Capital planning for senior living communities is as challenging as it is important. The constant wear and tear on equipment, systems and infrastructure, coupled with scarcity of capital — all while caring for a more vulnerable population, make planning for repairs, renovations and replacements a constant juggling act.
Managing the overall capital health of an organization involves keeping facilities running smoothly in the short term, while preparing for the long term. The most effective planning integrates both.
A strong long-term capital plan is a multi-year, forward-looking document that describes what to expect 5, 10 or 15 years in the future. It should be consistent with a realistic one- to two-year capital budget that details a concrete project plan of specific, funded initiatives.
Both together ensure that an organization is deploying resources as effectively and efficiently as possible.
Short-term budgeting is the process of defining what, specifically, you’ll set funds aside for in the next capital budget. This involves taking the capital plan and reviewing what the projected needs were and then factoring in the current reality, including equipment performance, departmental needs, marketing needs, evolving resident demands and balancing all of it with the funds you have available.
Developing an optimal short-term plan often begins with identifying low-hanging fruit — those low- or no-cost improvements that will save money, improve resident satisfaction and/or attract new residents.
Too often the short-term capital plan is hijacked by the department with the loudest voice (or the manager with the loudest voice). Great organizations recognize this and switch to a fact- and data-based approach that involves:
All combine together to create a fact-based decision-making process that ensures the organization is positioned for success.
Long-range plans are often larger in scope and less granular n detail. With this type of planning, organizations consider estimates of what will be added or replaced. Other common tools are general asset lifespans, inflation-based purchase prices and general condition assessments. While the style of planning is different, the long-term plan should dovetail with short-term capital projects to ensure alignment.
Key to the planning process is transparency. Using agreed-upon definitions of capital planning ensures that the entire team shares a common understanding of goals and objectives. Be clear on what constitutes a short-term budget item versus a long-term planning project. Identify which tangibles might be involved in evaluating a capital project, such as major equipment, vehicles, land, buildings, computers or construction — and include the associated data that informs the process. Encourage including the potential impact that intangibles (such as staff turnover or lawsuits) might have as well.
Ultimately, any proposal for a capital planning project should identify needs, determine costs, prioritize requests and detail financing strategies. This not only helps ensure that no project moves forward without financial support, it prevents undeserving or pet projects from advancing.
The stakes are high for senior care organizations to get it right. Without consistent, data-driven processes, there is greater risk for underperformance, liability exposure and higher insurance premiums, among other threats.
Executing a solid capital plan empowers an organization to maximize the value of its assets, reduce risk and cost, and provide residents optimal quality.
To learn how TheWorxHub helps senior living providers master capital planning and manage risk, request a free consult.