3% for
Speaker 4 (21:37):
Everybody else mean. So all of those tools and processes are in place somehow that I’ve seen the most of that actually happens. I mean, there are some really sophisticated places that do zero based budgeting where you have to go in there and justify everything all over again to start the year, how many staff you’re going to have, how much money are you going to have for utilities? How’d you get to this number?
Speaker 2 (22:00):
But I would do zero based budgeting even if they didn’t ask me to. I wouldn’t necessarily turn it in, but I would have it ready when I had to defend my number.
Speaker 2 (22:10):
That’s important. And I want to add a couple of things. You’ve got to think about the different components that make up fm. So you need, well, if you don’t have the capability, you need assessments in all sorts of places. You need an assessment on your building envelope. You need an assessment of your parking garages, your striping in your parking lot. You need an assessment of your fire barriers. You need an assessment, what do you call it where you’re grading your equipment? I’m losing it where you go out and you say your air handlers at this age and there’s
Speaker 1 (22:48):
A term lifecycle.
Speaker 2 (22:49):
Yeah, it’ll come to me. Okay. You need to know it is related
Speaker 4 (22:53):
To lifecycle.
Speaker 2 (22:54):
You need to know the condition of your equipment, and then you need to understand how to prioritize all that. And when you’re talking throughout your day and in meetings, you need to start to socialize. Listen, we’ve got a roof plan that suggests we need $5 million this year, 2 million next year, $8 million next year, and here’s why. And it’s constant. And from a benchmarking standpoint, when you’re doing your operating budget, you better be on top of your benchmarks. You better understand. You need to know what your organization’s philosophy is. The one organization we worked for was you be at 25th percentile in cost and 90th percentile in performance.
Speaker 4 (23:44):
Well, let’s talk about, let’s define benchmark a little bit, okay? Okay. Because I mean, I think that can be an unknown term to an FM person as far as what we’re talking about here. So there’s organizations out there, and they have all escaped my mind right now. I wanted to bring up one, but there’s organizations out there that CFOs or organizations boards will say, Hey, we’re hiring Accenture. Accenture. That’s not the one I was thinking of. But there’s this one name that we always hit all the reports on,
Speaker 4 (24:15):
But they publish how much everything you should have for how much activity you do. Sometimes it’s square footage for facilities, which would be great if we used the square footage. We hit home runs all the time, but they say revenue for a million square foot building you should be operating at in the 25th percentile, which Mickey was talking about. You should be at, I don’t remember, $11,000 a square foot. And that’s not the number, but just bear with us out there. You probably want somebody, no, I want that much, but some dollars per square foot. And in the 75th percentile, you’re operating at 15,000 a square foot and your CFOs or your organization says you need to be at the 50th percentile, 25th percentile when you submit that budget. So it’s like if you’re not within that benchmark and you don’t know benchmarks, you’re already bond able, bond able. And then there’s normalization. And anybody out there that’s listening to this understands what I’m saying as far as, you said it a couple times before you’ve seen one hospital, you’ve seen one hospital in facilities. What that means sometimes in this regard, in my facilities department, I might have a courier department which needs cars and software and things like that. The facility department that this Accenture who did the benchmark, didn’t have that in there. That’s not a normal thing for facilities to do. So you have to then normalize that back into your budget. Say
Speaker 4 (25:55):
This isn’t in that 25th percentile. You got to add that in. And so there’s that data. When Accenture gives you the report says, this is what’s in this bucket. You have to go through that and match up your department to that say, Ooh, of course you don’t want to tell ’em something not. And
Speaker 2 (26:13):
The way you want to really understand how they calculate square footage. Oh yeah. Are roofs included or not? Do they include parking lots or not? Do they include your medical office buildings or not? So you really got to understand what you’re responsible for. And by the way, one year they may use one set of benchmarking. The next year they may use another. And they’re completely, the math
Speaker 4 (26:37):
Didn’t the way it worked last year if somebody got too much money or whatever.
Speaker 1 (26:41):
So one of the things you said was using right to go out there as a key, something to go get things done that you want to go get done
Speaker 2 (26:49):
Some evidence for a plan.
Speaker 1 (26:51):
So when you go to, I mean one thing that doesn’t work is, hey, when you go do an assessment and they bring it back and there’s just a dollar volume because who wants to just spend money without or good reason why? So if you go out and have someone do an assessment, what are those things that you want to see in the facility side? If you’re an independent contractor that’s going to help you sell the project,
Speaker 2 (27:18):
Right?
Speaker 1 (27:18):
So what is that?
Speaker 2 (27:20):
Go ahead. Okay, so one thing, let’s talk about equipment for a second. So one thing you want to know is you want the partner to bring back data and a source. If for talking about air handlers a type of air handler, why are you telling me that this needs to be replaced? How much more useful life does it have? Are there other options? Can I replace the motor? Can I replace the belts? Can I res shive it? So it’s specific to your equipment. A lot of companies when they do assessments, it’s generic. It comes out of some computer program that it doesn’t match up. The pumps they’re talking about aren’t your pumps, the fans aren’t your fans. So one, I would always give them my data and say, I want a plan based on this
Speaker 4 (28:16):
Data. Well, and one of the things, understanding your CFO understands this stuff.
Speaker 2 (28:25):
Very much so.
Speaker 4 (28:27):
Both of us worked for an organization, Jacobs Engineering, and they used to have like 35,000 engineers that worked for this company, A lot of them in healthcare, all kinds of industries. And they would do these kinds of assessments. And the tools they would use is basically an inventory which included the name, the brand
Speaker 2 (28:48):
Model,
Speaker 4 (28:48):
Sometimes the model number and age. So you plug all this data in and without a doubt it comes back that you need to replace 90% of everything you have because it’s all older. We never got to the point where we could say stuff was new. So you come up with this thing and you look at it and go, so I need $10 million more than my budget has to buy stuff. You can’t present that to the cfo. And CFO would just laugh at you because they say, yeah, they just plugged it into these benchmarks, but they mean nothing.
Speaker 1 (29:22):
Exactly.
Speaker 4 (29:23):
Because telling me all this stuff’s going to break next year, and you can’t predict that. You can try. You say, well, it’s on its 10th year, but its useful. Life is 10 years by your own because the CFO has a book that says here’s its useful life expectancy and all that really means to him it’s fully depreciated. Exactly. That’s what that’s for. It doesn’t really matter what it age is, if it’s working, all that goes into this calculus, if you will, that Mickey’s talking about. It’s like, gosh. It’s like how do you take it and turn it into something useful for
Speaker 1 (29:59):
That? That’s what I’m talking about.
Speaker 4 (30:00):
Yeah, your contractor, your support company that’s going to come in and help you with that don’t really usually understand those dynamics. They are doing what I would say Jacobs, and they would give you a whole bunch of data, and it’s really data as far as information. You have to glean the information out of it after getting all this into this nice spreadsheet with all these numbers. And then you have to take the time to go through item by item to understand what it’s really going on with it. So
Speaker 2 (30:29):
Most likely you’ve got a work order system. So if they’re telling you that something needs to be replaced and why, right? It could be age damage. You want to go back to your work order system and you should have evidence of the thing continually failing in your efforts to keep it going. And then you want to go to what’s the impact to the hospital if we don’t do this? So if it’s an air handler unit that’s in the HR office that serves the HR office, they go home and work from home. But if it’s a patient care area now, so you got more leverage. And a lot of times what happens in hospitals, and this is really sad, is it gets replaced when it fails and it causes a mess.
Speaker 2 (31:22):
One story that I remember was a Saturday morning, an air handler in surgery failed. There was a major operation was to be performed Monday morning at 5:00 AM the family was brought to, I think this was in Wichita from another area, what do you call it? A rural area. And I remember the, well, it was probably you that called me, but you were telling me, man, if we can’t get this fixed, we’re going to have to send this family back. And so we’re making phone calls and we find the motor and it’s in Dallas and we’re trying to figure out how to, again, this is Saturday morning, I got to get this thing here. I got to organize a shutdown, I got to get it done. And so you want to know that history and you want to use that. You remember what happened when the surgery thing, and we’ve narrowly escaped that, and this is similar to that. We don’t want that to happen.
Speaker 1 (32:24):
We had previously done a project for the University of Miami where we went in and looked at every floor and it was for a fire barrier deal and it was, Hey, we want to know the use and the occupancy and to develop a risk and then overlay that with the deficiency and the findings to be able to go in and prioritize asking for those dollars. But that’s something you just don’t see very often from a vendor. You just got done saying you’re doing it, you’re taking it and you’re looking at and making that. So if you have a vendor partner that comes in, have you ever asked them to be like, Hey, can I want you to go and help me identify where we have the greatest risk and help me identify where?
Speaker 2 (33:03):
So lemme give you an example of there’s industries that are much further along. So you can get a high quality roofing survey. It’s going to cost you some money and it’ll give you a lot of data. They’ll do drone stuff and thermal stuff that’ll show you when they say this has to be replaced, they’ll show you where the membrane’s breaking down. But from a mechanical standpoint, at least in my experience, maybe, I mean I’ve been out of it for a while, maybe they do it a little different now. I doubt it. It tends to be generic and then you have to dive into it. Now again, remediate our company. I think we do a fantastic job and there’s a reason why we do it. We’re trying to help them justify the project. We go in and we do very detailed assessments, take pictures, code, references. What happens if you don’t do it? We’ll even create presentations.
Speaker 5 (34:06):
Yeah, that’s exactly what I was going to say. I mean that depending on the company that you’re working with for year assessment, ask them to get as, what’s the word? I’m trying to think?
Speaker 2 (34:17):
Detailed.
Speaker 5 (34:17):
Detailed. Thank you so much. As detailed as possible because not only do they want to help your facility, but they want to also get that sale. And so they will work with you as much as possible to create a comprehensive plan to present to your CFO or your decision maker. I’ve had multiple situations where I’ve had to get even more in depth reporting done for a facility.
Speaker 4 (34:38):
And it’s no matter how you spin it, it’s very hard to sell that when nothing’s going wrong. I mean, the risk is risk. That’s a risk assessment. You prioritize based on the risk. But if you don’t have something happening and you’re sitting in front of this group of people who have their hands on the money and say, well, I understand if it breaks, it’s something, or if there’s a fire, you’re going to all die. You’re saying that the last thing you want to be as FM is the chicken little, right? The sky is falling. Then your reputation, you’re going to have for everything you bring. And they’re going to say, oh, it’s just art again. And he’s telling us, crying wolf, crying wolf, and look what happened last year. We didn’t lose any revenue because of things shut down. What is he talking about? But you just have to balance all, it’s really hard. It’s really hard. There’s a perfect
Speaker 2 (35:35):
Example for this. There was a hospital system we worked at. They had a hospital that had 12,480 volt. Oh Jesus Transformers inside the energy center. You
Speaker 4 (35:52):
Don’t want that, right? Yeah. Well, the standard is most, and again, you can probably have five, hopefully 5,000 people calling and tell us that they’re different after they’ve reviewed this and saw it online. But your standard is to have four 80 at the max inside the building. That’s what you want in the building when you’re working on a transformer transfer switch or something. Ideally that would be the highest you want because it’s still high voltage for a lot of reasons, but it’s a lot safer than what you’re going to say right now.
Speaker 2 (36:27):
And in the world of electrical companies, four 80 classifies as high voltage, but 12,400 you special equipment, it’s much more dangerous, right?
Speaker 4 (36:42):
Well, there’s even electrical contractors that are qualified as high voltage versus knots. So it’s a big deal. I mean, I don’t know how to say it. You’ve got arc flash and all kinds of things that started happening when you get up to these large voltages.
Speaker 2 (36:55):
So we were having an issue. We brought a company in to work on it, and we had to vet the company. It’s not easy to find. We brought ’em in. The electrician’s working on them, he makes a mistake, essentially gets electrocuted, blows him back 20 feet, he’s dead. Code blew, show up, save him right in the hospital. He ended up being fine. I mean it was scary, but he’s fine. I don’t know if he is today, but he was bad. All hell breaks loose. We’re on generator power, right? Guess what? Now we have the money to replace the switch gear. They’re like, here you go. And it became a priority. And within the next, what, four months we had it all switched out.
Speaker 4 (37:48):
That was an expensive project. This was not, we had presented it as an unsafe environment that we considered risky, high risk, but risky. But nothing had ever gone wrong with that. It went wrong once, but it was lucky that we didn’t lose a guy or two. Actually, there were two electricians. One didn’t code the other one. They both ended up in ICU that day. So it’s like,
Speaker 1 (38:16):
Well, that’s the hard thing. What’s the risk of something future happening? But I think as the facility manager being able to take it in and present it, and ultimately, I mean if the CFO says no, well then you got to get out of jail free card. You presented the risk, you presented what needed to be done and if they chose not to do it, if something happens, it is the look, I did it. You chose not to fund it. And
Speaker 2 (38:42):
I agree with you. I would push back a little bit because something that I would see on surveys, what’s going on with this, I’ve checked, I’ve been up the ceiling four times
Speaker 2 (38:58):
And I found 16 penetrations. And then you talk to the facility leader and the facility leader says, well, hey, I presented it. Administration said, no. It was so pervasive throughout the country that the joint commission actually created a leadership finding. I don’t say they created it. They have a leadership finding and they assigned that to, if you’re on survey and somebody that you’re talking to blames administration, you use that leadership finding. So my pushback would be yes, present it, yes, it is somewhat of a get out of jail free card, but also remember what your job is and continue to present it with respect and in the right format and whatever way your organization operates. If it’s monthly, if it’s quarterly, if it’s an annual budget, make sure that you keep bringing that up and you keep talking about it. Otherwise, then I think you’re just being
Speaker 4 (39:58):
Lazy.
Speaker 1 (39:59):
Yeah, not a one and done for sure.
Speaker 4 (40:00):
Yeah. Well, I was thinking the same thing as it’s an internal, that’s I think where you’re going, it’s an internal process. It’s get out of jail free within the world you work in, but don’t use that outside of that world. I’ve seen the same thing done. Good point. And administration gets the finding against them because you’re facilities manager blamed them in the facility tour. So don’t do that. But you,
Speaker 2 (40:32):
Short-lived career,
Speaker 4 (40:34):
We’re talking about finance here, but we’re going back to our past conversation with joint commission. They go, I mean, they go together. I mean they just do it call amazing.
Speaker 5 (40:42):
I was going to say, we call that a career limiting move, right? There usually is, yes.
Speaker 1 (40:46):
But it is amazing on the other career limiting move. If you don’t do that and then they come in and you have a joint commission inspection and it’s stuff that you didn’t bring up, it’s a career ending move, right? You’re done. I mean, you’re
Speaker 4 (41:00):
Going to go find a new job. I think both are pretty much career ending in both cases. You need to be working internally using the budget process because there the documentation would be you submitted it, it got prioritized out for a variety of reasons. Administration can defend that.
Speaker 1 (41:15):
You don’t have to.
Speaker 4 (41:17):
They they have this budget, they limit. We talked about nobody has unlimited resources, so they prioritize it out because there’s a whole bunch of other risks. This just happened to happen and everybody can understand. And then it gets pushed up in the risks process, right?
Speaker 1 (41:33):
Yeah, for sure.
Speaker 2 (41:35):
And then your world as a facility leader is a lot rougher because you’re responding under emergency circumstances. You’re shipping stuff
Speaker 4 (41:41):
In, you’re doing, I forgot who mentioned it right up when we first started talking, but again, the skillset you have on finance when you’re presenting the budget for these kind of things is there’s more than just the cost. And there’s more than just a depreciation. There’s more than just the operating support for that piece of equipment. After there’s the, if you want to get to this kind of detail in your presentation, you can do the risk of lost revenue new, and there’s all kinds of models out there that they use this for that can say, okay, if my air handler that I’m trying to replace or repair, whatever the money I’m asking for goes down, chiller, whatever it is, and you are now shut down for a week because that’s how long it’s going to take for you to go through the process to get this new thing in. You’ve lost this much revenue in your or
Speaker 1 (42:31):
That’s good,
Speaker 4 (42:32):
But it’s a lot of work.
Speaker 1 (42:34):
Hey, but you don’t think divide the deal, right? So we mentioned that. Also customer satisfaction, right? If something happens and the temperatures go up to 85 degrees,
Speaker 5 (42:45):
Nobody’s a happy camper when that happens.
Speaker 1 (42:47):
Water shuts down, water shuts down, things like that. Bringing those things into the equation for sure. What else? Anything else besides those three things come to your head that would be,
Speaker 4 (43:00):
Gosh, there’s
Speaker 1 (43:00):
So much big,
Speaker 4 (43:03):
It weaves in and out of so many things that you just don’t want to go overboard. I mean, I’ve gone down a lot of roads with how many justifications you have for this piece of equipment, but you can go too far where everybody just stops listening to you. I mean, really everyone has the same story.
Speaker 1 (43:18):
So your top three that you’d want to hear if you’re, what would that be? Customer satisfaction, revenue limiting?
Speaker 2 (43:23):
No, I think I’m going to go to patient safety. Safety one. Patient
Speaker 4 (43:26):
Safety.
Speaker 2 (43:27):
Oh, we always use that
Speaker 4 (43:28):
Safety one
Speaker 2 (43:29):
First and then patient or staff. Really? Yeah, patient or staff safety. The next would be it
Speaker 4 (43:39):
Has to be cost.
Speaker 2 (43:40):
Yeah, cost and then loss revenue. Lost
Speaker 1 (43:43):
Revenue.
Speaker 2 (43:44):
Yeah. That’s good. Yeah. How are we doing on time?
Speaker 1 (43:49):
We got about another three or four minutes.
Speaker 2 (43:51):
Okay. I want to make one point that, so it’s a little bit tangential, but one of my philosophies has always been if you control the money, you control everything. And we would go into a system and one of the first things I would do is do research to determine where facility costs are outside of the facility department. And then I would begin to socialize it with the CFO and explain that, look, I’m going to manage that cost much better than the clinical leader. In fact, that cost is probably in there in their budget, a pad. They’re probably spending the money on something else. And
Speaker 4 (44:36):
You’d be amazed, and your finance guy or gal has all this detail because when you submit it to spend, you got to put the right code on it unless they’re just cheating, which it happens to that they’re putting the code for patient care instead of repair. But usually your CFO is on top of that. Their staff’s on top of that, and they do their detailed reports says you’ve actually spent in your department $10,000 in maintenance. What was that for? Because you got a maintenance department and then the wheels start turning,
Speaker 2 (45:07):
And so you could pick up anywhere from three to 5% extra dollars in your budget. Now you can say, well, I just got more work. Yeah, okay. But if you employ the right strategies, you’re probably going to do it for a lot less than they’re doing it. And then you can use the leftover money to fix other optims.
Speaker 1 (45:27):
Sure. Yeah. Hey, one other term, you mentioned art was depreciation, right? Yes. So how is that viewed within, we’ll just say the CFO environment, is that something that a facility manager needs to worry about, or is that something that is of consequence or what?
Speaker 4 (45:44):
Well, when I say worry about, absolutely know about it
Speaker 4 (45:48):
Because this is back to the knowledge, the respect that you can get from your CFO, understanding that because you bought something new in capital, it does have an expense impact the future years. And then if you really want to impress him or her with depreciation years, how many years, those kind of things, because then it spans and is it an accelerated depreciation versus flatline, all those kind of things. You have those kind of discussions. It brings you into the fold with that CFO that they will then work with you more closely and have you understand, do you need to do the work? I’m buying a million dollar machine. Do I need to do the planning for this depreciation? You probably don’t need to do that because they’re going to do it. They’re going to plug it into their model, whatever they want it to be because they have different methodologies within gap, but with different methodologies. But yes, I would definitely know all about it. Make sure you understand that it’s not free because you got it through capital. I mean the capital expenditure’s done. It’s all, no, you now added depreciation to future year’s expenses.
Speaker 2 (46:56):
You made me think of something when we were doing the insourcing outsourcing and we got into the FTE discussion. You’ll do a better job of explaining this than I will talk about the pressures that we probably should have done it earlier, but
Speaker 4 (47:10):
If you, well understand why CFOs are so focused on, CFOs are focused on FTEs. And again, I’ve been out of the mix a couple years and I don’t believe it’s changed, but just in case it has, you want to investigate this. But the CFO has to present their budgets. If they’re a Medicare Medicaid type hospital, if you take Medicare, then they’re in the government mix. Now there’s private places that don’t have to deal with that. So they don’t have the same, but rarely are we talking to somebody in this podcast that’s not have to deal with this, but that CFO submits cost reports to the Medicare Medicaid, and within that there’s a CFOs. I mean the FTEs go in there and those FTEs are compared to the, and I can’t remember whether it compared to revenue, compared to cost, compared to square foot.
Speaker 2 (48:04):
I don’t remember square footage.
Speaker 4 (48:05):
I thought it was square footage too. But now I’m thinking it seems
Speaker 2 (48:07):
Very weird.
Speaker 4 (48:09):
But your FTE counting against whatever that other variable is measured, and if you’re outside of that, you lose some of your reimbursement and reimbursement’s a whole world of its own. This CFO, they don’t want to spend time with me because they are so overwhelmed with reimbursement and getting all the dollars that can they possibly get from Medicare, from their, not just Medicare, but all the insurance companies have the same, I’m going to call it game. I’m not trying to offend anybody, but game to keep you from getting as much money as you can. I mean, everybody plays the same game, right? I mean, the more you keep to yourself, the better off you are. So the CFO is spending most of their time on revenue trying to get revenue. And if you’re jeopardizing that because you got carrying extra FTEs, that’s CFO is going to try to get rid of those FTEs and it’s a big part of their job. And you don’t see, well, why do you care if I have extra FTEs when I’m saving you money? Because that FT count has bearing on what they do,
Speaker 2 (49:12):
Which goes back to the discussion we had last time. The one point I’ll add to that, it’s so severe that a timeline might be off, but about 15 to 20 years ago, hospital CFOs started hiring Chief revenue officers and setting up all sorts of systems to make sure they got the, it’s like in a business you’ve got to collect, right?
Speaker 4 (49:34):
So
Speaker 2 (49:34):
This is what they were doing,
Speaker 4 (49:35):
And it’s grown beyond that. You’ve probably heard the word talked on news or some coding. Coding, unless you’re in the business and you sit there and watch this stuff happen, I’m
Speaker 5 (49:51):
So sorry,
Speaker 4 (49:52):
I have to step out. I get you some water. The of what happens with this patient becomes critical on what they can get money for. And if people are making mistakes and coding it wrong, it messes everything up. So again, not talking to us about chillers and boilers and stuff because they’re worried about did the finance department or the nurse and the doctor and everybody code it, right, so I can get the money, get paid for what I actually did. It all goes together and they’re spending their time doing that stuff. Yeah. I don’t
Speaker 2 (50:25):
Want to get political, but you remember during the pandemic, somebody have a car accident, right? Oh yeah. They dodge some accident, but they had covid coded covid, higher rate of reimbursement. Not saying I know particularly of anybody doing that, but
Speaker 4 (50:39):
Stuff like that. Yeah, I mean, it was mentioned in the news, just, I mean, put it that way. There’s talk, there was talk that people were coding things. I came in dead from a car accident, but I had covid after they did the test. So then I got coded as a covid death. Well, they got more money. They didn’t care about coding it one way, but it was more reimbursement. I dunno if that really happened. I wasn’t even in the business anymore. As far as that goes. Was in the
Speaker 1 (51:00):
News though, for sure. So one last question. So is there much of a difference in the finance world when you go from a profit to a nonprofit environment? I mean, is nonprofit just a nice way of, obviously they still want to make their facilities as big as they can and pay executives and everything else.
Speaker 2 (51:22):
My experience is it is vastly different.
Speaker 1 (51:24):
Really? Okay.
Speaker 2 (51:25):
Vastly different. And I don’t want to offend because I’m sure there are exceptions. The biggest difference to me, nonprofit, well, let me start with profit. They run the business, absolutely run the business. They’re in the business to make money in healthcare. So if they’ve got staffing ratios for nurses to patient, they’re hitting those ratios. The executives tend to get paid a lower salary. They tend to have more on the upside on the for-profit or the not-for-profit side, the most frustrating thing that I saw is nursing is the biggest part of it. Why can’t you run the nursing department like a business? And I just didn’t see that,
Speaker 4 (52:11):
Right? No, I think there’s a lot of, I think across the organizations, departments all across a profit versus nonprofit on the profit side, they’re all run businesses. And again, I’m going to offend a whole bunch of people here, but you’re good on the profit side. You’re not getting, there is not a lot of care about future mechanical systems or whatever.
Speaker 2 (52:42):
It’s
Speaker 4 (52:42):
Make the buck. Now on the nonprofit side, because just a rough way to say this, and again, I am not an expert and I can’t define it, but the nonprofit side, the profits you make, the bottom line, anything that goes above the line when you’re done at the end of the day has to go back into the organization
Speaker 4 (53:02):
On the profit side, that above the line stuff goes to the company. And however they distribute that earnings, that’s the big difference. And many times profit will not do Medicare, so they don’t have joint commission, they don’t have a lot of these other governing things. It’s silly because there’s a lot of Medicare. I mean I’m Medicare now. There’s a lot of Medicare people out there and they’re giving up that right to have those people being treated in their places if they want to have Medicare. But majority of organizations take Medicare, so they’re still going to have joint commission, but they just are very focused on the bottom line where they’re driven by. And like Mickey was saying, business, I would say nonprofit hospital business is way behind how businesses are run or have been run. And that’s the biggest difference. You see, the numbers
Speaker 2 (53:56):
Don’t lie. And I don’t even know where HCA is this year, but I guarantee you they’re making money. Ascension’s losing hundreds of millions of dollars.
Speaker 4 (54:07):
Boy, for those that understand net, what’s the term? Not necessarily ebitda, but
Speaker 2 (54:16):
Net
Speaker 4 (54:17):
Income. Net income or earnings, profit margin or whatever. One year, I’m going to go back one year I can remember the competitor in town in a for-profit owners and having a 12 or 13% margin margin was the word I was looking for 12 to 15% margin. If I was in non-profit, if my nonprofit made three, we were doing great. Interesting.
Speaker 2 (54:43):
And that permeates throughout the entire organization. So quick story, A friend of mine was in a non-for-profit organization. They hired an HCA executive. The a c executive came in and the individual’s mind was just blown, absolutely blown. Because in a for-profit world, when you’re told to do something, you do it. Or there’s consequences in a not-for-profit world. I mean obviously there are exceptions, but Well, let’s talk about that, right?
Speaker 1 (55:16):
Yeah. It’s
Speaker 2 (55:17):
Interesting. Yeah.
Speaker 1 (55:18):
Yeah. All right. Well, I think we’re bumping up against time here. So maybe Mickey, you want to take a couple minutes and just sort of summarize, we’ve talked about here today, just in terms of finance in the FM world? Yeah,
Speaker 2 (55:29):
So some key takeaways. So I mean, we talked about it is absolutely imperative for a facility manager to have a working knowledge of operating in capital budgets. It establishes credibility with your CFO and your other executive team. I guess the advice I would give you is be understand your organization’s process, follow it, be organized and diligent, and continuing to ask for what you need. And then the last thing, and we hit on it a little bit, but benchmarking can save you. Make sure you understand. Go to ashi, get their latest benchmark. Go to ifma, get their latest benchmarks. Any of the consulting companies that are out there, get their stuff and make sure you understand the normalization process and be ready to defend yourself and protect the resources you have to take care of your hospital. Did that leave anything
Speaker 4 (56:24):
Out? No. I mean, I think in the future as we continue these discussions, we’re going to weave this information in and out of here because no matter what we’re talking about, this comes into play.
Speaker 1 (56:36):
Yeah, well said.
Speaker 2 (56:37):
Yeah.
Speaker 4 (56:37):
Awesome.
Speaker 1 (56:38):
All right. Well what do we have for next week?
Speaker 2 (56:41):
Next? Going to be exciting. It’s going to be fun. We’re going to talk about how you actually become a facility manager.
Speaker 1 (56:47):
Ah, nice. Very good. Be a good
Speaker 2 (56:49):
Time.
Speaker 1 (56:49):
Alright, and with that, we thank everyone for joining us. Thank you. Thanks. Thanks. Thank you for hanging out with us on FM After hours. Make sure you follow us on all of our social media platforms for your regular dose of Facility insights. As always, a big shout out to remediate and Granger for their gracious sponsorships. Catch you next time on FM after hours.
