Hospitals are community lifelines—they provide emergency services and the kind of specialized, intensive healthcare patients can’t receive in doctors’ offices or clinics. But hospitals are also expensive to run. In Ohio, as in the rest of the country, financial difficulties have caused a number of hospitals to close or to reduce the types of services they offer. The number of Ohio hospitals with licensed maternity units, for instance, fell from 127 in 2004 to 115 in 2011 as cash-strapped facilities were forced to choose between emergency rooms and maternity wards.
As of last fall, in fact, 23 percent of our country’s hospitals were operating in the red. Many hospital administrators don’t know that energy efficiency can make a sizeable difference in their bottom lines. But in Ohio, thanks to efforts by their highly-engaged trade association, the word is starting to get out. “Energy costs are about 1.5 to 2 percent of a hospital budget,” explains Richard Sites, senior director of health policy at the non-profit Ohio Hospital Association. “But while energy costs are a small percentage, they’re a big number. Saving $100,000 on energy can easily make the difference between running a negative margin and a positive one,” he says.
Fortunately, energy-efficiency programs made possible by Ohio’s SB221, the state’s energy efficiency and renewable energy standard, are helping hospitals reduce their energy costs. That’s good news for everyone who relies on quality healthcare being available when it’s needed.
Medical facilities consume a walloping amount of energy—as much as 4 percent of the energy used in the nation, according to some estimates.
There’s good reason for that. “Hospitals are up and running 24/7. And they use a tremendous amount of technology, both in terms of data processing and in terms of equipment,” explains Dale Woodin, Executive Director of the American Society for Healthcare Engineering. Hospitals contain energy-intensive commercial kitchens, “and we do quite a lot of ventilation, heating and cooling,” to help prevent airborne diseases, Woodin says.
Many hospitals are also housed in buildings built before energy-efficiency became a priority. Consider the not-all-that-unusual Mercy Medical Center in Canton. One of the eight buildings that comprises the hospital complex was built in the first decade of the 20th century.
To help capture the sector’s juicy energy-savings opportunities, the Ohio Hospital Association has undertaken a project that compares energy costs at participating hospitals. A low-efficiency hospital can spend more than $7250 per bed per year on energy, compared to $2733 per bed in a high-efficiency hospital. “A 25-bed critical access hospital can reduce annual electric expenses alone by about $100,000 if they improve their energy efficiency scores,” Sites explains. For many hospitals, especially small and mid-sized community facilities, those savings can make the difference between staying afloat and sinking.
At Mercy, energy savings have topped 35 percent compared to the nationwide hospital average. “Obviously, there is an investment cost,” says Elaine Campbell, coordinator of Mercy’s Green Team. “But we can show the return on that investment pretty easily.” Many hospital efficiency investments pay for themselves in less than five years, and, in the case of lighting, in less than two. The savings after that go right to the bottom line.
Energy-efficiency incentives provided by utilities such as AEP-Ohio can be especially compelling to hospital numbers crunchers who are otherwise uninterested in energy efficiency’s other benefits, such as job creation and lower pollution levels. “Without these efficiency mandates and incentives, it’s very easy for people in the financial office to focus on things besides energy efficiency,” says Bob Gianfagna, senior energy engineer at the Ohio State University Medical Center in Columbus. “But when you get a check from the utility company, no one argues with that. Those checks incentivizes people to explore more opportunities.”
At West Chester Hospital, in Cincinnati’s northern suburbs, energy-efficiency incentives are creating just the kind of benefits Gianfagna describes. “The rebates our local utility,Duke Energy, had available were very helpful to us, because they improve the ROI,” explains Mike Kuechenmeister, West Chester’s director of plant operations. Using utility incentives, the hospital was able to purchase high-efficiency mechanical components such as motors and variable frequency drives, rather than low-efficiency models that were less expensive upfront but more expensive to run.
These incentives mean West Chester and hospitals like it have more money to spend on services that sometimes can make the difference between life and death. “The dollars we save on energy,” Mercy’s Campbell says, “we can reinvest in patient care.”