Linen Services in AHS

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Leo Glenn
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! Alberta Health Services Linen Services in AHS Three main areas of concern have been identified since becoming AHS - Patient Safety concerns for laundry not

equipment - Infrastructure and equipment replacement costs that far exceed available funds ($2.

1 ! Alberta Health Services Linen Services in AHS Three main areas of concern have been identified since becoming AHS - Patient Safety concerns for laundry not processed to I PC standards - Staff Safety concerns for staff who are required to utilize unreliable equipment and performing work-arounds for broken down equipment - Infrastructure and equipment replacement costs that far exceed available funds ($2.2 M equipment needed to 2017; $12 M anticipated ) Only $168,000 for 2014/15 Studies undertaken on options for consolidating linen services provision include: Multiple new AHS sites (3) spoke and hub - Single new provincial site 13

Alberta Health Services Problem Statement There is an immediate concern for the sustainability of sub-urban rural operations at the 6 large /hub processing plants directly operated by AHS located in:

and remodeling of infrastructure to sustain current service levels, support new facilities, and mitigate staff risk.

2 Alberta Health Services Problem Statement There is an immediate concern for the sustainability of sub-urban rural operations at the 6 large /hub processing plants directly operated by AHS located in: - Medicine Hat, Lethbridge, Red Deer, Ponoka, Grande Prairie & Fort McMurray There is a need for significant financial investment for replacement of capital equipment as well as repair, renovation, and remodeling of infrastructure to sustain current service levels, support new facilities, and mitigate staff risk. Capital Project current builds in progress have not included on-site linen processing as part of the plan. Edmonton/Calgary Linen Services are excluded as service performance levels from current contracted provider are successfully meeting the service requirements for these urban markets i 138

nfk^s691 Laundry Capital Equipmenl t Replacement* Linen M a n a g e m e n t System (Automated Linen Item Capital Equipment Replacement Cost Avoidance Full Private Option Maintenance of Service Level

-------------- ----------------- Maintenance of Service Level beyond 2019 (over next 5 Years) ----------------------- ------------- 8 Year Total $ 7 9 3,0 0 0 $ 4 2 5,0 0 0 $ 3 0 0,0 0 0 $ 7 2 5 non

3 nfk^s691 Laundry Capital Equipmenl t Replacement* Linen M a n a g e m e n t System (Automated Linen Item Capital Equipment Replacement Cost Avoidance Full Private Option Maintenance of Service Level Status Quo (over next 3 Years) Quota/Tracker Com puter Program) $ 7 9 3,0 0 0 M e d ic in e H at Lethbridge Red D eer Regional C en ten n ial C e n ter (Ponoka) G rand Prairie Fort M a c M u rra y ~r Maintenance of Service Level beyond 2019 (over next 5 Years) Year Total $ 7 9 3,0 0 0 $ 4 2 5,0 0 0 $ 3 0 0,0 0 0 $ non $ 2 6 0,0 0 0 $ 1,5 0 0,0 0 0 $ $ 2,1 9 0,0 0 0 $ 9 5 0,0 0 0 $ 3,1 4 0,0 0 0 $ 8 0 0,0 0 0 $ 1 0 0,0 0 0 $ 9 0 0,0 0 0 $ 1,8 0 0,0 0 0 $ 4 6 0,0 0 0 $ 2, $ 5 7 0,0 0 0 $ 3 5 0,0 0 0 $ Total $6,838,000 $3,660,000 $ Based on LES Capital Equipment Replacement Planning List Assumes replacement of all pieces 20 years & older All equipment costs are high level estimates & incl. installation est

24 D(a) Other Decommis sion TOTAL $50.0 $6.0 $71.0 $50.0 $18.0 $83.0 $50.0 $28.4 $5.5 **$100.7 C ost recovery in years based on $16.

4 r*f:a Alberta Health Scr,":es Capital Investment Cost Public Model Zone South Central Alternative A - Lease Equip Building Total Alternative B - Purchase s.24(l)(a) s.24(l)(a) Equip Buildina Total Alternative C - Build Build- F m lin inn* I nnrl I North s.24 D(a) Other Decommis sion TOTAL $50.0 $6.0 $71.0 $50.0 $18.0 $83.0 $50.0 $28.4 $5.5 **$100.7 C ost recovery in years based on $16.5 m illion/year Cuthberl Smith 2010 plus 20% Proportional Costs " Dollars from 2010 evince VMe L^dTyConsoHdaton Business Case 167

Alberta Health Services Value of Current Outsourced Provider Calgary and Edmonton Urban markets will remain

Current contracted provider has proved to be a consistent and reliable vendor with a strong presence in

5 Alberta Health Services Value of Current Outsourced Provider Calgary and Edmonton Urban markets will remain with current outsourced service delivery model. Current contracted provider has proved to be a consistent and reliable vendor with a strong presence in Western Canada who has consistently met AHS s quality and service level requirements in it s provision of linen services. From January 1st to December 31, 2015, there were: - No concerns received regarding linen provision and/or service from current contracted vendor. - No service provision lapses from current service provider - Fill rates from current provider average close to 100% 169

1. Review of K-Bro Proposal > 1.3 Price Reduction for Calgary - $800k annually K-Bro will reduce the charge per kg for Calgary by CLEAN $0.

Dependent on K-Bro receiving all new volume contemplated and a 10 year extension on the Calgary contract (2028) > 1.

4mm the following equipment from AHS: o o o New Kannegiesser ironer lines in Red Deer, Lethbridge and Grande Prairie New Milnor tunnel system in

6 1. Review of K-Bro Proposal > 1.3 Price Reduction for Calgary - $800k annually K-Bro will reduce the charge per kg for Calgary by CLEAN $0.088/kg once all volume has been transitioned o This will result in annual operating savings of $800k/year once price decrease is implemented Dependent on K-Bro receiving all new volume contemplated and a 10 year extension on the Calgary contract (2028) > 1.4 K-Bro Purchase of AHS Equipment - $2.4mm K-Bro will purchase for $2.4mm the following equipment from AHS: o o o New Kannegiesser ironer lines in Red Deer, Lethbridge and Grande Prairie New Milnor tunnel system in Lethbridge Small washers in Medicine Hat (if not required for personal clothing) Proceeds from sale of equipment on secondary market would be significantly less K-Bro will assume the decommissioning costs for this equipment AHS Laundry Services Provincial Consolidation 183

7 1. Review of K-Bro Proposal 1.5 K-Bro Proposal Compared to Edmonton Contract /kg CLEAN Price for new volume, including linen $1,668 Less, rural freight (CPSM calc = $0.46/kg SOIL) -$0.520 New CLEAN Price, less rural freight $1,148 New CLEAN Price, less rural freight $1,148 Add, local freight - drop shelf program $0.066 Comparative "non-rural" CLEAN rate to Edmonton rate $1,214 Edmonton blended CLEAN price (Acute & LTC), excluding linen $1,105 Linen Replacement - $0.23/kg (AHS #) $0.230 Edmonton blended CLEAN price (Acute & LTC), including linen $1,335 Reduced CLEAN price for new volume compared to Edmonton contract $0,121 Percent reduction from Edmonton blended CLEAN price (Acute & LTC), excluding linen 11% AHS Laundry Services Provincial Consolidation 184

3. K-Bro Proposal Cost Comparison to AHS Revised Model 10 Year Cost Comparison K-Bro SOIL S/kg 2.

$0,038 $0,039 $0,040 $0,041 $0,042 $0,043 $0,044 $0,045 $1,481 $1,518 $1,556 $1,595 $1,635 $1,675 $1,717 $1,760 $1,804 $1,849 Annual Kilograms 2% annual growth Clinical expansion 12,500.

146,821,233 2,956,425 1,000,000 Total KG's 13,770,000 14,045,400 14,326,308 14,612,834 14,905,091 15,203,193 15,507,257 15,817,402 16,133,750 16,456,425 150,777,658 Annual laundry exp $20,390,802

8 3. K-Bro Proposal Cost Comparison to AHS Revised Model 10 Year Cost Comparison K-Bro SOIL S/kg 2.5% annual Increase 10 Year 10 Year Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Total Cost S/kg $1,481 $1,481 $1,518 $1,556 $1,595 $1,635 $1,675 $1,717 $1,760 $1,804 $0,037 $0,038 $0,039 $0,040 $0,041 $0,042 $0,043 $0,044 $0,045 $1,481 $1,518 $1,556 $1,595 $1,635 $1,675 $1,717 $1,760 $1,804 $1,849 Annual Kilograms 2% annual growth Clinical expansion 12, ,000 1,000,000 13,770, ,400 14,045, ,908 14,326, ,526 14,612, ,257 14,905, ,102 15,203, ,064 15,507, ,145 15,817, ,348 16,133, , ,821,233 2,956,425 1,000,000 Total KG's 13,770,000 14,045,400 14,326,308 14,612,834 14,905,091 15,203,193 15,507,257 15,817,402 16,133,750 16,456, ,777,658 Annual laundry exp $20,390,802 $21,318,583 $22,288,579 $23,302,709 $24,362,982 $25,471,498 $26,630,451 $27,842,137 $29,108,954 $30,433,411 $251,150,106 $1,666 Staff training Transition costs - Severance (158 FTEs) Transition costs - Additional Severance ( FTEs) Commissioning / decommissioning K-Bro to purchase existing linen and carts K-Bro to purchase AHS laundry equip tunnel, 3 ironers $0 $2,500,000 $1,775,316 $0 -$1,421,499 -$2,400,000 Calgary rate reduction - $0.088/CLEAN kg (over 4 years) Corporate Cost Reduction^ Value of Space J -$3,200,000 Sub-total -$2,746,182 GRAND TOTAL $248,403,923 $1,647 AHS Internal Cost Option 2 (Adjusted) $291,075,189 One-time costs and interim transition costs $15,764,171 TOTAL AHS OPERATING COSTS (ADJUSTED) $306,839,360 $2,035 AHS - Net Additional Cost over K-Bro -$58,435,437 AHS Laundry Services Provincial Consolidation 185

Capital Plan. G Capital Plan Spending G Capital Plan Financing

Capital Plan. G Capital Plan Spending G Capital Plan Financing Capital Plan G Capital Plan Spending G Capital Plan Financing 61 Table of Contents. Capital Plan Capital Plan Spending Capital Plan 2014 17... 65 Capital Plan Highlights.... 66 Investing in Families and