A profitable prescription
More hospitals across the USA are learning going green can help keep them out of the red
Hospitals are energy hogs. With their 24/7 lighting, heating and water needs, they use up to five times more energy than a luxury hotel. Executives at some systems view their facilities like hotel managers, adding amenities, upscale lobbies and larger parking garages in an effort to attract patients and increase revenue. But some hospitals are revamping with a different goal in mind: becoming more energy-efficient, which can also boost the bottom line.
“We’re saving $1 million to $3 million a year in hard cash,” said Jeff Thompson, former CEO of Gundersen Health System in La Crosse, Wisconsin, which in 2014 became the first hospital system in the USA to produce more energy than it consumed. And, he said, “we’re polluting a lot less.”
The health care sector, one of the nation’s largest industries, is responsible for nearly 10 percent of all greenhouse gas emissions – hundreds of millions of tons of carbon each year. Hospitals make up more than one-third of those emissions,
according to a paper by researchers at Northeastern University and Yale.
Increasingly, health systems are paying attention:
Gundersen Health System in Wisconsin employs wind, wood chips, landfill-produced methane gas – even cow manure – to generate power, reporting more than a 95 percent drop in its emissions of carbon monoxide, particulate matter and mercury from 2008 to 2016.
Boston Medical Center analyzed its hospital for redundant and
underused space, then downsized while increasing patient capacity. Among other changes, it has a gas-fired 2-megawatt cogeneration plant that traps and reuses heat, which saves money and emissions while supplying 41 percent of the hospital’s needs and backing up essential services if the municipal power grid fails.
❚ Kaiser Permanente aims to be “carbon-neutral” by 2020, mainly by incorporating solar energy at up to 100 of its hospitals and other facilities. One in use at its Richmond (California) Medical Center helped reduce electric bills by about $140,000 a year. (Kaiser Health News is not affiliated with Kaiser Permanente.)
Though the environmental benefits are important, “what I’ve seen over the years is cost reductions are the prime motivator,” said Patrick Kallerman, research manager at the Bay Area Council Economic Institute, which released a report this spring outlining ways the hospital industry can help states such as California reach environmental goals by becoming more efficient.
When Bob Biggio was hired in 2011 to oversee Boston Medical Center’s facilities, hospital leaders were about to launch a broad redesign. Yet the hospital faced serious financial struggles. He put the move on hold while analyzing how the hospital used its space.
“My first impression with data I had gathered was our campus was about 400,000 square feet bigger than it needed to be,” Biggio said. “A square foot you never have to build is most efficient of all.”
The new design is smaller but more efficient, handling 20 percent higher patient volume and eliminating the need for ambulance transportation between far-flung areas of the campus. It cut power consumption by 42 percent from a 2011 baseline.
Though the hospital sunk a lot of money into the renovation, the center was able to sell off some of its land to help offset the costs. That led to about a five-year return on investment, Biggio said. “We are a safety-net hospital with a large Medicaid population,” he said. “So this is the last place people expect to see the type of investments and progress we’ve made.”
How to sell that in the C-suite? The environment argument wasn’t how Thompson persuaded executives at Gundersen. “At no point did I mention climate change or polar bears,” he said.
Instead, he focused on the organization’s mission to improve health – and the potential cost savings.
Of the more than 5,000 hospitals in the country, about 1,100 are members of Practice Greenhealth, a nonprofit group that promotes environmental stewardship. Fewer than 300 hospitals qualify as Energy Star facilities, an Environmental Protection Agency program that recognizes buildings that rank in the top quartile for energy conservation among their peers.
Greenhealth estimates its members average about $1 million a year in savings, but it all depends what steps they take.
There are modest savings from such things as reducing the heating and air conditioning in operating rooms during hours they are not in use, with median annual cost savings of $45,398, a report from the group notes. Other energy reduction efforts net a median $53,599 in annual savings, and swapping older lighting for new LED bulbs in operating rooms saves $3,329.
Individually, those savings are not even rounding errors in most hospitals’ total expenses, which are measured in the millions of dollars.
Still, within facility expenses, energy use accounts for 51 percent of spending, so even modest cuts are “significant,” said Kara Brooks, sustainability program manager for the American Society for Healthcare Engineering.
Ultimately, that may affect what hospitals charge insurers and patients.
“If hospitals can lower peak demand through energy efficiency efforts, that will directly impact their pricing,” Thorpe said.
Kaiser Health News is a nonprofit news service covering health issues. It is an editorially independent program.