More than $6.5 billion—that's how much healthcare organizations spend on energy each year, and that amount is rising to meet patients' needs, according to EnergyStar, a government-backed program helping businesses and individuals protect the environment through energy efficiency. As CFOs look for innovative ways to trim expenses from the budget, they should look no further than the HVAC and lighting systems.
Oodles of energy is wasted at most hospitals and that means potentially thousands or possibly even millions could be saved. And for a change, energy usage is one budget line item that facilities have well within their control. Why is it important to be more "green"? Aside from the importance to our planet, consider that for every $1 a non-profit healthcare organization saves on energy, it's equivalent to generating $20 in new revenues for the hospital with a 5% margin $10 for medical offices, according to the Portland, Oregon-based BetterBricks, the commercial building initiative of the non-profit Northwest Energy Efficiency Alliance ; that's the kind of savings that should ignite the figurative light bulb above any financial leader's head.
Such was the case with the Portland, Oregon-based Legacy Health System, which after examining a few energy and financial numbers, decided to make the six hospitals on five campuses—totaling 3.9 million square feet—more energy efficient. Pat Lydon, the strategic resource coordinator in the system office, started out in a purchasing and managing role and found that one of the areas on which he was focusing heavily for savings after discovering that they weren't getting optimal energy and pricing through their utilities.
"I looked at what we were doing with the utilities and I quickly realized that the way the energy market is . . . there's the potential to save quite a bit of money," he says. "Using less of the resource is something we have direct control over versus the cost for energy which is always changing. So I made the case [to the CFO] that this is something we should work on internally."
Knowing where to start
As with any journey, the first steps are the most important ones, so Lydon looked to Jennifer Stout, healthcare market manager for BetterBricks, for guidance.
"Your first step is to get the buy-in from executive management by showing that cutting energy waste makes more dollars available to patient care," says Stout. "Once executives see that connection, they'll support energy efficiency as a long-term, mission-critical priority."
For Legacy Health that included working with the utilities and BetterBricks to create and implement a strategic energy management plan tailored to the hospital's mission of quality patient care, environmental stewardship and progressive action. This plan allows Legacy Health to implement some of the solutions right away into their operations and maintenance practices. But would they be spending more than they were saving? Not under this plan; many of the adjustments are low-cost or no-cost tactics that could be managed by the facility management team.
Lydon and the facility management team set out with two objectives for Legacy Health's expansive campuses: (1) to optimize the HVAC system across the board, and (2) to reduce unnecessary lighting. When applied, these two objectives cut energy usage, and therefore costs, quickly. The system-wide aggregate electricity usage year over year had been growing at 6%, however, through better resource management, Legacy Health was been able to slow that rate of growth to 2.6% (2006-2007) and 0.25% (2007-2008). Legacy's strategic energy plan also included resource management and best business practices; which put Legacy on track to reduce energy use intensity by 10% per square foot—a significant savings for most hospitals.