Energy efficiency strategies for hospitals

April 2021

Energy efficiency strategies for hospitals

Wherever you are in your journey, we can get you to your goal

Did you know that if the health sector were a country, it would be the fifth-largest greenhouse-gas (GHG) emitter on the planet?1 According to the U.S. Department of Energy, our hospitals spend about $8.3 billion total on energy costs each year, and these costs continue to rise.2

While hospitals today recognize the need to reduce their environmental footprint and prioritize energy efficiency initiatives, many find it difficult to mobilize an actionable plan. And for good reason: It’s complicated. The challenge hospital managers face to balance rising operating expenses (and deferred maintenance), shrinking budgets, reimbursement requirements, and patient-centered outcomes – all while containing costs to meet stakeholder expectations – is enormous. Add to that the growing social plea for all organizations to reduce their eco-impact as part of a more encompassing, formalized sustainability plan. Considering the administrative and operational complexity of most hospitals, it’s no wonder why energy-efficiency projects often take a back seat to more “tangible” initiatives. Or get dropped altogether, which could result in the loss of significant savings that can never be recaptured.

A 237,400-square-foot, 75-bed hospital spends about $9,800 per bed on energy costs – about $735,000 per year.3

Where to begin, what to expect

Putting energy efficiency improvements first is not only a practical place to start, it makes good business sense, as illustrated throughout this paper. Here we outline a spectrum of solutions to help hospitals reduce their costs, energy consumption, and environmental impact – often simultaneously. Let’s start with three common questions that often get in the way of creating a practical action plan: “What do we need, how do we pay for it, and where do we start?”

The cost of doing nothing

While energy is an unavoidable cost of doing business, most healthcare organizations see their utility budgets as fixed costs. The fact is, not implementing energy efficiency measures could potentially leave hundreds of thousands – if not millions – of dollars in savings on the table.4

According to Better Buildings,® an initiative of the U.S. Department of Energy, the healthcare sector accounts for more than 4.1 billion square feet of floor space in the United States and spends more than $5 billion annually on energy. Yes, energy costs are unavoidable, but they can be strategically reduced.5

Start with Key

As an industry leader with a dedicated energy team and tenured healthcare expertise, Key Equipment Finance has helped myriad healthcare organizations not only realize significant savings through equipment acquisition, but execute a broad range of energy efficiency and sustainability initiatives, as well. How? By supporting our clients at any (or every) stage of their journey and providing the tools they need to succeed.

First things first

While every hospital is unique, they all share the need to cut costs. Similarly, while we tailor every financing strategy and solution to the needs of our clients, we can also count on energy efficiency projects to reduce spend. So, we start with an assessment of your organization’s business goals and operational objectives to identify and prioritize the resources necessary for an effective energy efficiency strategy.

The savings spectrum:

Where does your organization stand?

Some hospitals seek step-by-step guidance to upgrade equipment and systems. Others have dedicated sustainability managers who work in lockstep with operations and need implementation resources or funding support. And many are somewhere in between. Here are examples of typical energy efficiency initiatives and related benefits for each of these stages.

The resiliency revolution

The human and health effects of climate change – and relative structural and financial impacts – are becoming increasingly hard for hospitals to ignore. Catastrophic weather events like hurricanes Katrina and Sandy (2005 and 2008, respectively) have illuminated the threat of power deficiencies for all U.S. hospitals. As a result, and impetus of the Affordable Care Act, the Centers for Medicare & Medicaid Services (CMS) has increased patient-safety compliance standards. One of the programs introduced under this initiative is value-based purchasing (VBP), which assesses outcomes and performance based on value rather than volume.7

Under these programs, healthcare providers are granted incentives or penalties based on regulatory measures ranging from equipment safety codes to building performance.8

Gridless power solutions

Combined Heat and Power (CHP)

CHP generates electricity and captures the heat that would otherwise be wasted to provide useful thermal energy (e.g., heating, cooling, hot water, and steam). CHP systems play a vital role in keeping infrastructure operational during and after natural disasters, as well as in normal, year-round operation. In fact, CHP systems can provide an entire hospital’s energy services efficiently and indefinitely during grid outages.9 In addition to its reliability, other benefits of CHP include:

Superior efficiency

CHP systems can achieve efficiencies of over 80%, compared to 50% for typical technologies (i.e., conventional electricity generation and on-site boilers).10

Cost savings

Superior efficiency means lower energy costs. CHP is especially cost-effective for hospitals because they operate continuously, have high energy costs, and use both electricity and thermal energy.

Lower emissions

CHP systems use less fuel than conventional energy services. CHP systems produce fewer greenhouse gas emissions like carbon dioxide (CO2), and fewer nitrogen oxides (NOx) and sulfur dioxide (SO2) emissions.

Fuel cells

A fuel cell is an electrochemical cell that converts the chemical energy of a fuel (such as hydrogen) and an oxidizing agent into electricity. Similar to traditional CHP systems (typically powered by natural gas), fuel cells also produce clean, efficient electricity and provide thermal energy.

In proportion to their equipment footprint, fuel cells produce the largest quantity of zero emissions electricity compared to any other technology currently on the market. Hydrogen fuel cells are three times more powerful than fossil fuels and nearly twice as efficient as conventional combustion-based power generation. For example, a conventional combustion-based power plant generates electricity at 33-35% efficiency compared to up to 65% for hydrogen fuel cells.11

Additional features and unique benefits that make fuel cells attractive to hospitals include:

  • Applications for the water and heat produced by hydrogen fuel that include building/space heating, water for laundry, and steam for sterilization
  • A modular design that allows the system to operate even while individual components are being repaired or replaced
  • A faster build, uptime, and recovery time than an electric utility grid network
  • Long-duration backup generation (any length of time over 24 hours)
  • Smooth and seamless transition from and back to the grid during a power outage, without interruption to the end user

The people perspective:

Broadening the circle of impact

Every stage of the sustainability journey outlined above includes the opportunity for hospitals to improve physiological conditions for patients and providers alike. A simple upgrade to LED light bulbs, for example, is known to elevate mood, improve cognitive function, reduce symptoms of depression and anxiety, and help regulate the circadian rhythm.13

More sophisticated lighting products use the natural power of light and leverage human-centered lighting (HCL) technologies to help patients sleep better and recover faster.14

One such study from the International Journal of Industrial Ergonomics found employees working under LED lighting had faster reaction times, reduced fatigue, and an 8.3% performance improvement in visual and cognitive tasks.15

Good air quality and functional lighting are equally important for doctors and nurses. According to one CEO of a multi-facility clinic in Oregon, upgrading a relatively “invisible” HVAC system improves the air quality for both patients and staff – to a great extent.16 Other studies show that a functional lighting system not only helps them feel less tired at the end of their workdays, but also improves productivity– dramatically.17

Sustainable payment alternatives:

A practical and progressive approach

If increasing patient outcomes and staff productivity while reducing your overhead and environmental footprint seems confusing or cost-prohibitive, we’re here to help. With quality, effectiveness, and service at the forefront of our principles, we visualize the big picture from the client’s perspective. You can rely on Key for:

  • Comprehensive, single-source support
  • Customized, flexible funding solutions
  • Deep medical expertise and energy asset knowledge
  • Renowned structuring expertise
  • Strategic energy efficiency vendor partner alliances
  • Long-standing relationship with an energy-focused legal team
  • In-house underwriting, operations, and asset management specialists

Regardless of your business goals, energy initiatives, and obstacles preventing you from achieving them, Key is well positioned to get you to the finish line, beginning now.

Learn more

Visit keyequipmentfinance.com/cleanenergy, or for more information about how we can help streamline your efforts to improve your facility’s energy efficiency, please contact your Key Equipment Finance Officer.

This document is designed to provide general information only and is not comprehensive nor is it legal, accounting, or tax advice. KeyBank does not make any warranties regarding the results obtained from the use of this information. Credit products are subject to credit approval, terms, conditions, and availability and subject to change. Key Equipment Finance is a division of KeyBank. Key Government Finance is a subsidiary of KeyBank. Key.com is a federally registered service mark of KeyCorp.

KeyBank is Member FDIC.

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