Energy Efficiency and Your Hospital's Bottom Line
Concerns about rapidly rising healthcare costs and increasing energy demands are forcing hospital leaders to explore new approaches to cutting energy costs. Today's evolving energy-efficiency and renewable energy technologies offer sustainable, cost-effective solutions.
Costs are Rising
Hospital CEOs and CFOs are facing healthcare costs that are escalating on a steep upward curve. Lower reimbursements, an aging population, and outdated facilities are adding to the pressures of the current economic downturn to push budgets to the breaking point and heighten competition for hospital dollars.
At the same time, hospital energy costs have risen from $3.89 per square foot in 2003 to $6.07 per square foot in 2008. Reliable current estimates project that hospitals are spending at least $8.5 billion on energy costs, and the amount could easily be closer to $11–$15 billion. Added to these demands are tightening regulations on carbon emissions and an imperative unique to hospitals: maintain energy reliability and provide round-the-clock critical care, even during the most extreme emergencies.
Energy Efficiency Saves Money
For hospitals—among the nation's most complex and diverse public facilities—energy is a cost center that can be directly controlled. Efficiency reduces exposure to energy price volatility and offers a highly cost-effective strategy for reducing carbon emissions. Beyond cost-control implications, many energy-efficiency improvements also yield short payback periods and ROI, leading to potentially significant O&M savings, which can then be redirected to mission-critical investments.
When competing for limited dollars, how can facilities make a compelling financial argument for energy-efficient technology over medical equipment? The answer is that energy-efficiency improvements can contribute to a hospital's financial security by tempering future cost increases and becoming "revenue generators."
Energy-efficiency technology offers more than simple paybacks; it generates continuous revenue over the life of the investment. Estimates on "energy dollars saved" vary from $20–$50 saved for every $1 spent on energy efficiency. Life-cycle cost analysis provides a complete evaluation of energy-efficiency opportunities, considering all relevant costs and savings, including first costs, reduced maintenance costs, improved reliability, available incentives, reduction in other system costs, and tax savings.
Case Study
|
Mission-Critical Benefits
According to a 2008 study released by the American Society for Healthcare Engineering, healthcare executives place a higher priority on energy efficiency than executives in other industries, with 65 percent of respondents calling energy efficiency "extremely important" or "very important." More than any other sector, hospitals are defined by mission-critical goals that go beyond bottom-line considerations. Hospitals serve as important stewards of community health, balancing growing expectations to guard patient safety, retain top staff, and act as environmental catalysts.
Increasing energy efficiency and reducing carbon emissions advances the goal of promoting a healthy environment for patients, staff, and community. Energy-efficiency improvements can contribute to enhanced indoor comfort and air quality. And, according to a growing body of research, greener and more energy-efficient facilities tend to improve patient outcomes, including decreased length of stays, and can lead to higher employee retention and increased productivity.
Finally, on a macro-community level, energy efficiency can reduce the impact of hospital operations on public environmental and health issues linked to power plant emissions. Scientific studies have demonstrated that increased exposure to pollutants such as those caused by carbon emissions can cause chronic health problems including cancer, liver and kidney disease, and reproductive issues. The World Health Organization reports three million people die each year from the effects of air pollution; improved air quality could save more than $20 billion annually in healthcare costs in the United States alone.
Taking Action: Creating Energy-Efficient, High-Performance Hospitals
The Department of Energy (DOE) is committed to helping hospitals drive down both energy use and costs. DOE's EnergySmart Hospitals initiative is supporting hospitals with the tools and resources needed to integrate energy-efficiency and renewable energy technologies into hospital design, construction, retrofit, and operations and maintenance. Through partnerships, design support, training, and outreach, EnergySmart Hospitals is validating the benefits of energy efficiency and renewable energy as highly effective strategies to impact the bottom line while meeting mission-critical goals.
To support hospital leaders, EnergySmart Hospitals is developing technology assessments and case studies as well as a series of brief, targeted fact sheets on HVAC, lighting/daylighting, boilers and chillers, power alternatives, medical equipment and plug loads, water efficiency, renewables, and benchmarking. In addition, an interactive Web site will provide access to tools and peer-to-peer networking.
In September 2009, the first of two planned Advanced Energy Design Guides will be released, focusing on 30 percent energy savings in smaller hospitals and healthcare facilities (typically up to 90,000 square feet). A guide for larger facilities will be released in 2010. All EnergySmart Hospitals tools will complement existing resources such as ENERGY STAR® for Healthcare, the Green Guide for Healthcare, and the U.S. Green Building Council's LEED for Healthcare.
|
Utility bills account for about 1% of campus operating costs. However, with some 8 million square feet to heat, cool and power in 26 buildings covering four city blocks, that 1% adds up to tens of millions of dollars. |
Getting Started: Building Your Energy Management Program
Building systems are interdependent; improving hospital building design and operation depends on the development and coordination of energy-efficiency technologies across every major building system. Energy-efficiency upgrades considered together in sequence will ensure building systems are right-sized and optimally used, and will avoid wasted improvement efforts and unnecessary expenses.
Implementing (or strengthening) a strategic energy management program can be effective in tracking and measuring energy performance through setting a process for benchmarking, agreeing on goals, developing action plans, and tracking program results. An energy management program can also provide a basis for budgeting for future energy-efficiency and renewable energy improvements.
Goals of EnergySmart Hospitals
- Promote 20 percent improved efficiency in existing buildings and 30 percent in new construction over current standards
- Increase efficient and renewable energy applications in hospitals
- Reduce energy use and operating costs
- Create healthier healing and work environments
- Maximize successful hospital upgrades and design strategies
- Ensure reliable backup power during disasters
- Improve environmental performance
