Why Your Next Project Needs a Financial Feasibility Study

Why Your Next Project Needs a Financial Feasibility Study

The Benefits of Financial Feasibility in the Planning and Programming Process

Anyone who’s been involved in the planning or programming for a facility is probably familiar with “key planning units.” KPUs are determined by first looking at projected market trends for the growth rates of different patient populations such as:

  • inpatient
  • outpatient
  • emergency care
  • long-term care

These projected growth rates are then coupled with a facility’s larger strategy and may include:

  • physician recruitment plans
  • business plans
  • additional data related to current departments and facility usage

Combining growth rate data with strategy data forms KPUs that help determine factors like the number of beds, ORs, or clinic rooms that a facility will require in the next 5-10 years.

Obtaining accurate KPUs are very important to smart planning and phasing, but they are only part of the programming story. For example, COVID-19 has generated additional financial impacts.

Financial feasibility is a key data point in the decision-making process

The financial viability of a project often hinges on determining the right mix of services to make the project successful.

quote iconWe recommend layering a financial analysis on top of a market assessment in order to get an early, eye-opening estimation of the true feasibility for implementing your project.

 

Even if a need is identified and a viable solution arrived upon, the current bottom line must be able to support the project.

What a financial feasibility study can answer

Our main goal when taking on any study is to help clients optimize for project success. The financial feasibility aspect of the study essentially answers the question: how practical is the pursuit of this project?

A successful financial feasibility study should be thorough and nuanced enough to help refine the current plan, make new plans for operations, and further assess the risks and opportunities.

It helps to think of a financial feasibility study less like a balance sheet and more like a story. The story of your facility’s financial feasibility starts by discovering:

  1. The resources you already have, what will you need, and when you will need them.
  2. What you can realistically support from a volume perspective (factoring in years of operation).
  3. Any policies that are expected to change (such as reimbursement) that could influence the viability of this project and what will that mean for related services tomorrow, 5 years from now, and beyond?

Once you can look at all of the pieces of the story together, including capital, volume, facility square footage, and finances, prioritizing and making good decisions becomes much easier.

Additional benefits of studying financial feasibility

Say you have two competing projects. A strong argument could be made for starting both of them — but your current capital will only allow for one. A financial feasibility study can help break the tie and reveal the project that makes the most sense to act on now.

There are other projects completed for the benefit of the community and may never show a positive return on investment. While almost all healthcare operators have some of these projects in their portfolio, it’s important to maintain a sustainable mix of projects (some that should see a healthy return on investment, and others that serve other purposes). An in-depth financial feasibility study should be able to assure a healthy balance.

These types of studies also lead to creative solutions. For example, a financial feasibility study might reveal services that can be cut back to increase revenue or reveal new ones that could be added to provide the cash flow necessary to fund future projects.

Healthcare executives must examine many factors to make informed decisions and financial feasibility works alongside market trends, demographics, national healthcare trends, reimbursement policies, site logistics, and models of care to help a facility forge a successful and sustainable path forward.

Call-to-Action graphic for Financial Feasibility Study Advisor's Blog

Healthcare Design Tips for Hospitals + MOBs 4 Things to Consider Before Planning an Ambulatory Surgery Center