By: Jennifer Prom

First-time home buying can be an exciting new experience. This experience can quickly invoke dread and anxiety due to unaccounted-for expenses, such as closing costs, homeowners’ insurance, prorated property taxes, etc. Compound this with the time and expenses of moving, including packing, unpacking, and learning how the new house works, and all of a sudden, you might be scratching your head as to why your checkbook is not balancing. These unforeseen costs have to be paid for somehow, regardless of whether they have budgeted for them or not. The costs associated with a Transition and Activation project are similar to the above situation. When unplanned for, these costs can add up to a significant financial strain on the organization.

Transition and Activation Budget Overview

A well-planned Transition and Activation Budget captures the costs associated with activating a new healthcare facility and helps avoid surprise expenses or variances to operating budgets. The Transition and Activation Budget is typically approximately 1-2% of the overall Project Budget (including medical equipment). We recommend including a 10% contingency reserve to cover any unforeseen expenses or cost increases. An additional consideration when planning the budget is adjusting the staff hourly rates for annual rate increases for those projects planned over multiple years. This rate should also include approximately a 30% adjustment to the hourly rate to capture the true cost per hour (benefits, taxes, etc.).

Transition and Activation Budget Expense Categories

Below are the expense categories and some sample costs to consider for inclusion in the Transition and Activation Budget:

• Building Readiness – This category includes interim utility costs, cleaning costs, vendors and contract staff to prepare the building for operations, certifications of spaces, hoods, and/or equipment, and staff time to stock and set-up departments
• People Readiness – Typically the highest cost of the Transition and Activation Budget, this category includes staff time to complete the required orientation & training activities, Dress Rehearsal simulation events, recruitment and onboarding efforts, and regulatory survey preparation
• Move/Day 1 – This category includes mock moves, the move company contract, move staffing, and rental equipment
• Other – This category may include marketing and communications, advertising, and opening events/celebrations

Budget Tracking

Once the Transition and Activation Budget has been finalized and approved, an important step is setting up a method to track the utilization of costs. The organization should establish standards for the use of the Transition and Activation Budget and provide clear instructions for charging staff time or other expenses to this cost center. The finance team should conduct regular audits to monitor the use of the budget throughout the project.

Some may think, “We’ll just absorb the costs in the operating budget; it won’t really cost that much.” Don’t be like the overly optimistic and naïve first-time home buyer; plan for the inevitable costs on your next Transition and Activation project. This will save you time, money, and headaches in the future and ultimately lead to a more successful project.