‘Project managing a proton therapy center.’
From 2012 till 2016 the founder of Trees with Character's managed a proton therapy center from scratch to the point where vendor selection, reimbursement, and financing had been finalised. Then politics intervened — yet another risk in proton therapy to minimise. This case gives an overview of main activities as well as risks.
15 augustus, 2016
Amsterdam, the Netherlands
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- Three hospitals in Amsterdam have founded a consortium to realize proton therapy in Amsterdam
- One of four permits to realize a proton therapy center in the Netherlands was obtained
- A Strategic Brief, a project organization, and a 30-year exploitation model were realized
- The exploitation model allowed to determine a ‘price ceiling’ for the tender of equipment with Total Cost of Ownership (TCO) for 10 years
- Decision Free Procurement was used to tender for proton therapy equipment and 10 years of TCO using the ‘price ceiling’ of 90 MEUR
- Following vendor selection the cost of equipment and building were obtained and from the exploitation model a reimbursement rate was determined
- The substantiation that the model provided resulted in the acceptance of the reimbursement rate by the Dutch Healthcare Authority
- The substation that the model provided in calculating ‘worst case’ scenario’s as suggested by senior lenders contributed to obtaining senior lender financing
- An overview of the main risks encountered is provided
Project managing a proton therapy center from scratch — and the risks encountered
Two university hospitals1 and a comprehensive cancer center2, all based in Amsterdam, founded a consortium (APTC) to obtain one of four permits to realise a proton therapy center in the Netherlands. As the three hospitals are reference centers for all major proton therapy indications, all have a large research component, and are renowned for innovation in radiotherapy. The goal for the consortium is to realise a beyond-state-of-the-art proton therapy center. For the project leader the main responsibilities were obtaining the permit, write the Strategic Brief (vision, mission, aims, etc.), build an exploitation model (business case), organise the project structure, report to the steering group, and run the project on a daily basis.
After the permit was obtained and the exploitation model built, the model was used to determine the optimal number of treatment rooms, to assess the impact of risk-scenario’s, to calculate the required reimbursement rate (which was still to be determined by the government), and to determine the so-called ‘price ceiling’ for the tender of proton therapy equipment, including TCO for 10 years.
In preparation of a 90 MEUR tender Decision Free Procurement (DFP) — never before used in tendering for proton therapy equipment — was identified as the methodology of choice to select the expert-vendor. A previously prepared list of 400+ specifications was reduced to 5 aims with a limited lists of ‘sought performances’ (suggestions, not minimal requirements). Six months after the start of the tender the expert-vendor was selected (see this case for a description of using DFP to identify the expert vendor).
Following the selection of the vendor the preliminary design of the APTC-building was completed and the construction and installation costs priced in. With all major costs components determined the model allowed for the calculation of the required reimbursement rate. The model at the same provided the substantiation of the rate, and the rate was subsequently granted by the Dutch Healthcare Authority.
With the vendor selected (determining productivity and cost of both equipment and building) and the reimbursement rate fixed, the exploitation model allowed for the detailed analysis of a range of ‘worst case’ scenario’s as provided by senior lenders. The provided substantiation of the outcome of these scenario’s contributed to obtaining senior lending financing.
At this stage of the project the chairman of one of the two academic hospitals intervened and ‘froze’ the project.
Common risks in proton therapy
Proton therapy is associated with risk, and rightly so3. The focus of this risk is often on technology, but the technology is merely complex, and not a big risk. There are a range of other risks, however.
One of the biggest risks is the result of the long lead-time of realising a proton therapy center. From the moment an organisation starts to seriously look into proton therapy to signing the various contracts can easily take a good part of a decade. Unless the need for proton therapy is firmly anchored and its benefits aligned with the (long term) strategy of the organisation there can be many causes that can derail a proton therapy initiative. Project champions can leave, boards replaced, new projects may start to compete, resources shifted away, etc. etc.
Then there are many other questions to be answered. Which patients are eligible for proton therapy? How many will come from within the organisation? How many external referrals are needed? Where might they be coming from? What is required to actually get them referred? How do I integrate the proton therapy center into the organisation/department? How to deal with the many IT-related challenges, recruitment of required expertise, training and education, altered and entirely new workflows? Which vendor has the right expertise for the particular challenges the organisation faces? How to identify this vendor? What is the impact on the project if there is a delay in construction, of slower than expected patient ramp up, of not meeting expected productivity? How to avoid paying a risk-premium to investors?
In the context of this case, and for brevity, these risks are put into two categories: is the project anchored in the organisation, and is the project financially viable. For APTC the answers were No and Yes respectively.
- Is the project financially viable? — This is the main focus, and the biggest question mark, for most projects. It wasn’t so for APTC for various reasons. For one, the three radiotherapy departments (all reference centers) only had to refer 3% of their existing radiotherapy patient volume for proton therapy. In other words, the patients were already there. Two, a detailed 20 year exploitation model was developed which allowed to calculate the financial impact of a range of risk scenarios. What would be the consequence of a slower patient ramp up, of a building delay, of a lower than expected productivity? This exploitation model provided the data for a financing model and was able to provide the answers to the risk-related questions senior lenders formulated. Finally, and uniquely so, the permit holders were to hand in their requested reimbursement rate, including detailed substantiations, for subsequent approval by a national authority.
- Is the need for proton therapy anchored in the organisation? — Writing a strategic brief which aligns the benefits/risks of proton therapy (clinical, financial, strategic, etc.) with the overall long term strategy of the organisation anchors the project and will keep it on track. But not all hospital organisations have such a long term strategy, or don’t have a board/chairman interested in a long term strategy. This may become even more problematic when project champions/board members leave/are replaced. This is not at all unlikely given the multi-year nature of a proton therapy project. New board members have to get acquainted with (the rational for) proton therapy. Given the large investments involved, and the new priorities new members tend to bring, this poses a risk. This is de facto what terminated the APTC project after nearly five years: the main champions (board members at two of the three involved organisations) had left. One hospital even had its entire board replaced in this period. Their replacements did not replace them, or simply had their own agenda and other priorities.
Proton Therapy is not about Risk Management, it is about Risk Minimisation. This was the lesson taken from this experience, and the inspiration for Trees with Character.
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