EROSION OF HOSPITAL INFRASTRUCTURE : Raymond Rupert MD, MBA. (source McKinsey 2016)

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The need to renew existing healthcare infrastructure is acute, and doing so will be expensive. Once an asset—whether it is a road, a bridge or a hospital—degrades beyond a certain point, it enters the “failure zone” in its life cycle (Exhibit 1). The cost to maintain such assets is high, adding further financial pressure. In addition, the service an asset provides declines substantially when it is not renewed.

Investing capital in existing infrastructure at the right time reduces the proportion of assets that enter the failure zone. When an asset reaches that juncture, it can become necessary to pour in emergency money. By paying attention to the factors that help estimate the point in the asset’s life cycle where it makes sense to invest in renewal, such emergency spending can be avoided, unlocking capital for new projects.

The inventory of hospitals in Canada represents an aging infrastructure with many hospitals entering the failure zone.

A study should be done by our health system planners to quantify the amount of capital that will be required to renew the capital stock of hospitals before a critical mass of these hospitals hits the failure zone.