A New Model for Military Medical Construction Decisions

by John A. Becker and Clayton A. Boenecke

In recent years, the quality and condition of military medical facilities have been subject to intense scrutiny. Our Secretary of Defense has said that our service members “deserve the very best facilities and care to recuperate from their injuries . . .and apart from the war itself, the department has no higher priority.” As a result, leadership within the Department of Defense (DoD) and Congress concluded that the current inventory of hospitals, clinics, and support facilities required substantial improvement. Fundamental to this support was the recognition of our military medical infrastructure as a strategic national asset. While additional funding has become available to modernize a large, diverse, and world-wide inventory of military medical facilities, these increased resources have been accompanied by many new challenges.

Perhaps most significantly, the DoD required a rational approach to establishing budgets and setting priorities. With over a thousand medical facilities worldwide, how should DoD determine which should be replaced or improved first? What will it take to formulate realistic and appropriate budgets over the next several years? How can DoD convey to multiple stakeholders that the proposed investments are indeed necessary?

New process adds benefits

Fortunately, since 2005 the Military Health System (MHS) had been moving toward a completely new process to articulate the requirement for increased medical military construction (MILCON) dollars and create a rational system to determine priorities from among the proposed investments sought by the medical departments of the Army, Navy, and Air Force. The initial goal of this effort was to create a structured decision making process to facilitate prioritization and resource allocation of capital facility investments. However, implementation of this new process has produced additional benefits and has an impact beyond anything previously envisioned. Decision Lens, of Arlington, VA, provided the professional expertise and the software program that has become the backbone of what would become known as the Capital Investment Decision Model (CIDM). The MHS now has in place a rational, transparent, and structured approach to making difficult resource-allocation decisions. The lessons learned from this endeavor can be applied to any other organization which faces similar challenges.

A difficult environment

The MHS manages over $30 billion of physical facilities encompassing 59 hospitals, 653 medical and dental clinics, 258 veterinary clinics, 26 medical research centers, 19 training facilities, and a host of other mission support buildings such as blood donor centers, medical warehouses, and occupational/preventive medicine facilities. The MHS is responsible for the life cycle management of facility investments within the Department of Defense—to include making decisions as to when to improve them, when to build new ones and when to determine that a facility has outlived its usefulness.

This world-wide inventory can be described as large, diverse, complex, and aging. Health care is one of the most dynamic human endeavors, with changes flowing from ever-evolving technology, clinical practices, medications, and, importantly, the expectations of patients and their families. Yet with over 47% of its hospitals over 40 years old, it was clear that the MHS facilities could not keep up with the rapid pace of change. 

The competition for the resources necessary to modernize MHS facilities has always been high. In addition to acquiring the necessary funding, the primary challenge faced by the MHS was how to define, prioritize, and articulate the value of investing in new facilities across the system. The process is further complicated due to the numerous stakeholders involved in decision-making. These include the Office of the Assistant Secretary of Defense for Health Affairs; the medical departments of the Army, Navy and Air Force, the line Services, and key staff elements within the Department of Defense and the Office Management and Budget. Congress, by law, also plays a major role in deciding how and where investments are made in MHS facilities.

The traditional approach previously employed to allocate limited construction funds across a mammoth health system entailed providing budget targets on a pro rata basis to each individual Service medical department. This simple approach had several serious drawbacks. For one, there was no way to view and address the holistic needs of the MHS and DoD. The MHS leadership could not adequately articulate how and why proposed investments were critical to overall system performance as opposed to that of each individual Service. As there was no consistent basis for the recommended investments MHS leadership also encountered difficulties when it came time to defend their decisions in the budget process. Service funding allocation caps discouraged the presentation of all important requirements and precluded a system wide view of investment needs. The end result was that despite increasing need, the actual funding available to modernize MHS facilities largely remained flat. An aging facility inventory grew older and less capable with each passing year.

The move to a Capital Investment Decision Model

The traditional approach to funding the recapitalization of MHS facilities was simply not sustainable. A new approach was clearly needed. The effort to improve began with research and an attempt to identify best practices employed in both the public and private sectors. A survey of industry and a review of pertinent literature revealed a fairly dismal state of most resource allocation decision procedures. One exception, however, was the Capital Asset Management System employed by the Department of Veterans Affairs. The VA has had in place for several years a process to evaluate and prioritize potential investments across the enterprise. The VA operates a very structured approach that is supported by a commercial software package. The VA system served as the starting point for what the MHS began to call its CIDM, and discussion with the VA facilitated the selection of Decision Lens.

Development of the CIDM required addressing several issues at the outset. The first was defining the key principles and characteristics of a capital decision model. It must be rational, transparent, consistent, and auditable. The model and associated business processes should ensure that all reasonable alternatives were considered. Evaluation of alternatives would be based not on opinion, but on jointly-developed evaluation criteria. The model also had to allow for a range of policy constraints and options. Another issue entailed development of an effective instrument for the Service medical departments to submit their capital investment proposals. A web-based Proposal Submission Tool was created that allowed for the Services to enter summary information related to the specific criteria. The third major issue was overcoming the natural human resistance to change. Some thought that implementation of such a radically different process appeared to be a lot of work for relatively little gain. Others were concerned that with a truly competitive process, there existed the risk of losing “guaranteed” funding. The response was to proceed in a deliberate and transparent manner. Numerous work sessions were conducted to address both business processes and policy implications. Several “test” runs were conducted and analyzed prior to the actual scoring of capital investments.

Fundamental to the prioritization process was development and weighting of evaluation criteria. In essence, the MHS was forced to explicitly define what it sought to gain from making investments in its infrastructure. Simply fixing or replacing bad buildings was not sufficient. While replacing old, dysfunctional facilities was important, what mattered more was the degree to which a proposed capital investment aligned with the strategic direction of the MHS. The risk of not making an investment was also weighted heavily, as were the operational efficiencies to be gained from a given investment. 

As development of the CIDM progressed, it became increasingly apparent that this new approach afforded the MHS the opportunity to clearly articulate its true requirement for capital funding. This requirement was not limited to traditional funding levels but instead was expected to display the dollars that were actually necessary to reverse the downward spiral of an aging facility inventory. Other expected benefits included:

• Improved support of MHS-wide strategic goals;
• Development of a consistent basis for making capital investments;
• An improved focus for articulating Service investment candidates;
• Increased probability of support from program review agencies; and
• Quantifiable improvement of the health status of the MHS facility portfolio.

Implementation of the CIDM was targeted for the spring of 2008, with the expectation that its results would inform development of the FY2010-2015 medical military construction program. Once the criteria and business processes were established, the Service medical departments submitted a total of 43 capital investment proposals (CIP). These proposals were then reviewed and scored by the MHS Capital Investment Review Board (CIRB), composed of representatives of the TRICARE Management Activity (TMA) and each of the Service medical departments. The scoring by the CIRB produced an order of merit that was subsequently reviewed and approved by senior leadership within the MHS and DoD. 

For the first time, the MHS had a rational, transparent, and structured approach to making capital investments. Decision-makers were able to see the actual requirement for medical facility modernization and how additional funds would be applied if made available. The CIDM output helped convince MHS leaders of the need to internally allocate more funds to facility recapitalization. It also proved invaluable when congressional leaders sought to increase funding specifically for military medical facilities in supplemental legislation such as the American Reinvestment and Recovery Act of 2009. The bottom line is that CIDM has facilitated the potential investment of approximately $9 billion over the next six years and has provided the DoD with ability to articulate and defend recommended requirements for military medical construction to all decision makers and stakeholders.

Efforts are currently underway to refine and improve the CIDM process first employed in 2008. For example, the evaluation criteria have evolved, with a greater focus on quantitative rather than qualitative factors. The CIPs submitted for the FY 2012-2017 medical military construction program is approximately double the 43 submitted two years ago.

Meeting tomorrow’s challenges

The MHS has turned a loosely structured decision making process into a consistent and reliable methodology. The new methodology integrates the decision making of each of the services to develop a joint healthcare facility planning process for developing capital construction initiatives. Investments are optimized across the Services and best serve the Department of Defense and the Military Health System as a whole.

Decision criteria reflect the increasingly complex and interrelated nature of the military as well as fundamental concerns about facility conditions. The definitive audit trail allows the MHS to monitor any inconsistencies as well as explain why a funded project is more important than an unfunded one. The MHS has created a process that allows it to meet tomorrow’s challenges with today’s decisions. Our nation’s warriors, their families, and other beneficiaries will benefit for years to come.

This fundamental change was not easily accomplished and even today continues to be improved upon. The long journey to develop and implement the CIDM in the MHS offers insights that may prove useful to other entities attempting to bring structure to their decision-making. As described above, the process requires the enterprise to define “goodness”—those elements that matter most to the leadership. It should also be acknowledged that even with quantitative criteria and sophisticated software, such as that provided by Decision Lens, decision-making is still inherently a subjective process. For better or worse, the human dimension cannot be understated. Resistance to change can be overcome with transparency and a willingness to address all stakeholder concerns.

John A. Becker is a Master of Health Administration (MHA), Fellow of the American College of Healthcare Executives (FACHE), and Director, Portfolio Planning & Management Division (Facilities), Military Health System, U.S. Department of Defense, and Clayton A. Boenecke, MHA Chief, Capital Planning Branch, Portfolio Planning & Management Division, Military Health System, U.S. Department of Defense.