Reprinted from Vol. 26 No. 47 Boston Business Journal - December 22-28, 2006

Health care, energy sectors should work together

If we believe the Farmer’s Almanac; this winter will be colder than normal in New England. Expect falling temperatures to have a chilling effect on hospital bottom lines.
Medical centers use more energy per square foot than any other commercial building, spending $5.3 billion annually on energy, according to the U.S. Department of Energy.
Reducing energy costs is a conundrum for all hospitals, but especially in New England, which has the nation’s highest energy costs and some of the most aged hospitals. Stakeholders urge hospitals to reduce operating costs and improve efficiency. But this economic challenge is piled atop increasing demand, higher-cost receivables and competition for workers from states with lower costs of living and higher salaries.
Competition for health care dollars makes it difficult for facilities managers to make energy improvement a budget priority. The problem is the up front capital outlay. Most hospitals will choose a clinical investment that will save a life before investing in new HVAC systems.
It is rare to hear discussion of energy and health care in the same sentence. Yet both sectors are seeking innovation to solve their respective supply and demand crises. Perhaps it is time for them to collaborate and explore solutions that already exist.
Manufacturers have teamed up with energy companies and consultants to devise a creative financing strategy that enables up front capital costs to be paid down with guaranteed energy savings later on. Performance-based contracting, provided by an energy equipment manufacturer or service company, would enable hospitals to retrofit existing facilities with new energy efficient lighting, boilers, chillers and air-handling units. Initial equipment costs are covered by guaranteed savings from reduced energy consumption by as much as 25 percent.
The American Society for Healthcare Engineering estimated that such energy improvements could save members of the American Hospital Association more than $65 million in the first year. Connecticut’s Waterbury Hospital has taken this innovative step. The hospital entered into a 10-year performance contract with Siemens Building Technologies, which guaranteed $10 million in savings from avoided energy costs. The hospital is upgrading electrical, heating, cooling and plumbing systems, which will reduce emissions of greenhouses gases by approximately 65 million pounds and save the equivalent of 69,000 barrels of oil.
In the quest for something new and alternative, the energy and health care sectors should not overlook the multitude of common sense solutions that already are in their grasp.

ELLEN LUTCH BENDER is president and CEO of Bender Strategies LLC, a health care consulting firm.