Part 2: ILPD at UHS Henderson Hospital

An IFOA contract encourages team members to challenge each other on a continual basis to reduce risk and increase productivity.


An IFOA contract encourages team members to challenge each other on a continual basis to reduce risk and increase productivity. Courtesy: Southland IndustriesThe Universal Health Services (UHS) Henderson project is a 142-bed medical facility that spans more than 250,000 sq ft. The hospital is built for future expansions with a target value design of $170 million. It features four operating rooms (OR) with two shelled OR rooms for future expansion, a women's center, catheterization laboratory, as well as, gastrointestinal (GI) bronchial and radiology services. The women's center includes labor, delivery, recovery, post-partum, C-section, and a neonatal intensive care unit.

The UHS Henderson Hospital project used an integrated lean project delivery (ILPD) method, which strives to eliminate waste in construction. Likewise, the project features an integrated form of agreement (IFOA) contract to bind together 10 different companies including Universal Health Services, Southland Industries, Turner Construction, SR Construction, Berg Electric, Buehler & Buehler, Amfab Steel, Excel Engineering, Anning-Johnson, and HMC Architects. With an IFOA, all 10 companies have a shared interest in striving to achieve the same goals.

The IFOA contract ties together these 10 companies to share in the risk or reward of the project. The team is incentivized to increase quality while decreasing cost. The incentive is the 50% enhanced profit. If the total project cost is less than the agreed contract value, the savings go back to the signing partners up to 50% of the agreed profit. For example, if the entire profit pool for the project is $5 million, the team can earn up to an additional $2.5 million of profit, which is split amongst the team. Any savings beyond that will go back to the owner for additional upgrades that may not be in the current contractual value. This is called project target cost estimate (PTCE). In order for the team to receive the enhanced profit, the goals set in the contract must be met. These goals are defined as:

  1. Energy Star rating of 90 or higher for the first 12 months of operation (8% of the enhanced profit pool)
  2. Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS) scores during the first 12 months show an average cleanliness of the hospital environment rating of 82 or higher, or 15% above the national average (8% of the enhanced profit pool).
  3. HCAHPS scores during the first 12 months show an average quietness of hospital environment at a rating of 67 or higher, or 15% above the national average (8% of the enhanced profit pool).
  4. Hospital Acquired Infections (HAIs) during the first 12 months rate an average of:

    1. 0.45 or less per 1,000 APD, methicillin-resistant staphylococcus aureus (MRSA) infections, or 10 % below the national average
    2. 0.81 or less per 1,000 APD, Clostridium difficile, or 10 % under the Centers for Disease Control and Prevention National Healthcare Safety Network standardized infection ration (SIR)
    3. 0.45 or less per 1,000 APD for multiple drug-resistant organisms (MDRO), or 10% below the national average
    4. HAIs will be measured using SIRs and rates for MDROs (8% of the enhanced profit pool).

  5. Hospital capital costs related to design, construction modifications, or omissions are zero after 12 months. Any modifications or omission discovered may be paid out of this portion of the incentive up to the 8% of the enhanced profit pool.
  6. Patient falls during the first 12 months are an average of 2.15 or less, 10% lower than the UHS Benchmark of 2.39/1,000 APD (8% of the enhanced profit pool).

The team was challenged to build a hospital with all of the requests from UHS and Valley Health System-a local operational branch of UHS in the Las Vegas Valley that was incorporated for $170 million. This was no small task. The initial estimates of the hospital were well over the PTCE. Through heavy cooperation, collaboration, and innovation, the team was able work the estimate to achieve the original PTCE. The team members work frivolously to find savings in just about any category ranging from material and equipment buyouts to restructuring workflows to achieve maximum productivities.

The IFOA drives innovation, collaboration, and cooperation from all parties tied to it. Team members no longer focus on their own bottom line. With the profit pool of these 10 companies tied together, it encourages team members to challenge each other on a continual basis to reduce risk and increase productivity. It is a never-ending exchange of trade-offs where somebody may take a $100,000 hit in order for another to achieve a $250,000 savings. Overall, it creates a safe environment where team members can present their risks or opportunities without the fear of reprisal.

-Jacob Lynch is a project engineer at Southland Industries. This article originally appeared on the Southland Industries Blog. Southland Industries is a CFE Media content partner.

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